Application Fraud – Why credit scoring alone is not sufficient to detect Application Fraud.

Credit scorecards are the preferred application vetting mechanism in the developed markets. However, they are a distant prospect for most developing economies struggling to maintain a reliable record of consumer credit data over time. Often times, service providers rely on foot soldiers for physical verification at best and unreliable identity proofs at worst. While the scorecards and the physical verifications help, to an extent, to reduce the risk of lending, they are both far from being the ideal application fraud detection tools.

Take for example, an application with a stolen identity – the person “applying” will have accurate data matching against the credit bureau data resulting in a high score, however, the person applying will not in any way be the account holder whose identity has been stolen responsible for future payments. The same will also apply to applicants providing legitimate details – again passing the credit score with flying colors – but have no intention to pay for the services. In both examples above, it goes to show that credit scorecards, by themselves, are not very effective at curtailing application fraud.

Detecting and preventing application fraud requires a different technique. For example, to make connections with internal and external fraud data, even when the details provided in the application are used out of context; make use of fuzzy matching algorithms that can identify potential fraudulent applications with even the slightest variation in name and address to sophisticated foreign name variations used in a different market; look at historical patterns in applications that are prone to be high risk (not necessarily an indicator of fraud but would warrant manual verifications) etc.

Application Fraud detection should make use of the full spectrum of data available at a service provider’s disposal – confirmed fraudsters, suspected applications, previous attempted connections, bad debts, customers with irregular payments and in some cases even the data of good customers (to check for identity theft or account hijack) to ensure that no fraudster is let through the cracks of the mundane application process.

If Application Fraud is an area of concern for your organization, please do talk to us about our Application Fraud Detection tool, Atreus.  You can learn more about how Atreus can help you from the following earlier blogs. If you need a demo of the Atreus software please drop us a line to

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