Fraud. It’s a term that is often identified by the abuse types or tactics used by perpetrators: account takeover, payment fraud, malicious content, and synthetic ID. This siloed use of terminology has contributed to the belief that fraud activity is siloed. However, fraudsters don’t rely on single activities or single types of abuse. Today’s fraud network is comprised of various, interconnected relationships of different abuse tactics.
In the new digital-centric world, fraudsters are leveraging vast amounts of digital content for the purpose of false information, financial fraud, and phishing attacks. Using different web forums, marketplaces, and social media channels across the internet, fraudsters create spam and scam attacks to trick everyday consumers into sharing sensitive information — later sold or used to steal rewards, store credit, or even cash and identities.
Seeing Fraud from a Holistic Viewpoint
Whether it’s ransomware, loan stacking, loan fraud, payment fraud, or something else, fraudsters don't take a singular approach to attacking businesses. Therefore, there's no such thing as a single fraud solution. Addressing the various forms of fraud requires auto lenders and dealers to leverage the right tools at each stage of the customer journey.
Intercepting fraud requires a multidimensional approach. Using multiple fraud point solutions is overly complex and difficult to manage. Lenders and dealers today are leveraging solutions that provide a holistic view of their fraud risk, correlated across a growing number of channels. These solutions use advanced analytics, artificial intelligence (AI), machine learning (ML), and intelligent data orchestration to provide risk managers with insights to help manage fraud decisions throughout the customer journey.
Sophisticated Fraud Alerts
As organizations shift more of their operations to digital, fraudsters are focusing more of their activities on things like new account fraud and often creating new, fraudulent identities or synthetic identities. Synthetic identity fraud is built on the foundation of a fictitious identity, often created with a combination of real data and fabricated information. Fraudsters then attempt to gain credit with the fictitious identity to monetize it.
These manufactured identities are used for short-term gain and then abandoned. When this is the case, there is no one for the lender to contact to collect funds. This poses a problem for organizations as these misclassified non-payment matters get sent to collections, further wasting resources. Lenders and dealers are now setting up sophisticated alert solutions that can help protect businesses from losses associated with synthetic identity fraud while minimizing false positives. Delivered in batch or real-time, the alerts use patent-pending ML algorithms to detect synthetic identity behaviors and patterns at various entry points.
Advanced Identification and Payment Solutions
Mobile devices are the new normal for today’s on-the-go consumers. The changes in technology and offerings to accommodate mobile consumers drive even higher expectations to transact with ease. If their experience aligns with their expectation, consumers are more likely to complete transactions and repeat them.
Low friction experiences are expected. When consumers encounter friction in a transaction, they tend to abandon it. This leads to both lost revenue and the opportunity to gather valuable consumer insights. As such, lenders and dealers are using API-based payment enablement tools that streamline the way consumers make online payments. These businesses can provide real-time payment options leveraging a suite of sophisticated data to the consumer while limiting risk of card-not-present fraud.
Aside from payment options themselves, lenders and dealers are now leveraging sophisticated data from partners and carriers to authenticate a consumer’s identity. This allows for pre-population of consumer data during online checkout or form completion, providing a simpler experience with less friction. Businesses then benefit from quicker and easier digital consumer verification and lower transaction abandonment.
While this technology is important, dealers and lenders are going one step further. To fight fraud effectively without disrupting the consumer’s experience, organizations are changing how they approach identity authentication and fraud prevention in today’s digital era. Through layered authentication practices, dealers and lenders can vet consumers properly, accurately, and thoroughly at the first point of contact to develop a baseline for subsequent interactions with each consumer. This enables businesses to determine if consumer behavior is consistent or if there's an anomaly that might indicate fraud. The impetus to get digital authentication right the first time provides dual protection for the business and the consumer.
Fraudsters know there is no single-source tactic to steal a victim’s identity or perpetrate into the inner system of a business. Businesses involved in the automotive industry are also realizing that there is no single-source tactic to fraud prevention and are now taking important steps to cover all possible bases to thwart the rising threat of fraudulent activity.
Angelica Jeffreys is a visionary sales leader-automotive financial services executive at Equifax.