A new TransUnion (NYSE: TRU) analysis found that the growth in outstanding balances of suspected synthetic fraud in the credit card market is slowing in large part due to recently focused efforts by issuers to prevent such instances of fraud. Synthetic fraud involves fraudsters creating fictitious identities with the intent to open fraudulent accounts.
Outstanding suspected synthetic fraud balances rose 5.2% between Q4 2016 ($276.01 million) and Q4 2017 ($290.37 million). This was a far smaller percentage rise than what was observed the previous year when such balances rose 68.5% between Q4 2015 ($163.77 million) and Q4 2016. Despite the slowing of fraud balance growth in the credit card space, TransUnion found that the incidence of such fraud on credit applications remains similar to last year, moving from 0.59% at the end of 2016 to 0.60% in 2017.
While the growth of synthetic fraud in the credit card market is slowing due to proactive measures being taken by issuers, outstanding balances of suspected synthetic fraud identities increased 6.6% to $885.42 million in Q4 2017, up from $830.25 million in Q4 2016 for auto loans, credit cards, personal loans and retail cards combined.
“The threat of online fraud is significant as faceless digital application channels can make it more difficult to assess the veracity of the identity being used to acquire credit,” said Geoff Miller, head of global fraud and identity solutions for TransUnion. “High tech fraudsters armed with real personal information on good consumers apply with multiple identities for multiple products with multiple lenders within hours or days.”
The stakes are high in determining a genuine consumer from potential fraud. A December 2017 TransUnion survey found that 63% of consumers would consider no longer doing business with a financial institution or retailer if they were declined when applying for credit.
TransUnion has been at the forefront in addressing concerns of financial institutions by developing innovative solutions to help mitigate ever-changing fraud and identity management risks. As part of this commitment, TransUnion today introduced 25 new IDVision Alerts and data enhancements to its current collection of alerts, including new alerts for possible synthetic fraud, new or recently created identities and social security numbers that may be compromised. In total, TransUnion IDVision Alerts now provide more than 65 notifications to businesses about high risk, suspicious identities and other potentially fraudulent activities.
IDVision Alerts are part of TransUnion’s IDVisionSM suite of solutions, providing businesses with a holistic approach to fraud and identity management that minimize consumer friction, protect brands and maximize revenue.
“IDVision Alerts deliver new types of information within minutes of a loan application and are developed to capture today’s new and more sophisticated fraud schemes,” said Miller. “It also delivers new alerts that address mandatory red flags and Know-Your-Customer – KYC – compliance requirements.”
“Our proprietary algorithms have been proven to better understand which consumers are truly fraudsters – helping to ensure consumers with no intentions of fraud are seamlessly onboarded,” continued Miller. “This not only benefits the consumer, but clearly the lender as well.”
The industry has taken notice of TransUnion’s fraud solutions. Last October, TransUnion was one of three companies – and the only credit bureau – to be named an “Innovative Category Leader” by Javelin Strategy & Research in their inaugural Identity Proofing Platform Awards. The awards provide financial institutions and other identity-reliant businesses with a view into the identity proofing vendor landscape, to better assess their current capabilities against modern fraud threats and to facilitate the process of identifying potential new partners.
“TransUnion’s innovative approach to fighting fraud and identity theft has been recognized by many of our customers, and we are appreciative of the Javelin award. We recognize that there are a number of ways fraudsters can infiltrate organizations and our aim is to continue to try to stay ahead of them to ensure our customers can not only thwart these threats, but also ensure consumers are not negatively impacted by them,” said Miller.
Source: TransUnion Press Release