The fake account problem — why it’s everyone’s problem

Larry Ponemon

Larry Ponemon

User growth has become a key indicator of a company’s financial growth and sustainability. Even a company’s revenues can take a back seat to its user base as a metric that predicts future success. While it may have taken the telephone 70 years to reach 50 million users, in today’s fast-paced world companies can reach that same number in a matter of months.

As the user-base becomes a new form of currency, driving valuations of companies around the world higher and faster than ever before, it is becoming increasingly important to protect the integrity of these users. Information about who users are, what they do and how they do it is incredibly valuable. If not adequately protected this information can be (and is being) exploited.

The purpose of this report is to understand the scope of registration fraud, and how this epidemic is impacting companies and their users. It offers a glimpse into how companies verify and protect their users, and the damage that can be done when fraudulent users and fake accounts are allowed to exist within a user base.

Thanks to a sponsorship from Telesign, We surveyed 584 U.S. and 414 UK individuals who are involved in the registration, use or management of user accounts and hold such positions as product manager, IT security practitioner and app developer. Eighty-nine percent of these respondents say their organization considers its user base a critical asset with an average value of $117 million.

However, account fraud is becoming more prevalent because most organizations have a difficult time ensuring bona fide users and not bad actors are authenticated during the registration process. Only 36 percent believe they are able to avoid fraudulent registrations. Moreover, once fake users are registered, they spam legitimate users and often create more fraudulent accounts. Fake users also steal confidential information as well as engage in phishing, social engineering and account takeover.

The findings reveal why companies are vulnerable to the threats of fake users:

  • The authentication process is difficult to manage, according to 69 percent of respondents, allowing fake users to infiltrate the user base.
  • Fifty-eight percent of respondents say user convenience is most important to their fraud prevention strategy and 42 percent of respondents say ease of use is critical. Only 21 percent say security is important.
  • The majority of respondents (54 percent) say a phone number is enough to stop fraudulent registrations and protect account access.
  • Companies seem to be unwilling to crack down on fraudulent registrations. Forty-three percent of respondents say their company doesn’t worry about the registration of fake accounts to avoid friction in the registration process. Most companies do not have a formal method for determining whether a potential user is real.
  • Only 39 percent of respondents say their company is vigilant in determining that each user account belongs to a real person.
  • Only 25 percent of respondents believe the traditional username and password(s) is a reasonably secure authentication method for their users. However, 94 percent of respondents say they use passwords or PINs and 79 percent use email addresses to create an account(s).

To read the rest of the report findings, please download the PDF from

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