The world of credit originations is constantly changing, mostly due to
advancements in
technology. It is not unusual for a borrower to apply for a new loan, and for the
lender to process their application and provide a response, entirely digitally
within a matter of seconds. Paperwork and human interaction (face-to-face
or by phone) simply slows the process for all involved.
While benefits of digital originations are vast, there exists an increased
risk with the acquisitions channel: fraudster interference. Banks and
lenders face a steep challenge to book more loans/accounts while also
countering
fraud. It is far easier for a fraudster to impersonate a victim or open credit
with a false/non-existent identity (i.e. synthetic) through a non face-to-face
channel where speed and ease of application is the priority.
This paradigm shift in originations calls for an increase of knowledge,
awareness and preparation.
Common Types of Application Fraud and Defense Mechanisms
|
Fraud Type
|
Primary Defense Mechanism
|
|
Third-Party Fraud (Identity Theft)
Traditional fraud application where a perpetrator uses a true consumer
profile to open credit accounts.
|
Decisioning Rules Utilizing Bureau Data / Alerts, Scoring / Modelling,
Device Scoring / Risk Assessment, One-Time Password to a Verified Phone
Number, ID Document Validation, Knowledge Based Authentication (although
effectiveness varies)
|
|
Synthetic Fraud
Involves the creation of a fake identity using information from multiple
true individuals or fabricated information. Frauds establish a credit
profile and apply for accounts with intent to defraud.
|
Decisioning Rules Utilizing Bureau Data / Alerts, Scoring / Modelling,
Device Scoring / Risk Assessment, ID Document Validation, Negative Files
/ Consortium Data, Velocity Rules
|
From initial application intake to processing and onboarding, it is important
to ensure that you have the defense mechanisms in place for your business.
While the elements in the table above are not needed for all clients,
careful consideration should be given to ensure that sufficient application
fraud prevention controls are in place to mitigate losses.
The
specialized services we offer help clients identify specific gaps within their process and
implement solutions that are “best-fit” for their environment.
Contact us
today for more information.