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Online fraud and Lending, What Lenders Should Know


The greatest challenge alternative lenders are facing these days is not credit assessment of potential clients. Nor is it the competition posed by banks trying to delve into the potential lending market of small businesses. It is the growing number of account takeovers for the sake of obtaining a loan under a false identity. In fact, the assumption is that alternative lenders lost as much as 4 billion in 2018, to this new form of theft. In order to overcome this major difficulty, lenders must understand what online lending frauds are.

Basically, this lending financial scam is based on securing online loans through a chosen victim, their data, accounts and credit. The money is even transferred into the unknowing party’s accounts, before it is taken. No need for a new identity or phony financial background. All the thief has to do is have access to the victim’s information. Understandably, it is easier than ever to have a person’s sensitive information at anyone’s disposal. When all of our information is online, all it takes is a hacker with bad intent and suddenly private information is exposed. From there the path to accessing accounts, withdrawing money and obtaining loans is fairly simple.

The Scope of the Problem

As more people are moving to online purchasing, so are the criminals. The global online market growth forecast in the next two years is 4.9 trillion dollars. The assumption is that in three years, of all international retail sales, 17% will be done online. Imagine the number of credit card information there for the taking, if you consider the criminal point of view. Payment fraud, which means making online purchases through access to victim’s credit card is already a Billion-dollar problem. Online lending is just as susceptible to these impersonations. There are reports showing that since 2013 over 14 billion records of private information have been stolen.

Institutions, corporates and small businesses have one thing in common. They are all susceptible to cyber-criminal activity. There are as many types of account takeovers, from credit card scams to mailing address scams to phishing. The fact that the information is out there, is enough to tempt criminal activity. The lending sphere is just as vulnerable, since data breach processes are evolving all the time. The sophisticated criminal activity is usually only discovered after it is too late and the money lent has been transferred elsewhere and used.


The Data-based Solution

The bright side is that through AI and ML capabilities, lenders are able to position themselves one step ahead of the criminals. Unique monitoring systems can actually detect suspicious behavior on multiple platforms. If a device is stolen or compromised, these monitors will cease action from that device. New, advanced methods help differentiate between legitimate transactions and systematic hijacks. These newly developed, technological tools couldn’t come at a more needed time.

When it comes to online lending frauds, account takeovers are the biggest, most costly issue. It is fast-growing and devastating in its consequences. Yet, there are ways to mitigate the hurts through newly developed methods. Finally, a breakthrough in the battle with cyber-criminals. Hopefully, as these systems develop further and become widespread in use, account takeover will no longer be such a problem for the lending world. In the meantime, read up on all the new protective systems and their capabilities. They can save you a lot more money than you think.

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