Welcome to the final instalment of our three-part blog series on first-party fraud.
In the first 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 the second blog, we revealed what first-party fraudsters look like in Australia today.
To recap, first-party fraud is a form of fraud where an individual omits key information such as debt or liabilities when making a loan application with a financial institution, onboarding to a telecommunications business, or any other service provider. It sits separately from most types of financial fraud because it often doesn’t involve the exploitation or stealing of identity details.
The fraudster in question is the genuine holder of the identity credentials and is usually just a ‘regular’ member of the community making false representations.
Other times, however, first-party fraud can be carried out by an informal group looking to capitalise on weaknesses in an onboarding or transactional system.
For businesses such as financial institutions, telecommunications providers and gambling agencies fraud prevention and fraud analytics are two key tools that can be used to prevent and combat first-party fraud. Recent research conducted by GBG in a new report, The Evolution of First Party Fraud in Australia, surveyed 1,008 Australian consumers on their attitudes towards truthfulness in the loan application process.
Whilst first-party fraud is not a novel concept or challenge, it is likely to undergo significant evolutions in the next 12 months as financial pressures mount nationwide. Although 89% of Australians said they are unchanged or less likely to omit a debt or liability in an upcoming application, the minority that are likely to commit first-party fraud is not a negligible amount.
Financial institutions and telecommunications providers can and must proceed with both vigilance and compassion to protect the interests of its customers when it comes to first-party fraud. Whilst not a new phenomenon, institutions need to take heed of the extraordinary economic trends that can and will influence how different types of financial fraud evolve — and adapt their security measures accordingly.
How do you know if your business has been a victim of first-party fraud?
The interesting thing about first-party fraud is that it is less insidious than other types of financial crime. Industries such as financial institutions or telecommunications providers are challenged with a set of consumers who might mean no intentional harm to themselves or others, but underestimate or misunderstand the impact of telling ‘white lies’ on their applications.
As such, businesses need to find a way of detecting and responding to these incidents in ways that quickly resolve misunderstandings, while not pushing away legitimate customers in the future.
Because first-party fraud represents a situation where the actual account holder or identity owner is also the bad actor committing the fraud, it can be tricky to identify such fraud upfront. That is why implementing end-to-end fraud detection platforms is the best way to have access to real-time detection and decisioning across the customer journey.
What can a business do to prevent first-party fraud?
One of the most robust forms of preventing first-party fraud is to combine fraud and anti-money laundering initiatives to combat all threats, whilst maintaining the level of compliance required to protect legitimate customers.
GBG’s layered data intelligence in its application fraud product suite orchestrates solutions against complex kinds of application fraud. These strong layered defences, underpinned by machine learning, evolve alongside increasingly sophisticated application fraud typologies.
Some specific fraud prevention strategies and technology solutions include a three-pronged approach to assess, reduce, and prevent.
Businesses should also consider:
Finally, a key preventative step businesses can take is better communication with and education for their customers about the seriousness of first-party fraud and the damaging implications for individuals who lie in applications or in the onboarding process.
Taking a proactive and preventative approach to fraud will help mitigate risk while also enabling businesses to deliver customer-centric digital experiences, as growing financial pressures continue to influence financial decision-making across different industries.
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/
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