How we’re taking the fight to online fraud

If you haven’t fallen victim to it yourself already, chances are you probably know someone who has fallen foul to online fraud. It’s an unfortunate evil that seems to be sweeping across the UK, and many unsuspecting victims are left to count the considerable financial cost thereafter.

Indeed, an alarming recent survey in This is Money revealed that the vast majority of fraud victims are actually blamed for their own negligence by their bank, and left with no other recourse but to contact cyber-crime reporting centre Action Fraud, who in turn bin eight out of 10 cases off the bat. Indeed, one premier bank even admitted that more than 70 per cent of their fraud victims never regain a penny after making a claim.

With banks shirking responsibility, and fraud techniques becoming ever-more sophisticated, it paints a discouraging and frightening future for ordinary savers. In fact, for as little as a fiver, and no more than £50, a fraudster can get their hands on a person’s name, address, mobile phone number, bank details and even passport details – plenty of ammo for their quest to defraud innocent people and organisations. So can the tide be turned against this thriving criminal activity?

Identity verification and KYC

We’re not in a position to comment on banks and other financial services providers, but the good news is that regulators are continuing to intensify the requirements they impose with respect to compliance, fraud prevention systems and overall risk management. It places a significant operational burden on all companies within the wider industry, but certainly as a peer-to-peer lending platform this is something we embrace. After all, we recognise that, without the confidence of our customers in the systems we have in place, our prospects as a going concern would be pretty grim.

When underwriting loan applications, our first line of defence is an approach known in the industry as Know Your Customer (KYC), which forms part of Anti-Money Laundering (AML) compliance. This includes an automated process of performing exhaustive checks on the candidate. These include simple things like confirming a customer's personal details and credit history. We also use what we call ‘fuzzy matching’, which makes sure the initial data matches up with things like the person’s home address, IP address, mobile number, bank account and more.

Taking it a step further

Our automated procedures reject a large number of applicants before our team of underwriters have even moved a muscle. Most of these will be due to poor (or thin) credit files or a low credit score, but it’s also fair to say that most fraudulent applications will have also received the red card. But those who make the cut after these initial checks will then need to face considerable further scrutiny.

Uploading documents such as bank statements, a driver’s licence, passport or national ID are a pre-requisite for many borrowers, and from there we run various checks against the person’s credit and identity data. We also cross reference this against the data held by Cifas (the UK’s leading fraud-prevention service) via our online interface, which in turn allows us to verify the details submitted, and establish an identity risk score.

The human element

We have invested heavily in our technologically advanced and robust systems, but one of the most difficult hurdles of all for fraudsters to contend with is undoubtedly our team of underwriters. The manual element of assessing loan applications remains one of the most important of all, and by conducting gatekeeper checks, discussing applications with customers, analysing employment details, examining documents and a whole lot more, we’ve been able to keep incidents of fraud to a minimum.

There is cause for optimism for the future of fraud prevention too, with non-consenting bank account information soon to become available. Perhaps an even bigger breakthrough is that banks are soon likely to be obliged to open up APIs relating to account information, allowing platforms like ours to make even more accurate underwriting assessments, with even less of a fuss for both us and the customer.

Certainly, we remain conscious that consumer confidence in the wider world of financial services has been strained since the recession, and the growing threat of online fraud only damages this further. At an individual level, all we can advise is vigilance, and taking the utmost care with all dealings relating to your personal finances. But you can at least rest assured that, as a company, we’re taking the fight to fraud and cybercrime, and consistently proving that it is a battle which can be won – one day at a time.

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