“First-party fraud will be responsible for an estimated US $18.5 billion in credit losses for Financial Institutions around the globe in 2012, this is expected to grow to US $28.6 billion by 2016.” AITE Report: First-Party Fraud: The Global Battle Against Diabolical Charge-Offs, October 2012.
Application fraud is the deceptive practice of applying for products or services with an intent to defraud service providers. Application fraud is pulled off in many ways – using own identity but with subtle changes in personal details to circumvent normal personal rules checks; creating fake, synthetic or multiple identities that pass off as genuine; stealing identities to obtain new products or services etc. The list seems to grow with every passing year.
First party fraud or application fraud is often classified as credit loss (worse still as bad debt) rather than fraud. It can be a tricky issue to deal with, particularly when there is pressure to sell more – how can your sales agent distinguish the good customers from the opportunistic or organised criminals – how can the online store distinguish a mule using genuine details to pass off credit checks.
Staying ahead of the fraudsters requires sophisticated fraud prevention tools. Credit checking alone is not sufficient as there are vast swathes of mules and opportunistic fraudsters ready to use their own identity to obtain services with an intent to defraud the service provider. In such cases, a service provider (e.g. Telecommunications Company) can part with several new subsidized phones to a fraudster in a single day as every single credit check would come out clean.
Most organisations rely on the age old rules based system for detection (i.e. once the fraud has already happened). However, history has taught us that prevention is better than cure. Preventing application fraud cannot simply be relied on traditional rules based systems that the fraudsters have come to circumvent easily. It requires sophisticated techniques to make connections with internal and external fraud data, even when the details provided in the application are sparse, inconsistent or used out of context; make use of fuzzy matching algorithms; use historical patterns in applications that are prone to be high risk and so on. Most of all, it should be real time, at the point of application.
First party fraud cuts across industries – Financial Services, Insurance, and Telecommunication companies are hit the hardest by application fraud. Identifying and eliminating application fraud can cut fraud losses instantly and at the same time improve customer experience by providing a faster lending or credit decision to legitimate customers.
About Atreus – Application Fraud Prevention Tool
Atreus is a powerful fraud prevention tool used for controlling first party application fraud. Atreus is designed with a simple principle that the best way to control fraud loss is to prevent fraud in the first place. Please read our other blogs to learn more about Atreus and its capabilities but please feel free to drop us a line (firstname.lastname@example.org) if you would like to see a live demo.
If you would like a referral to one of our existing clients using Atreus, please let us know. We would be more than happy to introduce them to you to have an independent assessment of Atreus.