3 methods for early detection of synthetic ID fraud
Fraud related to credit application, loan application, and any kind of on-boarding platform to access financial services or assets is on the rise since the world has been besieged by the coronavirus. This means that a seamless member experience with top-notch security is a must for credit unions in today’s digital world, particularly as digital payments skyrocket. “Application fraud is not only here to stay; it will get worse before it gets better,” according to a report from Aite Group. Thieves know where the money is and where to strike, so those in the financial services sector must be particularly vigilant. Last year, $31 billion in unemployment funds were found stolen by scammers in California alone. The battle against smart cybercriminals is never-ending. But some of the technology and services available to credit unions are getting smarter. And thankfully, this doesn’t always mean sacrificing a smooth user experience.
“Application fraud continues to be a major issue for financial institutions,” Aite reports. “It also remains among the most compelling ways to reduce losses while also supporting growth in revenue and improving the client experience in what is arguably the most important client-facing process.” To understand what technologies can effectively reduce losses, we should consider the different approaches fraudsters can take. Application fraud can be automated through bots, or manually through call centers paid to commit the fraud. While the manual approach is expensive, it’s also more effective because fraudsters can bypass the security measures put in place to thwart the bots.
Most fraud prevention tools can only detect simple bot activity. KYC (Know Your Customer) controls fail because the identity is either an existing one–which raises no questions–or a synthetic one–that can’t be compared to any previous data–and there is no other reference to know it is not legitimate. Similarly, while credit history reviews are valuable when legitimate users are involved, they don’t work with regard to synthetic identity fraud. And this deficiency is only getting worse. Aite states, “Synthetic identity fraud accounts for the lion’s share of losses associated with application fraud, which is projected to reach more than $4.1 billion in the U.S. by 2023.”
So what can your credit union do to get out ahead of this? Start by following these methods to detect fraud early:
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