All posts by Alex Lvoff

The gig economy — also called the sharing economy or access economy — is an activity where people earn income by providing on-demand work, services, or goods. Often, it is through a digital platform like an application (app) or website. The gig economy seamlessly connects individuals with a diverse range of services, whether it be a skilled handyman for those long-awaited office shelves, or an experienced chauffeur to quickly drive you to the airport to not miss your flight. However, there are instances when these arrangements fall short of expectations. The hired handyman may send a substitute who’s ill-equipped for the task, or the experienced driver takes the wrong shortcut leaving you scrambling to make your flight on time. On the flip side, there are numerous risks faced by those working in the gig/sharing economy, from irritable customers to dangerous situations. In such cases, trust takes a hit. The gig economy has witnessed a surge in recent years, as individuals gravitate towards flexible, freelance, and contract work instead of traditional full-time employment. This shift has unlocked a multitude of opportunities for both workers and businesses. Nevertheless, it has also ushered in challenges pertaining to security and trust. One such challenge revolves around the escalating significance of digital identity verification within the gig economy.  Digital identity verification and the gig economy  Digital identity verification encompasses validating a person's identity through digital means, such as biometric data, facial recognition, or document verification. Within the gig economy, this process has high importance, as it establishes trust between businesses and their pool of freelance or contract workers. With the escalating number of remote workers and the proliferation of online platforms connecting businesses with gig workers, verifying the identities of these individuals has become more vital than ever before.  Protecting gig users and improving the customer experience   One primary rationale behind the mounting importance of digital identity verification in the gig economy is its role in curbing fraud. As the gig economy gains traction, the risk of individuals misrepresenting themselves or their qualifications to secure work burgeons. This scenario can lead businesses to hire unqualified or even fraudulent workers, thereby posing severe repercussions for both the company and its customers. By adopting digital identity verification processes, businesses can ensure the legitimacy and competence of their workforce, subsequently decreasing the risk of fraudulent activities.  In the digital age, trust and safety are crucial for businesses to succeed. Consumers prioritize brands they can trust, and broken trust can lead to loss of customers.According to Experian's 2023 Fraud and Identity Report, over 52% of US consumers feel they’re more of a target for online fraud than they were a year ago. As such, online security continues to be a real concern for most consumers. Nearly 64% of consumers say that they are very or somewhat concerned with online security, with 32% saying they are very concerned. Establishing trust and safety measures not only protects your brand but also enhances the user experience, fosters loyalty, and boosts your business.    Role of a dedicated Trust and safety team  Trust and safety are the set of business practices for online platforms to follow to reduce the risk of users being exposed to harm, fraud, or other behaviors outside community guidelines. This is becoming an increasingly important function as online platforms look to protect their users while improving customer acquisition, engagement, and retention.  That team also safeguards organizations from security threats and scams. They verify customers' identities, evaluate actions and intentions, and ensure a safe environment for all platform users. This enables both organizations and customers to trust each other and have confidence in the platform. Their role has evolved from fraud prevention to encompass broader areas, such as user-generated content and the metaverse. With the rise of user-generated content, platforms face challenges like fake accounts, imitations, malicious links, and inappropriate content. As a result, trust and safety teams have expanded their focus and are involved in product engineering and customer journey design. Another noteworthy factor contributing to the growing emphasis on digital identity verification for trust and safety teams stems from the necessity to adhere to diverse regulations and laws. Many countries have implemented stringent regulations to safeguard workers and ensure the legal and ethical operations of businesses. In the United States, for instance, businesses must verify the identities and work eligibility of all employees, including freelancers and contractors, as part of the Form I-9 process. By leveraging digital identity verification tools, businesses can streamline these procedures and guarantee compliance with prevailing regulations.  Mitigating risk in online marketplaces  To mitigate risks in online marketplaces, businesses can take several steps, including creating a clear set of user guidelines, implementing identity verification during onboarding, enforcing multi-factor authentication for all accounts, leveraging reverification during high-risk moments, performing link analysis on the user base, and applying automation. Online identity verification plays a pivotal role in safeguarding gig workers themselves. With the surge of online platforms connecting businesses with freelancers and contractors, there comes an augmented risk of workers falling prey to scams or identity theft. By mandating digital identity verification as an integral part of the onboarding process, these platforms can shield workers and ensure they only engage with bona fide businesses.  While automation can be a powerful tool for fraud detection and mitigation, it is not a cure-all solution. Automated identity verification has its strengths, but it also has its weaknesses. While automation can spot risk signals that a human might miss, a human might spot risk signals that automation would have skipped. Therefore, for many companies, the goal should not be full automation but achieving the right ratio of automation to manual review. Manual review takes time, but it's necessary to ensure that all potential risks are identified and addressed. The more efficient these processes can be, the better, as it allows for a quicker response to potential threats. As the number of individuals embracing freelance and contract work surges, and businesses increasingly rely on these workers to carry out vital responsibilities, ensuring the security and trustworthiness of these individuals becomes paramount. By integrating digital identity verification processes, businesses can shield themselves against fraud, comply with regulations, and cultivate trust with their gig workers.  Finding the right partner While trust and safety are concerns for all online marketplaces, there’s no universal solution that will apply to all businesses and in all cases. Your trust and safety policies need to be tailored to the realities of your business. The industries you serve, regions you operate in, regulations you are subject to, and expectations of your users should all inform your processes. Experian’s comprehensive suite of customizable identity verification solutions can help you solve the problem of trust and safety once and for all.  Learn more *This article leverages/includes content created by an AI language model and is intended to provide general information.

Authorized Push Payment fraud, also known as APP fraud or APP scams, involves a fraudster persuading a victim to willingly deposit funds to their account or to the account of a complicit third party, also known as a money mule. This type of fraud often includes social engineering of the victim using fake investment schemes, impersonation scams, purchase scams or other schemes. Social engineering clouds victims' judgments and encourages them to make payments willingly to one or more money mules, with funds eventually reaching fraudsters' accounts. This type of fraud has become more attractive to criminals since the advent of real-time payment systems, which are now a reality worldwide. Fraud fueled by real-time payments Authorized push payment fraud is becoming more prevalent, and it is imperative that you know how to detect and prevent it to safeguard your organization. Real-time payment systems, such as Faster Payments in the United Kingdom (UK), PIX in Brazil, the New Payments Platform in Australia, and FedNow in the USA, make real-time payment fraud a reality.  APP fraud is notoriously difficult for banks to prevent because the victim is sending the money themselves, and steps that banks take to authenticate customers are ineffective, as the customer will pass identity checks. The victims cannot reverse a payment once they realize they have been conned, as payments made using real-time payment schemes are irrevocable. APP fraud is particularly prevalent in countries where banks have an infrastructure that facilitates fast or immediate transfers, like the UK. Learn more about the new UK legislation around APP fraud Reimbursment is vital to victims Some common types of authorized push payment fraud include attacks on individuals like romance scams, family emergency swindles, targeting property transactions, and intercepting supplier payments. To protect against APP fraud, it is important to employ layered fraud protection across all products and channels used to manage real-time payments. But that alone is not enough. Reimbursement is vital in reversing the financial distress caused by APP scams, but it cannot reverse the emotional distress these scams cause. Prevention, detection, and awareness measures must be moved up on the agenda for banks, non-traditional lenders, PSPs (Payment Service Providers), and customers alike to ensure that the customer is protected at every stage of the payment journey.  Effective alerts are a key focus area for preventing customers from falling victim to APP scams. An effective warning is one that is dynamic and tailored to the customer’s payment journey. Recent research indicates that minor changes to notifications across banking apps can have the potential to drastically reduce the number of individuals that fall victim to APP fraud. The biggest effects were achieved when a combination of risk-based and Call to Action (CTA) warnings were implemented over a period of time. A collective effort across the banking industry and beyond is crucial to protect customers and tackle the fight against APP fraud. Banks, non-traditional lenders, and PSPs can raise awareness to educate their customers on the signs and risks of APP scams, and work with industry oversight bodies to commit to voluntary standards and codes to ensure good customer outcomes. Online forums, social media platforms, and influential voices also have a role to play in raising awareness of and preventing scams. Customers can also help by being vigilant and reading and acting upon warnings and information presented to them.  Authorized push payment fraud prevention To effectively combat authorized push payment fraud, financial institutions must implement a range of measures, including:  Direct communication with consumers.  Enhanced transaction monitoring.  Effective risk mitigation and management.  Improved employee education.  Public awareness campaigns.   In response to this growing threat, banks have introduced various checks and balances, such as the Confirmation of Payee (CoP) service in the UK, which cross-references bank details with the account holder's name when processing online payments.  Banks are also leveraging sophisticated fraud prevention software stacks, incorporating machine learning and contextual data to identify and flag suspicious transactions. By utilizing AI technologies, financial institutions can process  data points faster and enhance their fraud detection capabilities, mitigating identity risk and safeguarding customer accounts. Clear communication with customers is essential in the fight against APP fraud. Higher-risk companies now include warnings in their communications, advising customers not to act on messages that request payment into new bank accounts.  Financial institutions can also offer cool-off periods before payments are sent, increase due diligence around payment destinations, and monitor accounts that regularly receive high-value payments. Additionally, financial institutions can play a crucial role in educating their customers and promoting awareness around this increasingly common type of fraud. By combining these approaches with robust fraud prevention software, the public can fight against this type of fraudulent attack.  Taking the next steps with the right partner At Experian, we offer rich data sources, advanced analytics capabilities, and the consultancy services needed to rapidly adopt data analytics solutions that mitigate fraud risks. Our solutions are used by PSPs of all types and sizes – including some of the largest banks – to identify potentially fraudulent customers and transactions, and to ensure that action is taken in real time to prevent fraudulent payments being made.  Learn more about our fraud management solutions *This article leverages/includes content created by an AI language model and is intended to provide general information.

In financial crime, fraudsters are always looking for new avenues to exploit. The mortgage industry has traditionally been a primary target for fraudsters. But with the 30-year fixed-mortgage rate average above 7.19% for the month of September, it has caused an inherent slowdown in the volume of home purchases. As a result, criminals are turning to other lucrative opportunities in mortgage transactions. They have evolved their techniques to capitalize on unsuspecting homeowners and lenders by shifting their focus from home purchases to Home Equity Line of Credit (HELOC), as they see it as a more compelling option.  Understanding mortgage fraud  Mortgage fraud occurs when individuals or groups intentionally misrepresent information during the mortgage application process for personal gain. The most common forms of mortgage fraud include income misrepresentation, false identity, property flipping schemes, and inflated property appraisals. Over the years, financial institutions and regulatory bodies have implemented robust measures to combat such fraudulent activities.  As the mortgage industry adapts to counter established forms of fraud, perpetrators are constantly seeking new opportunities to circumvent detection. This has led to a shift in fraud trends, with fraudsters turning their focus to alternative aspects of the mortgage market. One area that has captured recent attention is HELOC fraud, also known as home equity loan fraud.  HELOC fraud: An attractive target for fraudsters  What is a HELOC?  HELOCs are financial products that allow homeowners to borrow against the equity in their homes, often providing flexible access to funds. While HELOCs can be a valuable financial tool for homeowners, they also present an attractive opportunity for fraudsters due to their unique characteristics.  HELOC fraud schemes  An example of a home equity loan fraud scheme is a fraudster misrepresenting himself to deceive a credit union call center employee into changing a member’s address and phone number. Three days later, the fraudster calls back to reset the member’s online banking password, allowing the fraudster to login to the member’s account. Once logged in, the fraudster orders share drafts to be delivered to the new address they now control. The fraudster then forges three share drafts totaling $309,000 and funds them through unauthorized advances against the member’s HELOC through online banking platforms.   Why HELOCs are becoming the next target for mortgage fraud  Rising popularity: HELOCs have gained significant popularity in recent years, enticing fraudsters seeking out opportunities with larger potential payouts.  Vulnerabilities in verification: The verification process for HELOCs might be less rigorous than traditional mortgages. Fraudsters could exploit these vulnerabilities to manipulate property valuations, income statements, or other critical information.  Lack of awareness: Unlike conventional mortgages, there may be a lack of awareness among homeowners and lenders regarding the specific risks associated with HELOCs. This knowledge gap can make it easier for fraudsters to perpetrate their schemes undetected.  Home equity loans do not have the same arduous process that traditional first mortgages do. These loans do not require title insurance, have less arduous underwriting processes, and do not always require the applicant to be physically present at a closing table to gain access to cash. The result is that those looking to defraud banks can apply for multiple HELOC loans simultaneously while escaping detection.  Prevention and safeguards  There are several preventive measures and fraud prevention solutions that can be established to help mitigate the risks associated with HELOCs. These include:  Education and awareness: Homeowners and lenders must stay informed about the evolving landscape of mortgage fraud, including the specific risks posed by HELOCs. Awareness campaigns and educational materials can play a significant role in spreading knowledge and promoting caution.   Enhanced verification protocols: Lenders should implement advanced verification processes and leverage data analytics and modeling thorough property appraisals, income verification, and rigorous background checks. Proper due diligence can significantly reduce the chances of falling victim to HELOC-related fraud.  Collaboration and information sharing: Collaboration between financial institutions, regulators, and law enforcement agencies is essential to combat mortgage fraud effectively. Sharing information, best practices, and intelligence can help identify emerging fraud trends and deploy appropriate countermeasures.  Acting with the right solution  Mortgage fraud is a constant threat that demands ongoing vigilance and adaptability. As fraudsters evolve their tactics, the mortgage industry must stay one step ahead to safeguard homeowners and lenders alike. With concerns over HELOC-related fraud rising, it is vital to raise awareness, strengthen preventive measures, and foster collaboration to protect the integrity of the mortgage market. By staying informed and implementing robust safeguards, we can collectively combat and prevent mortgage fraud from disrupting the financial security of individuals and the industry.  Experian mortgage is powering advanced capabilities across the mortgage lifecycle by gaining market intelligence, enhancing customer experience to remove friction and tapping into industry leading data sources to gain a complete view of borrower behavior.   To learn more about our HELOC fraud prevention solutions, visit us online or request a call.  *This article leverages/includes content created by an AI language model and is intended to provide general information.

The Federal Reserve (Fed) took a big step towards revolutionizing the U.S. payment landscape with the official launch of FedNow, a new instant payment service, on July 20, 2023. While the new payment network offers advantages, there are concerns that fraudsters may be quick to exploit the new real-time technology with fraud schemes like automated push payment (APP) fraud. How is FedNow different from existing payment networks? To keep pace with regions across the globe and accelerate innovation, the U.S. created a alternative to the existing payment network known as The Clearing House (TCH) Real-Time Payment Network (RTP). Fraudsters can use the fact that real-time payments immediately settle to launder the stolen money through multiple channels quickly. The potential for this kind of fraud has led financial regulators to consider measures to better protect against it. While both FedNow and RTP charge a comparable fee of 4.5 cents per originated transaction, the key distinction lies in their governance. RTP is operated by a consortium of large banks, whereas FedNow falls under the jurisdiction of the Federal Reserve Bank. This distinction could give FedNow an edge in the market. One of the advantages of FedNow is its integration with the extensive Federal Reserve network, allowing smaller local banks across the country to access the service. RTP estimates accessibility to institutions holding approximately 90% of U.S. demand deposit accounts (DDAs), but currently only reaches 62% of DDAs due to limited participation from eligible institutions. What are real-time payments? Real-time payments refer to transactions between bank accounts that are initiated, cleared, and settled within seconds, regardless of the time or day. This immediacy enhances transparency and instills confidence in payments, which benefits consumers, banks and businesses.Image sourced from JaredFranklin.com Real-time payments have gained traction globally, with adoptions from over 70 countries on six continents. In 2022 alone, these transactions amounted to a staggering $195 billion, representing a remarkable year-over-year growth of 63%. India leads the pack with its Unified Payments Interface platform, processing a massive $89.5 billion in transaction volume. Other significant markets include Brazil, China, Thailand, and South Korea. The fact that real-time payments cannot be reversed promotes trust and ensures that contracts are upheld. This also encourages the development of new methods to make processes more efficient, like the ability to pay upon receiving the goods or services. These advancements are particularly crucial for small businesses, which disproportionately bear the burden of delayed payments, amounting to a staggering $3 trillion globally at any given time. The launch of FedNow marks a significant milestone in the U.S. financial landscape, propelling the country towards greater efficiency, transparency, and innovation in payments. However, it also brings a fair share of challenges, including the potential for increased fraud. Are real-time payments a catalyst for fraud? As the financial landscape evolves with the introduction of real-time payment systems, fraudsters are quick to exploit new technologies. One particular form of fraud that has gained prominence is authorized push payment (APP) fraud. APP fraud is a type of scam where fraudsters trick individuals or businesses into authorizing the transfer of funds from their bank accounts to accounts controlled by the fraudsters. The fraudster poses as a legitimate entity and deceives the victim into believing that there is an urgent need to transfer money. They gain the victim's trust and provide instructions for the transfer, typically through online or telephone banking channels. The victim willingly performs the payment, thinking it is legitimate, but realizes they have been scammed when communication halts. APP fraud is damaging as victims authorize the payments themselves, making it difficult for banks to recover the funds. To protect against APP fraud, it's important to be cautious, verify the legitimacy of requests independently, and report any suspicious activity promptly. Fraud detection and prevention with real-time payments Advances in fraud detection software, including machine learning and behavioral analytics, make unusual urgent requests and fake invoices easier to spot — in real time — but some governments are considering legislation to ensure more support for victims. For example, in the U.K., frameworks like Confirmation of Payee have rolled out instant account detail checks against the account holder’s name to help prevent cases of authorized push payment fraud. The U.K.’s real-time payments scheme Pay.UK also introduced the Mule Insights Tactical Solution (MITS), which tracks the flow of fraudulent transactions used in money laundering through bank and credit union accounts. It identifies these accounts and stops the proceeds of crimes from moving deeper into the system – and can help victims recover their funds. While fraud levels related to traditional payments have slowly come down, real-time payment-related fraud has recently skyrocketed. India, one of the primary innovators in the space, recorded a 23% rise in fraud related to its real-time payments system in 2022. The same ACI report stated that the U.S., making up only 1.2% of all real-time payment transactions in 2022, had, for now, avoided the effects. However, “there is no reason to assume that without action, the U.S. will not follow the path to crisis levels of APP scams as seen in other markets.” FedNow currently has no specific plans to bake fraud detection into their newly launched technology, meaning the response is left to financial institutions. Fight instant fraud with instant answers Artificial Intelligence (AI) holds tremendous potential in combating the ever-present threat of fraud. With AI technologies, financial institutions can process vast amounts of data points faster and enhance their fraud detection capabilities. This enables them to identify and flag suspicious transactions that deviate from the norm, mitigating identity risk and safeguarding customer accounts. The ability of AI-powered systems to ingest and analyze real-time information empowers institutions to stay one step ahead in the battle against account takeover fraud. This type of fraud, which poses a significant challenge to real-time payment systems, can be better addressed through AI-enabled tools. With ongoing monitoring of account behavior, such as the services provided by FraudNet, financial institutions gain a powerful weapon against APP fraud. In addition to behavioral analysis, location data has emerged as an asset in the fight against fraud. Incorporating location-based information into fraud detection algorithms has proven effective in pinpointing suspicious activities and reducing fraudulent incidents. As the financial industry continues to grapple with the constant evolution of fraud techniques, harnessing the potential of AI, coupled with comprehensive data analysis and innovative technologies, becomes crucial for securing the integrity of financial transactions. Taking your next step in the fight against fraud Ultimately, the effectiveness of fraud prevention measures depends on the implementation and continuous improvement of security protocols by financial institutions, regulators, and technology providers. By staying vigilant and employing appropriate safeguards, fraud risks in real-time payment systems, such as FedNow, can be minimized. To learn more about how Experian can help you leverage fraud prevention solutions, visit us online or request a call.  *This article leverages/includes content created by an AI language model and is intended to provide general information.