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2011 Small Business Owners (SMBO) Identity Fraud Report: How SMBO Fraud Rates Impact FI Revenues and Retention
Javelin Strategy & Research, May 2011, Pages: 32
In 2010, the overall rate of fraud and identity theft declined among all consumers and also among small business owners (SMBOs) for the various reasons cited in this report. However, the cost of this fraud hit SMBO constituents particularly hard. Javelin research has uncovered what was previously an undocumented cost to the industry of $5 billion as a direct result of this fraud. In addition, financial institutions (FIs) lost over $590 million in clients and revenue opportunities over a five-year period. By following the recommendations in this report, FIs and issuers can retain more clients, increase their revenue streams and improve cross-marketing opportunities.
Primary Questions
- What is the financial cost to the industry of fraud among small business owners and self-employed consumers?
- What is the rate at which small business owners are impacted by identity fraud?
- What are the most common items that are compromised in an identity theft involving a small business owner?
- What are the most common actions that are taken by those who defraud a small business owner?
- What is the average length of time that a small business owner is affected by identify fraud?
- What are the most common actions taken by small business after fraud occurs?
Additional Information
Methodology
Survey Questionnaire
To ensure that longitudinal trends could be observed, Javelin asked questions for this survey that were identical or very similar to those asked in 2009 and 2008. To observe current conditions, address emerging concerns and provide a foundation for observing future trends in small business owner fraud, we also added new questions to the survey.
The consumer data was collected as a representative sample of the US population. Javelin employed Opinion Access, one of the nation’s leading data collection providers, to conduct this survey.
Collection and Margin of Error
Javelin surveyed 5,004 randomly selected respondents via a standardized telephone interview on November 2010 for a larger ID fraud report. Data on all consumers was pulled from previous surveys done by Javelin. Questions asked on previous surveys and compared to the data gathered for small businesses were identical or very similar to those asked for this survey.
The sample of fraud victims who also identified themselves as small business owners or self-employed was relatively small, and this size is reflected in the margin of error. Javelin was able to make inferences from the data on the general trends of small business owners, and exact numbers and percentages should be regarded as such.
The margin of error for the total SMBO population for 2010 was 3.34% at the 95% confidence level. The margin of error for the SMBO fraud victims in 2010 was 9.56% at the 95% confidence level.
All dollar estimates for small business owners are calculated from ranges and incidence rates generated through Javelin’s ID fraud consumer survey. Fraud analysis is based on data as reported by consumers who are also small business owners or self-employed individuals. This self-reported data may be applicable to their business and/or personal accounts.
Definitions
In this report, a small business owner (SMBO) is a self-defined self-employed or small business operator. This report classifies fraud in the three categories originally defined by the Federal Trade Commission (FTC):
- Existing card accounts: This category includes the account numbers and/or the actual cards for existing credit cards or card-linked debit accounts.
- Existing non-card accounts: This category includes existing checking and savings accounts and existing loan, insurance, telephone and utilities accounts.
- New accounts: These are fraudulent new accounts or loans that are opened in the victim’s name and use the victim’s personal information.
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