What is New Account Fraud?Watch Those Signups Closely. Not All of Them Are Real Customers.
What is New Account Fraud? Definitions & Overview for 2025
When your website gets signups, that’s a good thing… usually, at least.
It’s great to have legitimate customers sign up for accounts. But, it’s a disaster when your signups aren’t from real buyers.
Like the checkout and payment process, your signup flow is vulnerable to fraud. Left undefended, you could find yourself overrun with scammers who use synthetic identities and harmful automation to create invalid accounts and abuse your platform.
In this article, we discuss new account fraud by taking a closer look at what exactly it is.
New Account Fraud
In this guide, we’ll take a closer look at new account fraud. We’ll talk about what it is, how it works, and how prevalent it is. We’ll also provide real-life case studies and examine how you can detect and prevent your business from falling victim to account creation scams.
What is New Account Fraud?
- New Account Fraud
New account fraud occurs when a fraudster adopts a false identity to create a new payment card account. This can occur at either the banking or the merchant level, with fraudsters using stolen or synthetic identities to secure new credit or debit cards.
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New account fraud is a third-party fraud tactic. In a new account attack, the scammer will use stolen information to create a new user profile and try to get a bank account. The fraudster then uses that account to make purchases. Once the fraud is eventually discovered, the merchant will be left holding the bag.
A new account scheme starts with a fake payment account that, for all intents and purposes, looks like the genuine article. The data used to create the account may be stolen, obtained through devious techniques such as phishing, or purchased off the dark web for pennies. The fraudster may attempt to impersonate an existing cardholder, or create a synthetic “Frankenstein” identity with bits swiped from multiple individuals.
New account fraud incidents have been growing at an alarming rate recently. According to the Federal Trade Commission, fraud losses increased more than $5.8 billion from 2020 to 2021, representing a year-over-year jump of more than 70%.
Once a new identity profile exists, it can be used to secure a payment card with either an issuing bank or a merchant. In some cases, the fraudster will open multiple accounts at different banks simultaneously. Using the newly acquired cards, the crook starts shopping (usually online, where customer validation tends to be more lax).
Fraudsters who engage in new account fraud know that the scam will eventually be detected. So, their goal is to max out the credit accounts and disappear before getting caught. Not surprisingly, new account creation fraud generally occurs within 90 days of securing a new card.
