What Impact Will No Saturday Delivery of Mail Have on Fraud
A few days ago, the United States Postal Service (USPS) announced that beginning in August, 2013, mail will no longer be delivered on Saturdays. The primary reason cited is that we can save $2 billion per year in costs. (click here for news article)
What I haven’t heard yet is what impact this will have in regards to fraud – especially when you consider account takeover fraud. Back in November of 2008, the FTC’s FACT Act went live which required all financial institutions in the United States to screen consumer requested address changes for the likelihood of account takeover identity theft.
One of the ways in which financials institutions could comply withe the new compliance requirement was to simply send a letter to the consumer at the new and/or old address. The notion is pretty simple. If someone fraudulently changed my address, I would then receive a letter saying “Dear Adam – we have record that you changed your address. If this is fraud – please give us a call”.
Of course, if it were only that easy. While the security letter notification does result in detecting some account takeover – we have not stamped out this type of fraud – as the total losses in the country are still in the billions.
When you think about the security letter notification, it might take a couple days for the letter to reach the consumer or it might take a week – especially if the letter is traveling hundreds and thousands of miles (fraudsters like to move people long distances by the way).
So – if we take away Saturday delivery – it is logical that on average the mail will be delivered later and therefore the detection rates will drop and fraud will go up. To what degree is the question.
Simple Math (plug in your own numbers)
- If you assume account takeover is a $10 billion dollar problem (annually), and
- You assume that 50% of account takeover is associated with an address change, and
- You assume that security letter notification catches half of the existing account takeover, and
- The current average delivery time for mail is 2 days, and
- Taking away Saturday delivery increases that average delivery time by 1/6th or 17% to 2.34 days:
This would suggest that we will see nearly a $500 million dollar increase in account takeover losses due to no more Saturday delivery. Change the assumptions a bit and we may be talking billions.
So much for that $2 billion savings. However, we can always come back and increase postage rates again so we can continue the spiral.
– Adam J. Elliott