A consumer stands a greater chance of getting hit by lightning than becoming a victim of fraud or identity theft when they use electronic bill payment and account services, according to new study.
Dispelling technophobic myths that the Internet is an open door for thieves, the study reveals just the opposite -- the Internet can actually help protect consumers and businesses from two of the most common kinds of identity theft: fraudulent opening of a new accounts and unauthorized use of existing accounts.
Online banking benefits come from both monitoring personal accounts and paying bills electronically.
"Turning off the paper" can help prevent more than one million cases of identity theft and save consumers and businesses $4.8 billion each year, according to "Online Banking and Bill Paying: New Protection from Identity Theft," a study recently release by Javelin Strategy and Research, a Pleasanton, CA-based consultant for financial services, payments, and commerce sector companies.
That's because, the study says, viewing and paying bills and statements online eliminates the most common means of identity theft. Information is more easily obtained in the physical world than via secure Web sites.
Identity thieves are not unlike burglars or other personal property thieves in their methods of operation. They want an easy mark. It requires much more sophistication to break into online systems protected by encryption software than to snatch a piece of paper from mailboxes, trash bins or your desktop.
"ID theft is typically done through a piece of paper. Forty-four percent of all ID fraud starts with a simple theft -- a wallet or a purse. In the case of new accounts being fraudulently set up, 14 percent is caused by the perpetrator taking things out of a mailbox. Paper is where the crime is being committed. If you follow the paper trail, so to speak, it leads you back to a piece of paper," said James Van Dyke, Javelin's founder and principal analyst.
"The biggest sources of ID theft is friends and family and a paper shredder is not going to help you with that. By the time you shred the documents, someone has already seen it," Van Dyke said.
The Federal Trade Commission recently reported identity theft victimized more than 10 million Americans last year and cost businesses nearly $50 billion.
Victims bear a small percentage of the out-of-pocket cost of ID theft, spending from $500 to $1,200 cash, but the value of time lost also must be figured on the 30 to 60 hours consumers spend resolving identity theft problems.
The Javelin Strategy & Research report analyzed findings from the Federal Trade Commission and U. S. Postal Service reports, as well as primary consumer and industry studies conducted by Javelin.
"More private personal content is being sent to mailboxes than ever before, with the average household receiving 20 paper statements and bills per month," said Van Dyke.
"By receiving and paying bills online, consumers take the information out of their mailbox, and out of the reach of those who would fraudulently open an account or make unauthorized purchases on existing accounts. Businesses that encourage their customers to move to electronic billing and ask them to turn off paper bills are also helping to reduce the costs of fraud," he added.
Van Dyke also said the cost of identity fraud mounts when there's more time to commit the crime. Online banking tends to reduce that time.
Paper-based customers typically see their accounts once a month and because of the nature of billing cycles, monthly statements can include activity that's more than a month old. Online banking consumers, on the other hand, typically view their accounts four times as often as paper-based customers.
Online customers are more apt to view their accounts even more often if it is set up with triggers that automatically e-mail them with bulletins when they make charges, exceed their credit limit, make payments and perform other transactions.
"If every consumer went out and did this tomorrow (paperless banking) the risk of identity theft would instantly drop by 10.4 percent," said Van Dyke.
Javelin advises consumers: