Fighting Fraud in Turbulent Times … Starting with Identity

COVID-19 has created a new normal—at least for now. Here in Manhattan, our kids are stir crazy at home and outside, the streets are as silent as a snowy Sunday though it’s a Spring weekday.

While we are all concerned about the health of our community, we are also watching closely as the market experiences the most extreme retraction in decades. The Wall Street Journal forecasts 5 million lost jobs in the first weeks after isolation, and a survey of 34 leading economists say a recession is almost certain.

From a fraud and financial crime perspective, there are a few crucial considerations:

1. While We Panic, Fraudsters Focus

As consumers dash through stores buying up toilet paper, fraudsters remain focused.

Across the Socure customer base, we see early signs of an uptick in fraud attempts, particularly in the credit card issuer space, as well as slimmer indicators in lending.

Unfortunately, this is not surprising. In the last recession, FinCEN reported a 28% rise in identity theft from 2007 to 2008, and a 41% increase in combined credit card fraud and identity theft during the same period.

As my friend Frank McKenna points out in his recent Frank on Fraud blog outlining potential COVID scams, panic combined with lots of time, idle hands, and access to rich digital banking channels will only add to fraud attempts. Likewise, my colleague Anthony Winslow, examines the fraud scams that are likely to follow once the government cuts stimulus checks and agencies disburse relief funds. In Tony’s view, we may also see an uptick in DDA fraud attempts as fraudsters seek to establish new accounts with digital banks to steal checks.

2. Multi-Dimensional Identity Tells a Consistent Story in a Changing World

Fraud teams must be more vigilant than ever in monitoring the performance of their models, to detect early signs of these attack patterns. Since 2008, financial institutions and fintechs have expanded enrollment capabilities in digital channels, so fraud strategies must begin with real-time risk assessment of day zero identities.

Tools must leverage a multidimensional view of identity, drawing from a wide breadth of data sources. Using machine learning and automation to correlate a wide set of data points provides a consistent and reliable story of consumer fraud risk and reputation even as fraud attack patterns rapidly change.

It’s also key to work with fraud and identity vendors that build predictive models based on performance data from a consortium of customers. These models are designed to reflect market-wide fraud trends.

3. Fraud Cannot Become a Cost Center in the Storm

As organizations look to strengthen their fraud strategies, they will also need to consider the financial strain their larger organizations are facing.

In a downturn, fraud teams must consider strategies that return funds to the balance sheet. That return on investment will be linked to both fraud loss prevention, as well as reduction in customer friction and increased enrollment.

The concept of balancing fraud prevention against customer friction is clearly not new. But as dependence on digital channels widens, it’s clearer than ever that fraud teams, product innovators and customer acquisition leaders must integrate strategies that focus on further unlocking functionality and customer acquisition while ensuring fraud prevention. As you build fraud strategies, seek to work with vendors that will assist with a consumable return-on-investment exercise to make the case for key stakeholders.

We look forward to supporting our partners in financial services and beyond as we tackle new and interesting times. As always, please feel free to reach out to me directly at rivka@socure.com