Experian is looking to help stop fraudulent sales at auto dealerships right at the start of the transaction.
The company’s Fraud Protect is a web-based application introduced last month that enables dealers to detect and prevent fraud while maintaining a positive shopping experience for the consumer.
The system allows automotive dealers to send customers—both online and in-person—a secure, dealer-specific URL via text, email or QR code. Once customers provide identity documentation, the information is cross-referenced against a wide array of data assets, including historical identity data and credit usage patterns, to identify potentially suspicious activity.
Experian’s Tools
According to Kanchana Sundaram, senior director of product and innovation at Experian, the program is borne out of the company’s years-long investment in fraud analytics solutions.
“We’ve been at the forefront of working with thousands of data sources, leveraging our relationship with lenders and dealers,” said Sundaram.
The tool is needed as the fastest growing financial crime is synthetic identity fraud, according to the Federal Reserve. According to a recent Experian report, nearly 70% of businesses reported that fraud losses have increased in recent years. And with the pandemic accelerating the use of the digital tools, the automotive industry has been specifically targeted.
Fraud Cases
“One of the biggest places where fraud starts occurring is within digital tools,” said Sundaram. “While you’re facilitating the convenience of not having to come into the dealership for out-of-state transactions, it is a hotbed of activity for fraudsters.”
Among the most common fraud schemes that dealerships experience include:
- Third-party fraud: Fraudsters steal an individual’s identity to purchase a vehicle;
- First-party fraud: A person knowingly misrepresents their identity or provides false information, often with the intention of not paying for the vehicle; and
- Synthetic identity fraud: Fraudsters create fake identities and build credit profiles over time before using them to finance a vehicle they do not intend to pay for
Fighting Crime Rings
Fraud Protect is helping to fight what Sundaram calls a “far more increased sophistication” from criminal rings who target vulnerable people and purchase or steal their credit profiles.
“What worked 20 years ago for dealers doesn’t work as well now because the fraudulent profiles that are being used could potentially pass a basic credit check,” she said.
The criminals, once they get their hand on one of these good credit profiles, target dealers of high-priced vehicles—more sophisticated ones have the goal of getting the vehicles out of the country before a dealer or bank knows.
Designed for Dealers
“The dealer might not even know frauds hit them initially because [the fraudster] is paying down the loan a little bit (in order to) get the car out of the country and they then stop paying,’ she said.
Experian’s tool was designed in partnership with dealers with a focus on not slowing down consumer from buying a car.
The first step in the process is assuring dealer’s that they are dealing with an individual who is who they say they are.
“We’re validating that the driver’s license is a valid driver’s license but also matching that the person who is interacting with you matches that driver’s license—that it’s a real person not just a picture of a picture,” said Sundaram.
“In addition to validating it’s a legitimate identity, we ensure the dealer is interacting with the owner of the identity by checking that the phone number provided has been associated with that identity, only then are we going to send the passcode to their device.”
Using AI
Sundaram stressed that Experian’s has the complete breadth and depth of the data across all the lenders as well as relationships with law enforcement to really be able to comprehensively to know the patterns of the buyer.
“This solution has the backbone of Experian’s analytic solutions where AI drives a frictionless consumer experience. These three steps help trap multiple types of fraud,” she said.
‘The first time we put this in front of somebody at a dealership, that person took their driver’s license pictures and the minute they had to take their selfie they walked away because they knew they would get flagged.”
Seamless Integration
Officials for the credit report company note their programs plugs into the process in a very seamless for dealership teams.
The tool uses artificial intelligence to provide fraudulent activity alerts with easy-to-understand icons and scores, empowering automotive dealers to make more informed decisions and mitigate portfolio risk.
“This really simplifies the process (with) results going right back into the CRM so it’s associated with the customer record,” Sundaram said. “It’s a really simple visual that literally gives them a thumbs up or a thumbs down that says do you need to take any more validation steps or walk away from this deal because we’re identifying that they are who they claim to be.”