Welcome to the second instalment of our three-part blog series on first party fraud.
In the first article of this blog series, we covered what first party fraud is, the different types of first-party fraud, and how rising interest rates and inflation could contribute to a growing prevalence of first party fraud.
In this blog, we will outline who is most likely to commit first-party fraud and how businesses can better equip themselves to prepare for first party fraudsters, particularly as the nature of fraud evolves with the growing financial pressures on consumers.
GBG’s latest research into the evolution of first party fraud in Australia uncovered that the majority of consumers will not commit first party fraud. However, the minority who are likely to commit first party fraud is not a negligible amount. Almost one in five (19%) Australians believing it’s OK to tell a ‘white lie’ and report having less debt than they actually have, in a financial service or loan application.
As the economic climate continues to change, financial institutions (FIs) need to go beyond simply knowing their customer, to having the processes and technologies in place that can anticipate and prevent fraudulent behaviour. This starts with understanding who is most likely to commit first-party fraud.
Research shows there are several common characteristics of first party fraudsters. Most commonly, they are male, young, living in a metropolitan area, and are regularly living beyond their means. This points to a potential trend that young, city-dwelling men are resorting to first party fraud to fund ambitious or aspirational lifestyles they cannot actually afford. With the coronavirus pandemic also putting further financial pressure on consumers, there is a likelihood that first party fraudsters have low incomes.
While first party fraudsters are often new customers, this is not the only type of customer that FIs and the likes of telecommunications providers need to prepare for. It’s a complex and evolving space that can only be mitigated by robust application fraud technology, as provided by GBG.
Here are the top three behaviours of first party fraudsters and how businesses can take preventative action:
The implications of first party fraud on FIs and telecommunications providers can be multi-fold, including customers defaulting on the first payment or very early defaults, fraudsters excessively going over an account limit, poor recovery rates, and being unable to collect on debts.
GBG’s research also found that only 22% of consumers were very confident in understanding the rules, legislation and consequences of lying in a financial service or loan application. Consequently, FIs and service providers such as telecommunications companies or gambling agencies will need to strike a balance between protecting their organisations from first party fraud, identifying and addressing criminal fraudsters, and also taking a compassionate approach to supporting consumers who may not have been aware of the impacts of their actions. Technology like GBG’s will play a critical role in helping the industry achieve this balance while also minimising risk to the organisation.
To find out more about how GBG can help your organisation address the growing complexity of fraud, visit https://www.gbgplc.com/apac/application-fraud/
To read the full GBG report, “The Evolution of First Party Fraud in Australia,” visit https://www.gbgplc.com/apac/fraud-compliance-management/evolution-of-first-party-fraud-in-australia/
This is the second in a three-part blog series about first party fraud. Catch up on part one or read onto the final part in this series here.
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