Smartphones and social media remain relative new frontiers for consumer banking, and they pose new risks.

Younger customers, who are more confident about posting personal details and are among the heaviest smartphone users, are particularly at risk.

But while the incidence of identity theft is increasing, cost to consumers has stayed about steady, according to Javelin Strategy & Research's 2012 identity fraud report.

"We know the risks are still prevalent, but when you look at improved response time and reduced cost for consumers, as well as increased consumer awareness, the banks … have done a good job with education," says Robert Dudacek, senior vice president for Wells Fargo & Co. insurance.

Two things that have helped customers stop fraud earlier are more frequent online account monitoring and alerts sent to mobile phones, Dudacek says.

Javelin surveyed 5,000 consumers 18 years and older in October. Wells Fargo was one of the study's sponsors.

Incidents of identity theft increased 4.9% in 2011 compared with 4.35% a year earlier. The cost of fraud per incident decreased 20%, to $1,513, though the cost to consumers increased only about 2%, to $354 from $346 a year earlier.

There were 11.6 million adults who experienced fraud in 2011, up 14% from 10.2 million adults in 2010. However, the total fraud cost was down 10%, to $18 billion.

Social-media users need stronger security education, Javelin found. Nearly 70% of consumers with public profiles posted birthdays with months and years. More than 60% posted the names of their high schools, and more than half posted their email addresses. Fraudsters could exploit all of this information.

"When we dug deeper, we found that people are over-sharing specific bits of personal information," says Jim Van Dyke, Javelin president and founder.

The most active social media and smartphone users, those 18 to 24 years old, take about twice as long to detect fraud as other groups, Dudacek says. That may be related to them having a false sense of security around social media and electronic channels, he says.

Nearly 90% of bank risk executives said they believe mobile banking will create the next big wave of financial-services fraud, says Julie Conroy McNelley, a senior analyst at Aite Group. McNelley surveyed 24 financial institutions in November.

In particular, younger users don't distinguish between the lax security on Facebook and their bank accounts.

"This group is much more tied to smartphones, and they have an expectation of immediacy with their services. And financial-services institutions are innovating and trying to come up with solutions that react to this," McNelley says.

Slightly more than one-third of smartphone owners use a security password to protect their phones, according to Javelin's study. One-third store login credentials on their devices, and 16% had installed software that could remotely wipe data in their phones.

However, nearly 70% updated their operating systems when updates became available. These updates commonly include security fixes.

Consumers also were victims of numerous data breaches in recent years. Fifteen percent of consumers reported receiving data-breach letters in 2011 compared with 9% who did a year earlier.

"Four years ago, if you received a data breach notification letter, you were three times more likely [to become] a fraud victim. The following year it was four times more likely, and last year it was six times," Van Dyke says.

This year, that group is nearly 10 times more likely to fall victim to fraud, Van Dyke says.

Generally speaking, Javelin's data correlate with what other fraud and security analysts say they have seen on the retail side, though not for small businesses and larger corporations.

More than 12% of small businesses had funds stolen from their accounts, according to a September survey of 210 small-business owners by Gartner Inc., with about 63% saying the funds had been stolen through electronic funds transfer. The average amount stolen was $3,400.

"Business accounts have a lot more money and facilities to get money out, like payroll and wires and near real-time wires and more ACH functionality," says Avivah Litan, Gartner vice president and distinguished analyst.

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