Data Analytics Help Prevent Loan Fraud

Financial fraud can cripple lenders. Battling scammers takes a toll, not only from the loss of money loaned, but also from the time spent trying to separate true customers from false applicants. Artificial intelligence and machine learning can help lenders protect themselves against scam artists.


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Image credit: SAS 

Financial fraud complaints are on the rise, having jumped 104 percent between 2019 and 2020. Identity theft, where a scammer uses a victim’s credit card information to make purchases or get cash, is the most common type of financial fraud.

While credit card scams top the list of fraudulent activities, the incidence of loan or lease fraud is climbing rapidly, with 116 percent increase in the number of reports in 2020. That marks the largest jump of any type of financial deception reported to the Federal Trade Commission last year.

Identity theft is devastating to the victim, but it also severely impacts credit card companies and lenders. Smaller lenders especially often aren’t equipped to handle the onslaught of false loan applications and have to manually process fraud flags.

A Loan Provider’s Conundrum

Axcess Financial knew there had to be a better way. The Ohio-based payday loan provider has been in business for more than 25 years and maintains nearly 600 locations. It has serviced more than 80 million loans to people across the US In recent years, with the number of loan applications—legitimate and fraudulent—rapidly increasing. 

One problem, particularly in the digital world, is that scammers can “reverse-engineer” the application process to determine the acceptable parameters of a legitimate application. Once fraudsters have that information, they can apply for multiple loans under false pretenses.

It cost Axcess Financial a lot of time and money to identify and reject fraudulent loan applications, which tallied in the thousands per month. The company had a single detection method to identify fraud, and it wasn’t enough. Axcess Financial then turned to data analytics company SAS and deployed SAS Identity 360.

SAS Singles Out Scammers

SAS Identity 360 is one tool in a suite of data analytics and fraud detection solutions from SAS. SAS Identity 360 is a cloud-based, software-as-service (SaaS) solution that automatically assesses data using artificial intelligence, machine learning, and analytics. Powered by Intel® Xeon® scalable processors, SAS Identity 360 can integrate and correlate customer data from multiple identity providers. It recognizes and authenticates users in near real-time, protecting true transactions while flagging false ones.

With multiple authentication data, SAS Identity 360 has enabled Axcess Financial to determine the type of fraud used on a loan application and counteract it quickly. The company uses machine learning-based anomaly detection, Know Your Customer (KYC) screenings, fraud rules, behavioral biometrics, and other methods to identify scammers. That information is fed back into the machine learning algorithms, making the entire system more powerful and effective.

Axcess Financial runs SAS Identity 360 in the cloud on Amazon Web Services, enabling it to process loan applications and screen for fraud in less than three seconds. Cases of identity fraud can be handled in about five minutes, rather than several hours. API support allows customers to layer and adopt new technologies as needed.

Woman looking at laptop screen

Image credit: SAS

Within a few months of deploying SAS Identity 360, Axcess Financial claims to have eliminated about 70 percent of its fraud problem and has reduced third-party fraud by 80 percent. One advanced and persistent group of fraudsters had been successfully awarded loans for about 30 percent of its applications; when the SAS system was implemented that group was unable to secure a loan at all. That kind of insight has saved Axcess Financial millions of dollars.

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