As financing moves increasingly onto the digital stage, one fraud expert urged auto lenders to leverage more data and analytics beyond the common credit data and ID verification tactics used today.
Experian’s Senior Fraud Solutions Consultant Chris Ryan said auto lenders are particularly vulnerable to the use of synthetic identities, which he noted is on the rise in the U.S., as shown in Experian’s Global Identity and Fraud Report. Risk will continue to climb as consumers move into channels and frameworks that enable them to complete transactions online, from application to delivery, he said. “Fraud is a consistent threat that continues to grow and expand in the digital landscape,” Ryan added.
Physical biometrics and behavior metrics can help shield lenders from fraud. For instance, lenders should compare identity documents with photographs to confirm identities. They can also evaluate the cadence with which applicants type, as well as background information like the history of an email address or phone number.
“An auto lender is going to have to make a large financing decision remotely, based on what’s likely going to be a single interaction with an individual,” Ryan said. “Those layers of security to understand the digital presence, the biometrics, the history — to be able to get a composite picture in real time and still deliver a decision that’s actionable and immediate — are going to be crucial.”
CarMax recently announced plans to expand its omni-channel buying experience that allows customers to finance a car and have it delivered without ever entering the store, while a recent TransUnion study showed that 60% of consumers start the car-buying process online and pursue financing as the first step. Referring to those two cases, Ryan said, “those are seismic shifts in the way people obtain financing, and going to financing first before the vehicle is kind of a revolutionary concept.”
As such, lenders should look for flexible solutions with open architecture to anticipate the next fraud scheme. “Fraud will continue to move,” he said. “As we erect new defenses, it’s going to go somewhere else, so the successful solution is flexibility over the long haul.”
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