Lenders looking to stifle synthetic fraud are relying on tools that identify borrowers by their electronics.
High levels of fraud activity are coming from mobile devices, according to credit bureau TransUnion and its affiliate software company, Iovation, meaning lenders need to keep tabs on the devices some customers are using to steal vehicles.
Iovation CEO Greg Pierson says its tool prevents fraud by connecting illegal activity to mobile and laptop devices. Iovation was acquired by TransUnion in July 2018.
According to Iovation, just over half of all digital financial service transactions worldwide start on a smartphone, compared with 49 percent from a desktop. In 2014, just 28 percent of financial transactions occurred on a mobile device.
And fraudulent transactions from these devices are rising as well. Financial services companies that use Iovation's fraud products denied 41 percent of transactions last year on suspicion of fraud activity, compared with 21 percent in 2017.
Pierson said the Iovation system can flag a device previously associated with synthetic fraud — the creation of an identity using fake and real information, notably a Social Security number — or if it's been used to open an unusually high volume of loan accounts in a short time.
If a device is used to secure an auto loan or lease, a lender can also see if the device has been flagged by other banks as potentially fraudulent.
Lenders don't have to identify themselves, and are unlikely to, because that risks publicizing that they have been the victim of fraud. However, Pierson said, the more information a lender is willing to share about previous fraud attacks, the less likely another financial institution will fall prey to the same scam.
Auto lenders suffer material losses from synthetic identity fraud every year. As criminals become more adept at sourcing auto loans with various digital tools, lenders should consider updating screening tools to keep pace. With mobile platforms being one of the fastest-growing avenues for synthetic identity fraud, lenders would do well to invest in processes that tie electronic devices to perpetrators.