The last few months have pushed forward the adoption of digital selling, lending and servicing solutions at breakneck speed — and consumers are happy with the changes. However, with great digital services comes great responsibility to ensure that fraud doesn't grow to an even bigger problem.
The shift to digital allowed car dealers and lenders to keep employees and customers safe while maintaining a semblance of business continuity amidst the crisis. At the same time, the rapid, urgent shift to digitization has meant auto fraud — a perennial problem — had a chance to proliferate. Indeed, in the digital world, bad actors can learn the digital fraud measures that are put into place and beat the system.
According to TransUnion research, the percentage of high-risk global financial interactions has jumped by 11 percent since March. Auto finance has been hit particularly hard with fraud spiking by 30 percent each week since March, despite a drop-off in originations.
Given the potentially greater risk of remote auto transactions, dealers and lenders may be tempted to bring customers back to the dealership as soon as possible. But digital is here to stay.
Here are some of the measures dealers and lenders can take to maintain or expand their digital offerings while preventing fraudsters from entering the system:
- Get digitally verified: In June, the Social Security Administration introduced the Electronic Consent-Based SSN Verification (eCBSV) service, which enables financial institutions to accept an electronic signature from the purported holder of a Social Security number to verify whether the applicant's submitted name and birth date combination matches.
- Examine context clues: Details that are part of the application can provide valuable context cues. For example, looking at how long a customer's email address has been active can suggest whether a synthetic identity has been "manufactured" recently.
- Implement digital ID verification: Having a customer submit their ID electronically along with a selfie taken in "live" mode and holding up the ID can add another layer of valuable protection. The photo in the ID is automatically compared to the selfie using facial recognition technology, with accuracy rates nearing 100 percent.
- Maintain open channels with dealerships: Dealerships can share information about scams among themselves to prevent repeat incidents.
- Maintain open channels with lenders: Dealerships can turn to their captive lender for support in busting online fraud, as lenders may have techniques or resources unavailable to the dealers.
While the movement toward more digital auto lending and selling has been largely positive, it does present unique challenges when it comes to fraud. Yet digital channels also open up possibilities to catch fraud through automated, sophisticated technology that can rival or even beat the accuracy of in-person verification.
— Zviki Ben Ishay is CEO of Lightico, which provides digital solutions for customer interactions.