By Glenn Porter, Managing Director, GBG
Fuelled by a decade of benign economy, the demand for UK consumer credit has expanded rapidly since 2013, growing at a steady annual rate.
To some extent demand is being driven by supply. From low rate credit cards and clever ‘take time to pay’ agreements through to car finance and personal loans, consumers have never had more choice for borrowing.
The growing market activity has encouraged new entrants into the consumer credit market. Perhaps the most notable entrant is Goldman Sachs, who recently announced an expansion of their US consumer lending product, Marcus, into the UK and Germany. The announcement early coincided with the highest peak of unsecured debt in the UK since the financial crisis.
Marcus has been involved in over $3bn worth of loans since its inception in the US and plans to lend 28 times as much by 2020. The bank has frequently talked of Marcus as a response to the growing number of tech-driven start-ups entering the lending market.
It’s clear then that even some established banks have been working hard on building and investing in new technology that allows them to be confident at speedy credit decision-making with minimal spreads.
In this fiercely competitive market, the providers that are most successful will offer the best customer experience, least friction, fastest on-boarding process, and terms of business tailored and flexible to balance risk with profit.
However, the consumer finance industry is also a particularly attractive target for fraudsters due to the potentially lucrative gains. Whilst most providers will have systems in place for performing various checks, fraud attempts are becoming increasingly sophisticated. When weaknesses are discovered that allow loans or credit to be granted on false or manipulated applications, the fraudsters continue to reapply tactics elsewhere looking for ‘easy target’ organisations.
The implications for providers that don’t perform proper checks for new applicants can include heavy fines, reputational damage and, potentially, jail sentences. Taking shortcuts is not a viable option.
So just how can you marry great user experience with secure data and fraud protection?
The weapons to have in your armoury
- Automated document validation
When providers ask for identity documentation from applicants, there is technology available to perform an automated validation of the document supplied, to check it is genuine. This is through a series of sophisticated business and technical checks, while OCR (optical character recognition) technology is used to extract and populate the data fields used to capture applicant information. As an additional security layer facial recognition should be measured against the photograph presented on the identity document.
- Electronic identity verification
Identity verification checks allow finance providers to check applicants against existing data provided on individuals which has been held on a wide number of databases (e.g. an identity register, address files, telephone & mobile files, electoral roll, credit header data, PEP & Sanction lists, etc.). This quickly authenticates their identity and meets regulatory requirements to process the application.
- Fraud detection solution
A dedicated application fraud detection solution flags any attempts by fraudsters to circumvent or mislead the existing checks performed on all new applications. This involves the use of sophisticated rules, scorecards and alerts to flag suspicious applications through checks against historical applications, blacklists, watchlists and reference data to block or flag potential fraudsters.
- 4. Process decision engine
When a number of checks are required against a number of different systems, manual processes such as the need to re-key customer data into other systems and wait for time consuming responses will risk the loss of potentially profitable customers who go elsewhere. A credit, decision and strategy engine provides a single platform with which to process applications, calling out to any internal or 3rd party systems with cut off strategies, policy rules and business strategies to offer consistent decision making with terms of business tailored to the applicant’s risk or profit potential.
We can already see that the fastest-growing companies in consumer credit are being driven by technology and data-powered lending platforms such as Auxmoney in Germany orZopa in the UK.
As credit products use more and more sophisticated technology, traditional banks could fall behind. To mitigate that risk, they need to invest in technology that can accommodate automated online solutions for fast and accurate identity verification and fraud checks in advance of on-boarding new customers.
Glenn Porter is Managing Director at GBG who offer a series of solutions and consulting services to help organisations quickly validate and verify the identity and location of their customers and detect fraud.
GBG products are built on an unparalleled breadth of data obtained from over 200 global partners. Its innovative technology leads the world in location intelligence and enables it to verify the identity of 4.4 billion people globally.