What Is New Account Creation Fraud and How to Combat It
The convenience and prevalence of online transactions comes with many risks, none more so than new account creation fraud. This type of fraud is the nexus of various identity theft schemes, including data breaches, consumer scams and social engineering. Powered by unprecedented levels of identity theft activity, criminals are exploiting new account creation for financial gain by:
- Opening new credit accounts using another person’s identity
- Obtaining credit with a fictitious or synthetic identity for the sole purpose of committing fraud with no intention of paying back the loan (also known as: bust out fraud)
- Opening an account for the purpose of depositing stolen, forged or counterfeit checks for another party (known as money mule fraud)
- Creating multiple accounts to use a retail promotion or gaming bonus by altering personal information
- Misrepresenting information about oneself or an insurable asset to receive a reduced insurance premium
- Falsifying information about oneself to benefit from government loan or stimulus programs
Not only does this cause significant financial and credit history harm to individuals whose identities are compromised, new account creation fraud leads to financial and reputational losses for organizations. It’s a major challenge as it often goes undetected until it has inflicted substantial financial damage. Combating it requires investment in stronger identity risk signals and proactive tools to streamline identity verification at the point of new account creation.
What is new account creation fraud?
New account creation fraud, often referred to as "account origination fraud" or “new account fraud (NAF),” occurs when someone uses stolen or fabricated personal information to create a new account, typically with a financial institution, retailer or service provider. Often initiated via a scam or personal information obtained from a data breach, this type of fraud can involve various forms of identity theft. For instance, a fraudster may use a person's genuine details without their knowledge, or they may combine stolen identity elements like names, addresses and Social Security numbers to create completely synthetic identities.
How risky are new account creation transactions?
According to TransUnion’s recent H2 2025 Update: Top Fraud Trends, 8.3% (or 1 in 12) of all new accounts created in H1 2025 were suspected to be fraudulent. This is a 28% increase over H1 2024, once again confirming that account creation is the riskiest step in the customer journey.
This significant percentage of suspected Digital Fraud was nearly double that of account login fraud, typically leading to ATO fraud, and is approaching three times as high as financial transactions where money was exchanged.
Consumer journey stages measured
- Account creation: Account signup, registration and loan origination
- Account login: Login and failed login events
- Financial transactions: Purchases, withdrawals and deposits
What’s the cost of new account creation fraud?
The cost of new account creation fraud varies by industry, but it’s a multibillion-dollar problem for businesses and consumers alike. According to Javelin’s 2025 Identity Fraud Study, new account fraud reached $6.2 billion in 2024, up 18% from 2023. The number of victims also rose significantly, from 3.2 million adults in 2023 to 4.2 million in 2024.
Synthetic identity fraud exposure is a $2.7 billion problem for US financial services firms, remaining near record-high levels since TransUnion started tracking it in 2009. As mentioned, in this scheme, criminals combine stolen or harvested identity data with other fictitious data to create completely fabricated synthetic identities. They use credit account holders or financial institutions to establish legitimacy for a synthetic identity by building credit history — enabling a fake identity to look and act like a real person. With a legitimized synthetic identity and access to credit in-hand, criminals can attack any organization and walk away with money, merchandise or services at will.
In an industry like telecommunications and technology, criminals use synthetic identities to commit subscription fraud tied to installment plans for mobile handsets and devices. The Communications Fraud Control Association (CFCA) reported a 12% increase in telecommunications fraud between 2021 and 2023, noting that “42% of the top ten fraud methods are related to telecommunication account manipulation rather than technological methods, a big shift from 2021 when the top frauds were spoofing, call-back schemes, SMS phishing and pharming, subscription fraud and IP PBX hacking…1 in 9 applications are believed to be fraud, with Asia and South America being the top destinations for stolen devices.”
New account creation fraud enables criminals to ultimately perform account takeovers and directly control accounts for a variety of reasons from accessing credit to opening mule accounts within financial institutions to opening many accounts to commit promotion abuse within gaming and retail.
What’s the risk of new account creation fraud to businesses?
New account creation fraud is challenging because unlike many types of fraud, there are degrees of acceptable risk when acquiring new customers — a primary objective for most organizations. A retailer may be willing to live with a certain level of promotion abuse if it means more sales. On the other hand, credit card fraud is completely unacceptable due to chargeback costs and the financial impact on the legitimate card holder. Online commerce platforms look for constant growth in users and a seamless customer experience that can lead to the creation of fake accounts. But, they also depend on trust to keep customers engaged and have little tolerance for third-party seller scams occurring on their platforms.
The H2 2025 update of top fraud trends revealed that online communities, gaming, retail, video gaming, and travel & leisure are among the industries with the highest rate of suspected Digital Fraud at the new account creation stage, ranging from 21.6% to 12.6%. These types of businesses share similar characteristics: high transaction volumes, highly promotional marketing to attract new customers, and limited identity verification process for new account creation.
Reasons new account creation fraud is so high in some industries
Many organizations are willing to prioritize sales and convenience over fraud prevention through these common practices:
- Customers often create new accounts to take advantage of account opening offers or benefits
- New accounts often require only an email or phone number to open
- There is often lax or no identity verification during the new account creation process
- Global operations often make it more difficult to verify identities in different countries and jurisdictions
Look to financial services to reduce new account creation fraud
When considering how to bolster protection from new account creation fraud, the financial services industry offers a solid track record. That could serve as a benchmark other industries strive to match. Some of the best practices developed by financial services could be adopted broadly to protect organizations in other industries:
- Borrow components from regulatory best practices: Stringent identity verification regulations like know your customer (KYC) in the financial services industry provide more protection for consumers and help prevent fraud. Even if an industry is not required to adhere to a regulation, it can be beneficial for organizations to seek solutions that support identity verification, KYC, document verification or device-proofing to improve confidence in new accounts.
- Use more sophisticated fraud tools: Advanced security measures, such as biometric authentication, multi-factor authentication (MFA) and synthetic fraud detection, provide additional layers of identity verification. Incorporate advanced features like MFA or synthetic fraud models into new account opening protocols.
- Implement sophisticated risk mitigation strategies: Multilayered risk assessment tools and models help detect potentially fraudulent activities, as well as suspicious patterns and behaviors to protect consumers and their organizations. Add more sophisticated fraud detection signals like device-to-identity linkages, email and phone verification, and device-proofing to drive smarter step-up challenges during new account opening.
- Establish reputation and trust as key brand values: Consumers value more protection against fraud, and financial institutions must act accordingly. Prioritize account security and fraud prevention to establish and maintain customer trust and credibility in your brand.
Now is the time to protect from new account creation fraud
Many industries have higher levels of suspected fraud than financial services at new account creation due to conflicting business goals, customer experience realities, and limited ability or requirement to invest in more sophisticated fraud prevention strategies. However, to detect, identify and mitigate costly impacts of new account opening fraud, organizations across all industries need to access more relevant risk signals that can help them better assess fraud at this earlier stage in the customer lifecycle.
