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Explainer: Identity Theft and how it targets the Banking Sector

Scammers and fraudsters leverage a plethora of schemes to conduct financial fraud. With a rise in internet penetration and the adoption of digital means, sophisticated forms of crimes have taken shape in the banking sector. One of the most pervasive forms of fraud is ‘Identity fraud’ which affects the customers and the bank equally. A study estimates that 45 percent of adult internet users in India faced identity theft in one way or the other in 2020.

Identity theft does more than simply compromising customers’ bank accounts. It costs them untold hours that force the customers to meticulously change their account passwords, contact customer services to have the charges revoked. The sophistication of such fraud attempts has forced financial institutions to address identity theft as a top priority.

There are varied forms of identity theft and frauds that take place in an online ecosystem and can wreak havoc on the financial status, from both the bank and customer’s perspective. Let us understand them in detail and how it targets the banking sector.


Scammers often send emails and pop-ups which appear that they’re from legit banks and credit card companies. The content of the message contains a link which when clicked directs the user to a fictitious site created to convince the users to reveal their personal information and banking details. The links directs to an exact-lookalike site of the official bank site.

Account Takeover Fraud

This type of fraud entails when someone else gains access and takes control of your accounts without your knowledge/permission. It can then be used for fraudulent transactions, gain access to other accounts and vital information, transfer money, undertake scrupulous exchanges. Research cites that account takeover fraud accounts for 53% of total frauds that take place online.

Senior Identity Theft

One of the most prevalent forms of fraud, the scammers target the elderly citizens (most vulnerable to cybercriminals) and tricks them to divulge important information. The scammers call to ask for passwords and personal information to gain access to the accounts by posing as bank officers and trustworthy allies.

Biometric ID Theft

Another very sophisticated form of fraud, Biometric ID theft involves stealing or spoofing a user’s physical or behavior traits to unlock a device- for instance voice recognition or facial recognition to unlock the device or tap into other devices. This form of theft is a goldmine for hackers for they get access to digital wallets and other important information.

Synthetic Identity Theft

One of the faster-growing forms of fraud, Synthetic Identity theft is an extremely sophisticated crafted fraud that uses personal consumer data (aadhar card numbers, PAN card, birthdays, addresses) to blend together to create new fictitious identities which are designed to look like real users with good credit history.  The scammers then opt-in for myriad financial frauds, opening if new bank accounts, apply for loans, default on credit card bills, all on the account of a real user’s name, birthday, and address (among others). 

There is a big playground for hackers and scammers to steal identity and commit a fraud on the pretext of a real user. Apart from opting for fraud solutions, it is imperative to keep a check and monitor the accounts for any suspicious activities.

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