Tag: customer experience

Although 2021’s continued focus is Americans learning to co-exist with COVID-19, automotive manufacturers and dealers will likely remember 2021 as the year of the chip. The semiconductor chip shortage is now expected to cost the global automotive industry $210 billion in revenue in 2021 and it is now forecasted that 7.7 million units of production will be lost in 2021, up from 3.9 million in the May forecast.1 Most experts agree that the shortage will likely extend into 2022. Chip Shortage Creates Additional Challenge for Dealers The current shortage in semiconductors has automotive manufacturers and dealers questioning whether to continue advertising or pull back. Some dealers view the increase in profits due to reduced inventory a signal to pull back on advertising spend. Other dealers, however, are thinking about long-term marketing strategy—and are continuing to advertise to help maintain brand exposure to customers. Foreword-thinking dealers and agencies should use this time to evaluate advertising strategies and plan for life after the chip shortage. Staying visible to customers in the interim is critical, so any advertising needs to be strategic in audience, medium and message. Here are three recommendations to help keep your brand in front of current and future consumers while using marketing dollars wisely. Identify Your Audience: Be Sure to Market to the Right People Knowing which consumers are most likely to purchase your vehicles is a key element of targeting with the promise of saving money by marketing only to those who are most likely to result in a sale. By evaluating prior purchase, demographic, and psychographic trends, including specific life events, dealership marketers can more effectively pinpoint demand as well as foster positive relationships. For example, knowing that a consumer recently added a new child to the family would be a great reason to send a coupon or make a call. Experian’s Automotive Intelligence Engine™ (AIE) will send “events” to your CRM to alert you of life events that can help develop and deepen relationships that lead to future vehicle sales. Additionally, AIE’s Market Insights enable dealers to grow market share by identifying the best prospects and matching them with the right messages. Strategically targeting both conquest and loyal customers with appropriate messaging keeps consumers engaged so they will remember your brand when they buy next. Leverage Your Brand Reputation Keeping your brand front and center has been the cornerstone of your marketing efforts and that shouldn’t change. Much like looking at family photos or reading an article about your favorite team, exposure to positive advertisements reinforces a consumer’s relationship with your brand. Whether the goal is to leverage your OEM driven brand awareness or support the consumer relationship with your dealership, positive messages from local dealers perpetuate ongoing loyalty. Experian’s Automotive Intelligence Engine generates powerful marketing strategies and efficient data-driven, omni-channel media plans with engaging, brand-specific messaging direction that resonates with consumers. Dealers and agencies use AIE to generate custom marketing plans that leverage data-driven market analysis, strategic audience creation, and powerful marketing strategy, creating messages that effectively reach the right prospects, with the right message, on the right channel. This end-to-end solution will reach consumer mailboxes, inboxes, screens, and computers where your best audiences spend their time. Continue to Foster a Positive Relationship with Consumers Marketing is more than selling a story.  Marketing initiates the consumer experience, especially in the digital world. From effective OTT ads to strategic social posts, successful dealerships often put their relationship with the community at the heart of their message. Simple images of your dealership delivering meals to local first responders and essential workers or posts showing the local high school marching band loading instruments into one of your trucks can convey a strong sense of community pride to your brand.  This sort of promotion impacts future consumer purchases well beyond any chip shortage. While the chip shortage has had a profound impact on how dealerships approach vehicle acquisition, price structures and marketing, it will eventually be resolved. The decisions you make now can have a big impact on your success when the shortage ends. Learn more about Experian’s Automotive Intelligence Engine™ (AIE). https://www.cnbc.com/2021/09/23/chip-shortage-expected-to-cost-auto-industry-210-billion-in-2021.html

The collections landscape is changing as a result of new and upcoming legislation and increased expectations from consumers. Because of this, businesses are looking to create more effective, consumer-focused collections processes while remaining within regulatory guidelines. Our latest tip sheet has insights that can help businesses and agencies optimize their collections efforts and remain compliant, including:   Start with the best data Keep pace with changing regulations Focus on agility Pick the right partner Download the tip sheet to learn how to maximize your collections efforts while reducing costs, avoiding reputational damage and fines, and improving overall engagement. Download tip sheet

The Telephone Consumer Protection Act (TCPA), which regulates telemarketing calls, autodialed calls, prerecorded calls, text messages and unsolicited faxes, was originally passed in 1991. Since that time, there have been many rulings and updates that impact businesses’ ability to maintain TCPA compliance.   Recent TCPA Changes   On December 30, 2020, the Federal Communications Commission (FCC) updated a number of TCPA exemptions, adding call limits and opt-out requirements, and codifying exemptions for calls to residential lines.   These changes, along with other industry changes, have added additional layers of complication to keeping compliant while still optimizing operations and the consumer experience.   Maintaining TCPA Compliance   Businesses who do not maintain TCPA compliance could be subject to a lawsuit and paying out damages, and potential hits to their reputation.   With the right partner in place, businesses can maintain data hygiene and accuracy to increase right-party contact (and reduce wrong-party contact) to keep collections streamlined and improve the customer experience.   Using the right technology in place, it’s easier to:   Monitor and verify consumer contact information for a better customer experience while remaining compliant. Receive and monitor daily notifications about changes in phone ownership information. Maintain compliance with Regulation F by leveraging a complete and accurate database of consumer information.   When searching for a partner, be sure to look for one who offers data scrubbing, phone type indicators, phone number scoring, phone number identity verification, ownership change monitoring, and who has direct access to phone carriers.   To learn more about how the right technology can help your business maintain TCPA compliance, visit us or request a call. Learn more

Lately, I’ve been surprised by the emphasis that some fraud prevention practitioners still place on manual fraud reviews and treatment. With the market’s intense focus on real-time decisions and customer experience, it seems that fraud processing isn’t always keeping up with the trends. I’ve been involved in several lively discussions on this topic. On one side of the argument sit the analytical experts who are incredibly good at distilling mountains of detailed information into the most accurate fraud risk prediction possible. Their work is intended to relieve users from the burden of scrutinizing all of that data. On the other side of the argument sits the human side of the debate. Their position is that only a human being is able to balance the complexity of judging risk with the sensitivity of handling a potential customer. All of this has led me to consider the pros and cons of manual fraud reviews. The Pros of Manual Review When we consider the requirements for review, it certainly seems that there could be a strong case for using a manual process rather than artificial intelligence. Human beings can bring knowledge and experience that is outside of the data that an analytical decision can see. Knowing what type of product or service the customer is asking for and whether or not it’s attractive to criminals leaps to mind. Or perhaps the customer is part of a small community where they’re known to the institution through other types of relationships—like a credit union with a community- or employer-based field of membership. In cases like these, there are valuable insights that come from the reviewer’s knowledge of the world outside of the data that’s available for analytics. The Cons of Manual Review When we look at the cons of manual fraud review, there’s a lot to consider. First, the costs can be high. This goes beyond the dollars paid to people who handle the review to the good customers that are lost because of delays and friction that occurs as part of the review process. In a past webinar, we asked approximately 150 practitioners how often an application flagged for identity discrepancies resulted in that application being abandoned. Half of the audience indicated that more than 50% of those customers were lost. Another 30% didn’t know what the impact was. Those potentially good customers were lost because the manual review process took too long. Additionally, the results are subjective. Two reviewers with different levels of skill and expertise could look at the same information and choose a different course of action or make a different decision. A single reviewer can be inconsistent, too—especially if they’re expected to meet productivity measures. Finally, manual fraud review doesn’t support policy development. In another webinar earlier this year, a fraud prevention practitioner mentioned that her organization’s past reliance on manual review left them unable to review fraud cases and figure out how the criminals were able to succeed. Her organization simply couldn’t recreate the reviewer’s thought process and find the mistake that lead to a fraud loss. To Review or Not to Review? With compelling arguments on both sides, what is the best practice for manually reviewing cases of fraud risk? Hopefully, the following list will help: DO: Get comfortable with what analytics tell you. Analytics divide events into groups that share a measurable level of fraud risk. Use the analytics to define different tiers of risk and assign each tier to a set of next steps. Start simple, breaking the accounts that need scrutiny into high, medium and low risk groups. Perhaps the high risk group includes one instance of fraud out of every five cases. Have a plan for how these will be handled. You might require additional identity documentation that would be hard for a criminal to falsify or some other action. Another group might include one instance in every 20 cases. A less burdensome treatment can be used here – like a one-time-passcode (OTP) sent to a confirmed mobile number. Any cases that remain unverified might then be asked for the same verification you used on the high-risk group. DON’T: Rely on a single analytical score threshold or risk indicator to create one giant pile of work that has to be sorted out manually. This approach usually results in a poor experience for a large number of customers, and a strong possibility that the next steps are not aligned to the level of risk. DO: Reserve manual review for situations where the reviewer can bring some new information or knowledge to the cases they review. DON’T: Use the same underlying data that generated the analytics as the basis of a review. Consider two simplistic cases that use a new address with no past association to the individual. In one case, there are several other people with different surnames that have recently been using the same address. In the other, there are only two, and they share the same surname. In the best possible case, the reviewer recognizes how the other information affects the risk, and they duplicate what the analytics have already done – flagging the first application as suspicious. In other cases, connections will be missed, resulting in a costly mistake. In real situations, automated reviews are able to compare each piece of information to thousands of others, making it more likely that second-guessing the analytics using the same data will be problematic. DO: Focus your most experienced and talented reviewers on creating fraud strategies. The best way to use their time and skill is to create a cycle where risk groups are defined (using analytics), a verification treatment is prescribed and used consistently, and the results are measured. With this approach, the outcome of every case is the result of deliberate action. When fraud occurs, it’s either because the case was miscategorized and received treatment that was too easy to discourage the criminal—or it was categorized correctly and the treatment wasn’t challenging enough. Gaining Value While there is a middle ground where manual review and skill can be a force-multiplier for strong analytics, my sense is that many organizations aren’t getting the best value from their most talented fraud practitioners. To improve this, businesses can start by understanding how analytics can help group customers based on levels of risk—not just one group but a few—where the number of good vs. fraudulent cases are understood. Decide how you want to handle each of those groups and reserve challenging treatments for the riskiest groups while applying easier treatments when the number of good customers per fraud attempt is very high. Set up a consistent waterfall process where customers either successfully verify, cascade to a more challenging treatment, or abandon the process. Focus your manual efforts on monitoring the process you’ve put in place. Start collecting data that shows you how both good and bad cases flow through the process. Know what types of challenges the bad guys are outsmarting so you can route them to challenges that they won’t beat so easily. Most importantly, have a plan and be consistent. Be sure to keep an eye out for a new post where we’ll talk about how this analytical approach can also help you grow your business. Contact us

As stimulus-generated fraud wanes, we anticipate a return of more traditional forms of fraud, including account opening fraud. As businesses embrace the digital evolution and look ahead to responsible growth, it’s important to balance the customer experience with the risks associated with account opening fraud. Preventing account opening fraud requires a layered fraud and identity management strategy that allows you to approve good customers while keeping criminals out. With the right tools in place, you can optimize the customer experience while still keeping risk low. Download infographic Review your fraud strategy

Over the past year and a half, the development of digital identity has shifted the ways businesses interact with consumers. Companies across every industry have incorporated digital services, biometrics, and other verification tools to enhance the consumer experience without increasing risk.   Changing consumer expectations   A digital identity strategy is no longer a nice-to-have, it’s table stakes. Consumers expect to be recognized across platforms and have a seamless experience every time.   89% of consumers use mobile banking 80% of companies now have a customer recognition strategy in place 55% of banking customers say they plan to visit the bank branch less often moving forward   Businesses are responding to these changing expectations while working to grow during the economic recovery – trying to balance consumer experience with risk appetite and bottom-line goals. The present state of digital identity   Digital identity strategies require both standardization and interoperability. The first provides the ability to consistently capture data and characteristics that can be used to recognize a specific individual. The second allows businesses to resolve an identity to a specific person – recognizing a phone number, user ID and password, or a device – and use that information to determine if the user of the identity is in fact the identity owner.   There are some roadblocks on the road to a seamless digital identity strategy. Issues include a lack of consumer trust and an ambiguous regulatory landscape – creating friction on both ends of the equation.   Recipe for success   To succeed, businesses need a framework that can reliably use different combinations of physical and digital identity data to determine that the person behind the identity is a known, verified, and unique individual. A one-size-fits-all solution doesn’t exist. However, a layered approach allows businesses to modernize identity, providing the services consumers want and expect while remaining agile in an ever-changing environment.   In our newest white paper, developed in partnership with One World Identity, we explore the obstacles hindering digital identity management, and the best way to build a layered solution that is flexible, trustworthy, and inclusive.   To learn more, download our “Capturing the Digital Evolution Through a Layered Approach” white paper. Download white paper

The pandemic changed nearly everything – and consumer credit is no exception. Data, analytics, and credit risk decisioning are gaining an even more significant role as we grow closer to the end of the global crisis. Consumers face uneven roads to recovery, and while some are ready to spend again, others are still dealing with pandemic-related financial stress. We surveyed nearly 9,000 consumers and 2,700 businesses worldwide about how consumers are stabilizing their finances and businesses are returning to growth for our new Global Decisioning Report. In this report, we dive into: Key business priorities in 2021 Financial concerns for consumers How to navigate an uneven recovery Business priorities for the year ahead The importance of the online experience As we begin to near the end of the pandemic, businesses need to prioritize technology that enables a responsive, flexible, efficient and confident approach. This can be done by leveraging advanced data and analytics and integrating machine learning tools into model development. By investing in the right credit risk decisioning tools now, you can help ensure your future. Download the report

As quarantine restrictions lift and businesses reopen, there is still uncertainty in the mortgage market. Research shows that more than two million households face foreclosure as moratoriums expire. And with regulators, like the Consumer Financial Protection Bureau (CFPB), urging mortgage servicers to prepare for an expected surge in homeowners needing assistance, lenders need the right resources as well. One of the resources mortgage lenders rely on to help gain greater insight into their borrower’s financial picture is income and employment verification. The challenge, however, is striking the right balance between gaining the insights needed to support lending decisions and creating a streamlined, frictionless mortgage process. There are three main barriers on the path to a seamless and digital verification process. Legacy infrastructure Traditional verification solutions tend to rely on old technology or processes. Whether a lender’s verification strategy is centered around a solution built on older technology or a manual process, the time to complete a borrower verification can vary from taking a day to weeks. Borrowers have grown accustomed to digital experiences that are simple and frictionless and experiencing a drawn out, manual verification process is likely to impact loyalty to the lender’s brand. Stale employment and income data The alternative to a manual process is an instant hit verification solution, with the aim to create a more seamless borrower experience. However, lenders may receive stale borrower income and employment data back as a match. Consumer circumstances can change frequently in today’s economic environment and, depending on the data source the lender is accessing, data may be out of date or simply incorrect. Decisioning based on old information is problematic since it can increase origination risk. Cost and complexity Lenders that use manual processes to verify information are adding to their time to close and ultimately, their bottom line by way of time and resources. Coupled with pricing increases, lenders are paying more to put their borrowers through a cumbersome and sometimes lengthy process to verify employment and income information. How can mortgage lenders avoid these common pitfalls in their verification strategy? By seeking verification solutions focused on innovation, quality of data, and that are customer-centric. The right tool, such as Experian VerifyTM, can help provide a seamless customer experience, reduce risk, and streamline the verification process. Learn more

The COVID-19 pandemic has created shifting economic conditions and rapidly evolving consumer preferences. Lenders must keep up by re-evaluating their strategies to accelerate growth and beat the competition. Here's how AI/ML can help your organization evolve post-COVID-19: With the democratization of AI/ML, lenders of all sizes can now use this technology to grow their lending and optimize for strategic growth. Register for our upcoming webinar to see how lenders like Elevate have incorporated this new technology into their business processes. Register now

The surge in digital demand over the past year reinforced the deep connection between recognition, fraud prevention and the online customer experience. As businesses transformed their operations to accommodate the rapidly growing volume of digital transactions, consumer expectations for easy, secure interactions increased at an even faster pace. That meant less tolerance for the interruptions caused by security and risk controls. We surveyed more than 9,000 consumers and 2,700 businesses worldwide about this connection for our 2021 Global Identity and Fraud Report. This year’s report dives into: Business priorities for the year ahead Why the digital customer experience remains siloed Consumer preferences that impact the digital customer journey Pandemic-era digital activities that have changed consumer expectations As we move forward into the rest of 2021 it’s crucial that businesses continue to focus on fraud prevention. In order to implement an effective fraud strategy that also makes it easier for customers to engage, businesses need to move away from a one-size-fits-all approach and focus on applying the right level of protection to each and every transaction. Download the report Review your fraud strategy

Digitalization, also known as the process of using digital technology to provide new opportunities for revenue and growth, continues to remain a top priority for many organizations in 2021. In fact, IDC predicts that by 2024, “over 50% of all IT spending will be directly for digital transformation and innovation (up from 31% in 2018).”[1] By combining data and analytics, companies can make better and more instant decisions, meet customer expectations, and automate for greater efficiency. Advances in AI and machine learning are just a few areas where companies are shifting their spend. Download our new white paper to take a deep dive into other ongoing analytics trends that seem likely to gain even greater traction in 2021. These trends will include: Increased digitalization – Data is a company’s most valuable asset. Companies will continue utilizing the information derived from data to make better data-driven decisions. AI for credit decisioning and personalized banking – Artificial intelligence will play a bigger role in the world of lending and financial services. By using AI and custom machine learning models, lending institutions will be able to create new opportunities for a wider range of consumers. Chatbots and virtual assistants – Because customers have come to expect excellent customer services, companies will increase their usage of chatbots and virtual assistants to facilitate conversations. Cloud computing – Flexible, scalable, and cost-effective. Many organizations have already seen the benefits of migrating to the cloud – and will continue their transition in the next few years. Biometrics – Physical and behavioral biometrics have been identified as the next big step for cybersecurity. By investing in these new technologies, companies can create seamless interactions with their consumers. Download Now [1] Gens, F., Whalen, M., Carnelley, P., Carvalho, L., Chen, G., Yesner, R., . . . Wester, J. (2019, October). IDC FutureScape: Worldwide IT Industry 2020 Predictions. Retrieved January 08, 2021, from https://www.idc.com/getdoc.jsp?containerId=US45599219

Preventing fraud losses requires an understanding of each individual fraud type—including third-party, first-party, synthetic identity, and account takeover fraud—and how they differ from one another. It’s only with a multi-layered fraud strategy that businesses can adequately detect and treat each type of fraud while maintaining the customer experience. When’s the last time you reviewed your existing fraud strategy? Download infographic Review your fraud strategy

Since 2002, lenders have been aware of the importance of Know Your Customer (KYC) and the associated Customer Identification Program (CIP) requirements. As COVID-19 has changed procedures and priorities for businesses and consumers across the board, it’s more important than ever for institutions to ensure their CIP process includes ongoing monitoring of identity risk.   What is CIP?   Standard KYC programs include a Customer Identification Program to verify and validate identities along with due diligence to assess the risks associated with each identity.   CIP defines the process by which a business collects data to establish a reasonable belief that the identity is valid, and that the individual is eligible to participate in our financial system. While this process works in conjunction with other fraud mitigation tactics, they serve different purposes. A good CIP program emphasizes the customer experience, regulatory compliance, cost control, and smart growth. Fraud mitigation focuses on ensuring that an eligible identity is being presented by its true owner, rather than as part of a scheme to acquire goods and services with intent to default on repayment obligations.   Businesses who focus on solely on fraud mitigation rather than complying with KYC and CIP regulations run the risk of potential harm to business reputation, and of course, financial penalties. Fenergo found that as of the end of 2019, global penalties for AML and KYC non-compliance totaled $36 billion.   CIP vs. Fraud Mitigation Many financial institutions equate a CIP program with efforts to mitigate fraud. It’s understandable, as both processes include emphasis on the accuracy of an identity as it’s presented by a consumer. It is assumed that only the true owner of the identity would possess the detailed information necessary to meet CIP requirements and therefore would not likely be committing fraud.   There was a time—prior to large scale thefts of stored information, personal details shared through social media and other behavior changes that made personal information very public—when this would have been true. Unfortunately, those days have passed and even an amateur criminal with limited experience and resources could find current, accurate identity information for sale online, information good enough to pass the CIP test and be considered a legitimate consumer.   The real challenge is that when they go through CIP, many real consumers may inadvertently provide true information that doesn’t meet the verification standard. This is a result of consumer lifestyle changes outpacing the sources of data used to verify the information they’ve provided. It makes sense; in most years roughly 13% of American adults change their address. New homes, job changes and changes in marital status impact a large number of people every day. Adding to the confusion—it’s life’s changes that prompt people to borrow and purchase. The result is that many of the people that are more likely to fail CIP verification are the very people trying to legitimately access financial services.   The result is that CIP verification often isn’t a challenge for those intending to commit fraud, but it can be for genuine consumers.   The challenges of CIP In a recent internal study, Experian reviewed the ability to pass a standard CIP strategy that assessed the accuracy of the name, current address, date of birth and Social Security number provided by a large sample of consumers. We then compared legitimate consumers to those later confirmed to have been identity thieves impersonating a victim. Consistently, the identity thieves were at least as proficient at passing CIP as their true-consumer counterparts.   In a second step, we applied a fraud score that looked for identity theft by assessing the past uses of the identities, their consistency, velocity and many other characteristics unrelated to the accuracy of the data. The difference between CIP verification and a fraud risk assessment was striking. Across the entire range of fraud risk, the percentage of records that passed CIP verification remained the same.   That said, CIP still plays a very important role in risk mitigation. In fact, CIP and fraud prevention are inextricable in financial services. Just as a CIP verified identity can still be fraud, a record that may appear to be low fraud risk may not pass CIP. Since both processes have existed side by side for nearly two decades, each presumes that the other is in place and both are necessary to detect and prevent fraud.   Striking a balance   CIP verification and fraud mitigation strategies are both necessary and important to protecting assets and the broader financial system from fraud. It’s important to leverage a layered approach where both eligibility and risk are assessed, and next steps for verification include resolution of identity discrepancies alongside verification that ensures an identity is not being misused for fraud.   Experian can help you confidently verify customer identities, understand and anticipate customer activities, and implement ongoing monitoring. If you’d like to set up a review of your current strategy or learn more about how we can help you with CIP and fraud mitigation to strengthen your ability to know your customer compliantly, let us know. Contact us

Over the last several weeks, I’ve shared articles about the problems surrounding third-party, first-party and synthetic identity fraud. To wrap up this series, I’d like to talk about account takeover fraud and how digital transformation has impacted it over the last year. What is account takeover fraud? Account takeover fraud is a form of identity theft that involves unauthorized access to a user’s online accounts to enable financial crimes. Criminals can obtain information in a number of ways, including the dark web, spyware and malware, and phishing to allow them to make unauthorized transactions with the user’s account. Fraudsters have made efforts to also gain control of mobile or email accounts so they can intercept one-time passwords or password change instructions to retain control of the account. Once fraudsters have control of one account, they can use it to access other personal information to breach additional accounts and graduate to full-scale identity theft. How does account takeover fraud impact me? Account takeover fraud is damaging to businesses and consumers. It leads to losses and well as resources invested to confirm fraud. The potential losses from account takeover fraud have spiked over the last year, in large part due to the opportunities created by the rapid increase of digital interactions and the influx of users interacting with merchants and financial institutions online for the first time. Aite research shows that 64% of financial institutions are seeing higher rates of ATO fraud attacks now than prior to the pandemic. – Trace Fooshee, Senior Analyst, Aite Group1 Account takeover can also be difficult to detect. Unlike credit card fraud where the true owner might quickly notice suspicious charges, an account takeover attack can go undetected for long periods of time. That’s because the criminal can change login and contact information, ensuring that the real accountholder doesn’t realize they’ve been compromised immediately. Solving the account takeover fraud problem A good account takeover fraud prevention strategy requires two things: frictionless customer experience and robust risk management. It’s clear that customers expect seamless interactions with merchants and lenders. At the same time, businesses need to be able to spot risky or suspicious behavior before a bad transaction occurs. That’s where a layered fraud management solution comes into play. With the right tools—including risk-based identity and device authentication and targeted step-up authentication—businesses can provide a good customer experience and only pull in staff for deeper investigations where necessary. With this strategy in place, businesses can easily recognize good customers and provide a more personalized experience, while at the same time combatting fraud – boosting growth and minimizing losses in the long run. I hope this series has helped provide insights into the different types of fraud and why each of them requires different treatment. To learn more about the risks of account takeover and how a layered fraud management solution can help protect your business and your customers, feel free to contact us. 1Key Trends Driving Fraud Transformation in 2021 and Beyond, Aite Group, December 2020

Recently, I shared articles about the problems surrounding third-party and first-party fraud. Now I’d like to explore a hybrid type – synthetic identity fraud – and how it can be the hardest type of fraud to detect. What is synthetic identity fraud? Synthetic identity fraud occurs when a criminal creates a new identity by mixing real and fictitious information. This may include blending real names, addresses, and Social Security numbers with fabricated information to create a single identity.   Once created, fraudsters will use their synthetic identities to apply for credit. They employ a well-researched process to accumulate access to credit. These criminals often know which lenders have more liberal identity verification policies that will forgive data discrepancies and extend credit to people who appear to be new or emerging consumers. With each account that they add, the synthetic identity builds more credibility.   Eventually, the synthetic identity will “bust out,” or max out all available credit before disappearing. Because there is no single person whose identity was stolen or misused there’s no one to track down when this happens, leaving businesses to deal with the fall out.   More confounding for the lenders involved is that each of them sees the same scam through a different lens. For some, these were longer-term reliable customers who went bad. For others, the same borrower was brand new and never made a payment. Synthetic identities don't appear consistently as a new account problem or a portfolio problem or correlate to thick- or thin-filed identities, further complicating the issue.   How does synthetic identity fraud impact me?   As mentioned, when synthetic identities bust out, businesses are stuck footing the bill.   Annual SIF (synthetic identity fraud) charge-offs in the United States alone could be as high as $11 billion. – Steven D’Alfonso, research director, IDC Financial Insights1   Unlike first- and third-party fraud, which deal with true identities and can be tracked back to a single person (or the criminal impersonating them), synthetic identities aren’t linked to an individual. This means that the tools used to identify those types of fraud won’t work on synthetics because there’s no victim to contact (as with third-party fraud), or real customer to contact in order to collect or pursue other remedies.   Solving the synthetic identity fraud problem   Preventing and detecting synthetic identities requires a multi-level solution that includes robust checkpoints throughout the customer lifecycle.   During the application process, lenders must look beyond the credit report. By looking past the individual identity and analyzing its connections and relationships to other individuals and characteristics, lenders can better detect anomalies to pinpoint false identities.   Consistent portfolio review is also necessary. This is best done using a risk management system that continuously monitors for all types of fraudulent activities across multiple use cases and channels. A layered approach can help prevent and detect fraud while still optimizing the customer experience.   With the right tools, data, and analytics, fraud prevention can teach you more about your customers, improving your relationships with them and creating opportunities for growth while minimizing fraud losses.   To wrap up this series, I’ll explore account takeover fraud and how the correct strategy can help you manage all four types of fraud while still optimizing the customer experience. To learn more about the impact of synthetic identities, download our “Preventing Synthetic Identity Fraud” white paper and call us to learn more about innovative solutions you can use to detect and prevent fraud.   Contact us Download whitepaper   1Synthetic Identity Fraud Update: Effects of COVID-19 and a Potential Cure from Experian, IDC Financial Insights, July 2020