Balancing speed, security, and cost in the era of evolving fraud
Consumer lending
The consumer lending landscape is facing a crucial balancing act. Technology empowers fraudsters to scale their operations and create more convincing synthetic identities, while simultaneously offering tools to combat them.
This blog post dives into the key takeaways from a recent event we hosted exploring these challenges and potential solutions.
The challenge of evolving fraud
Fraudsters are constantly adapting, leveraging technology to launch faster, larger-scale attacks and create more convincing synthetic identities. This not only increases financial losses but also creates a human cost for individuals, as they struggle to reconcile fraudulent transactions, particularly in the complex and expensive realm of Buy Now, Pay Later (BNPL).
The ever-present threat of social engineering further underscores the need for passive security measures like behavioural biometrics and device intelligence, which can identify suspicious activity without relying solely on user awareness.
Technology as a double-edged sword
While technology offers powerful tools to combat challenges like fraud ("Fighting Fire with Fire"), it also presents new considerations. Striking the right balance between robust security measures and a seamless user experience is key ("Friction vs. Security"). This can be achieved through orchestration, which streamlines processes while incorporating subtle verification methods.
Additionally, automation can significantly reduce burdens on IT departments, freeing up resources and managing cost pressures ("Automation to the Rescue"). However, it's important to remember that technology is a double-edged sword, and its effective implementation requires careful consideration of both its benefits and potential drawbacks.
LexisNexis® IDU®
Collaboration and learning
The battle against fraud in lending is a continuous one, demanding ongoing learning and collaboration. Staying abreast of the latest trends and solutions is vital for institutions to best protect themselves. Partnering with organisations like LexisNexis® Risk Solutions offers valuable insights into the evolving market and access to cutting-edge solutions.
Open banking presents another powerful tool, providing a broader view of a consumer's financial health and enabling lenders to make more informed decisions, potentially reducing fraud. However, data, while essential for cost reduction and investigation efficiency, can be a double-edged sword. Maintaining accurate and up-to-date data is critical to avoid creating vulnerabilities that fraudsters can exploit. By continuously learning, collaborating, and utilising data effectively, institutions can stay ahead of the curve and build a more secure financial future.
Key takeaways
Striking the right balance between user experience, security, and cost remains a persistent challenge for consumer lenders in the UK. While technology offers valuable tools for both streamlining processes and combating fraudulent activity, it's paramount to foster collaboration, communication, and continuous learning to stay ahead of ever-evolving threats.
Looking forward
The discussion highlighted several areas needing further exploration, including:
- Combating document forgery and fake documents.
- Strengthening the connection between fraud and underwriting teams.
- Addressing the potential impact of the Payment Services Regulations (PSR) on consumer behaviour and fraud prevention.
- Finding better ways to assess and explain fraud decisions to commercial partners.
Our roundtable was a great success and provided valuable insights into the complexities of fraud that consumer lenders face in today's technology-driven world.
By harnessing the power of technology, fostering collaboration, and continuously learning, together, the industry can create a more secure and efficient lending environment for all.
