Identity Theft and Fraud: Evaluating and Managing Risk

Chapter 10: Consumer and Business Perspectives

204 “Too bad all the people who know how to run this country are too busy running taxi cabs or cutting hair.” —George Burns Reducing the risk from identity theft is very much the responsibility of both individuals and organizations, who must also become aware of and take certain steps to protect themselves against identity theft and fraud threats. This chapter deals with several of the specific risks from IDTF that have not been covered elsewhere in this book. For consumers, we first examine perceived risks in shopping that influence customers in their choice of shopping venue. Then mortgage fraud and its ramifications to consumers is reviewed. This is an example of a high-impact but low-probability risk for consumers. Medical identity theft and fraud (MIDTF) is a relatively low-profile crime in Canada, because insurance payments are managed primarily by provincial authorities and incidents are unlikely to be made known to consumers . In the United States, where consumers are more likely to know about or to be billed directly for medical costs, MIDTF is more of a public concern. These issues are reviewed in some detail. IDTF risks to organizations are also covered, including data breaches, organizational costs, organizational responses to security threats, risks through outsourcing and potential risks through the disposal of electronic goods. Chapter 10 Consumer and Business Perspectives Consumer and Business Perspectives | 205 Risks to Individuals Perceived Risks in Shopping Shopping in a retail store can involve perceived risks due to the high media profile that terrorism, mugging and theft have received in the recent past, which may encourage consumers to stay home and shop online, where perceived risks are different but possibly more acceptable. Feelings of insecurity in any place where large numbers of people congregate, like shopping malls, can encourage people with low physical risk tolerance to go elsewhere or to shop at home (Predmore, Rovenpor et al. 2007). But there are a number of different perceived risks that have been identified in the consumer literature: functional, physical, financial , social, psychological and time (Evans and Berman 2005). One study of consumers (Predmore, Rovenpor et al. 2007) found that physical risks from shopping in retail stores did have an impact on the behaviour of US women consumers. In the United States, more men than women were concerned about financial risks and identity theft from shopping online, but men were less concerned about physical risks from shopping in retail stores. Online shopping also raises expectations of quick product delivery, which would result in time savings, although receiving damaged goods and/or having to return unsatisfactory goods can eliminate any such time savings, thus encouraging shoppers to face the risks of physical shopping. Perceptions of store brand quality and familiarity tended to reduce perceived risks from shopping online. Many shoppers believe that they must inspect products physically before purchasing, especially those that are not commodities or that have standard forms, like books. This is an indication that stores with both an online presence and a physical retail outlet are more likely to be considered safe for online shopping. Online retailers, however, must also focus significant efforts toward reducing perceived financial and identity theft risks to improve their attractiveness to online shoppers. 206 | Identity Theft and Fraud Consumer surveys show that the threat of identity theft affects consumer behaviour. A 2005 US survey found that nine out of ten Internet users had changed their behaviour because of the threat of identity theft. 25% said that they had stopped shopping online, while 29% said that they had reduced their purchasing frequency (Princeton 2005). In Canada, a 2008 survey found fewer, but still significant, changes, with 5% of consumers saying that they had stopped shopping online altogether and 15% saying that they had reduced the amount of shopping that they did online (Sproule and Archer 2008). These results indicate that the threat of identity theft is having a significant and detrimental effect on businessto -consumer e-commerce. If consumers do not trust electronic markets, then businesses cannot benefit from the productivity and market gains promised by e-commerce. In response to the increased risk of losses through online payments, the UK payment card industry has tightened retailer compliance by requiring retailers to encrypt customer names and account details on all card-based transactions. Although a significant additional expense to retailers, they are required to install firewalls and intrusion detection and prevention systems to protect their networks against...