Fraud Detection in Existing Accounts

Published: May 23, 2011 by Guest Contributor

By: Kennis Wong

When we think about fraud prevention, naturally we think about mininizing fraud at application. We want to ensure that the identities used in the application truly belong to the person who applies for credit, and not identity theft.

But the reality is that some fraudsters do successfully get through the defense at application. In fact, according to Javelin’s 2011 Identity Fraud Survey Report, 2.5 million accounts were opened fraudulently using stolen identities in 2010, costing lenders and consumers $17 billion.

And these numbers do not even include other existing account fraud like account takeover and impersonation (limited misusing of account like credit/debit card and balance transfer, etc.). This type of existing account fraud affected 5.5 million accounts in 2010, costing another $20 billion.

So although it may seem like a no brainer, it’s worth emphasizing that we need to have fraud account management system and continue to detect fraud for new and established accounts.

Existing account fraud is unlikely to go away any time soon. Lending activities have changed significantly in the last couple of years. Origination rate in 2010 is still less than half of the volume in 2008, and booked accounts become riskier. In this type of environment, when regular consumers are having hard time getting new credits, fraudsters are also having hard time getting credit. So they will switch their focus to something more profitable like account takeover.

In addition to application fraud, does your organization have appropriate tools and decisioning strategy to minimize fraud loss from existing account fraud?

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Fraud Detection in Existing Accounts

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