Experian SA has launched the National Fraud Prevention Solution to address the significant threat of identity and credit application fraud in South Africa. And SA’s largest mobile company, Vodacom, is the first to join the National Fraud Prevention Solution.
South African companies experience more fraud and bribery than their counterparts elsewhere in the world, the PricewaterhouseCoopers Global Economic Crime Survey 2014 found earlier this year.
According to the South African Banking Risk Information Centre (SABRIC), South Africa lost more than R2.2bn through fraud and related cybercrime in 2013. Meanwhile, data from the South African Fraud Prevention Services (SAFPS) revealed that the number of identity theft cases reported by the end of April 2014 increased 16% year-on-year.
Experian SA believes this is only the tip of the iceberg as many frauds still go undetected in the absence of more effective fraud prevention systems.
The most effective strategy is to prevent fraud occurring at the point of application. This requires the detection of potentially fraudulent applications before the customer is accepted, without adversely affecting customer service levels and speed of decisioning.
Experian’s National Fraud Prevention Solution (NFPS) offers South African credit providers an online, real-time credit application fraud prevention service.
The solution highlights potentially fraudulent activity within seconds of someone applying for any loan or credit across a company’s own data or a controlled match against other companies’ credit application data. The solution compares new applications for credit with previous applications and other data sets to identify inconsistencies and anomalies that indicate the likelihood of fraud occurring.
For example: If someone applies for a mobile phone contract using their name, address and an monthly salary of R10,000, and then applies for a store card using the same name and address but states a monthly salary of R30,000, a red flag will be raised.
Sophisticated detection rules are also used to screen for and identify any potential syndicate frauds across the participating companies. These rules can be customised by sector to enhance the interpretation of the data.
Vodacom’s Warrick Love, Managing Executive: Credit and Risk said: “Unfortunately, fraud is a reality we cannot ignore. Through Experian’s National Fraud Prevention Solution we look forward to improving our own efficiency in detecting fraud and attempted fraud. Collaborations such as this are essential for organisations seeking to stem the losses associated with fraud.”
To demonstrate the potential savings to companies and credit providers, David Coleman, Head of Analytics at Experian SA explains: “Prior to the launch of the new solution, we conducted a pilot programme with 12 companies from different sectors – including financial services, telecommunications, retail and automotive.
“The pilot programme identified 1.7 million credit application matches in the shared community pool. A total of 138,000 fraudulent and bad applications were identified across the community pool which amounted to approximately
R175 million in potentially prevented losses over that 3 month period,” he says.
The NFPS works on the principle of data reciprocity, with members contributing non-competitive data to a shared database. The solution enables controlled cross-referencing of applications across the industry without revealing any commercially sensitive information and uses a sophisticated software solution to identify potential fraud.
Experian SA MD Michelle Beetar elaborates: “As more organisations join the national fraud prevention solution, the fraud detection efficiency of each organisation dramatically increases.
“Once a fraudster is identified, the entire membership is protected from repeat attacks. Through collaborative and non-competitive fraud data sharing, organisations will have access to a wider breath of data that will assist in the early identification of potentially fraudulent applications.”
Fraudsters exploit the fact that organisations deal with limited information during a short period of time. Criminals can create, confuse and control identities piece by piece and can keep their activities ‘under the radar’ as long as companies operate in isolation. Often fraud is only detected at customer default or is even left unidentified as bad debt.
A picture of the fraudster’s ‘true’ identity can only be seen in full by joining up and collating all of the pieces of the identity jigsaw from the systems they have been recorded in across industries.
Entity data matching can link networks of suspicious activity, rapidly identifying potential fraud rings and spotting false identities earlier. When this is done across industries, the power of data matching increases significantly.
“Organisations are aware that fraudsters target the whole industry rather than opportunistic strikes at individual companies. As such, they are starting to realise the benefits and power of non-competitive collaboration and enhanced fraud intelligence”, said Beetar.
Experian has proved that facilitated collaboration can work on a large scale. The solution has already been launched and is operating successfully in a number of other countries including the UK and Russia.
Experian is recognised as the global leader in fraud prevention and credit risk management providing data and analytical tools to clients in more than 80 countries. Experian helps organisations to reduce impairment losses and prevent fraud across half a million applications every day, providing businesses with the tools they need to build trusted relationships with legitimate customers.