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Small businesses have been opening at record rates during and following the pandemic. With so many new businesses seeking capital, and not all of them borrowing with good intentions, Experian thought it would be a good time to talk about mitigating fraud with one of the leading FinTech lenders. Ryan Rosett is the Founder and Co-CEO of Credibly, and he shares several valuable insights with us in this Business Chat. Watch Our Business Chat Interview What follows is a lightly edited transcript of our interview. Gary Stockton: Hello, and thanks for joining us for this business chat. I'm Gary Stockton from Experian Business Information Services, and I'm here with our Vice President, Dominic DiGiuseppe, and also Ryan Rosett, the founder of Credibly, a fintech dedicated to helping medium and small-size businesses grow via funding decisions that are based on the holistic health and potential of a business.And we're here today to discuss fraud as it relates to FinTech in the small business space. Gentlemen, welcome to Business Chat. So Experian has recently released some interesting new statistics on the impact of fraud across several industries, notably that over 39% of recent FinTech inquiries were rated as high risk by our commercial first-party fraud score.And that's a predictive score that can predict the likelihood of first-party payment default and the credit bust-out scenarios that we see. These inquiries are projected to carry 62% of all first-party fraud risk within the population. And if you would like to see more on that analysis, we'll be including a link in the blog post for this business chat.So Dominic, I wanted to get your reaction to this statistic, given our mission to serve small businesses and considering small businesses make up the greater part of our economy and economic output.Dominic DeGuiseppe: Yeah, Gary, thanks for that. First and foremost, I want to give a shout-out to our data sciences and product teams for being able to continue to innovate in this space.But really, when you look at post-pandemic, the amount of businesses that have been created, it's, we were somewhat surprised by the numbers as well. But the amount of businesses that are being created, the mission that we have an experience making sure that we can help provide capital and we can provide funding and get that into the hands of business owners quickly.So if we take a look at some of the trends here, the amount of businesses that are being formed since the pandemic is pretty surprising. We've continued to see that trend. Rise and stabilize a bit, but it's still much higher than pre-pandemic levels. So when you think about businesses that are looking to understand the type of fraud that's being perpetrated or making sure that these types of businesses are actually legitimate as they're looking to make credit decisions and provide these companies with lending or funding decisions, these are the types of tools that have been that the team has been creating. Rapid new business formation during pandemic To make sure that we're assessing and helping folks determine the levels of risk that are associated with these businesses. I know we've talked about this in the past, a few times in different conversations, but can you tell the folks tuning in here a little bit about the Credibly origin story I find it super unique and interesting.Ryan Rosett: Oh, absolutely. So my partner and I started the business in 2010. If you think about 2010, it was a contrarian time to start a business. It was coming out of, the Great Recession of 2008/2009, and they were always talking about this double-dip recession, but it was actually an opportune time to start just because small businesses were really looking for access to credit.And what we are is that we're a cash flow lender. So, we look at the cash flow and make decisions and determinations in a very quick manner to provide working capital at an affordable rate for the customer. So that means, it's important to us that the business can sustain the payments that we're providing, and we can maximize the amount of money working capital that we can give them.So it's just something that we're focused on, and we've had the wind in our back for a, I would say, eight years. And then there's something called the pandemic hit, which was like, which, I didn't sleep for, I don't know, four months. But it was a period of time that was really like an interesting time for a small business lender, but then recognizing also that the government money really boosted up the small businesses, and it worked well for alternative lenders like ourselves.Gary Stockton: The pandemic did accelerate rapid digitization, and it does seem like an opportunity for FinTechs to address lending for small businesses digitally. This stat that we were talking about, it's really quite astounding that there were that number of businesses that sprung up during the pandemic.It makes a lot of sense, though, when you consider there were quite a lot of people that were transitioning from maybe a different industry into another industry, home businesses springing up. But with so many new businesses coming online and the impact of cybercrime on small businesses, Dominic, how do lenders know whether or not they are dealing with a real business when they onboard new customers digitally?Dominic DeGuiseppe: Yeah, I think that's certainly a challenge. And I think one of the things that we're looking to answer is, really, three things — is the business real? Is the business active? And is the applicant that's applying for the loan or the type of funding are they actually linked to the business?I think we can certainly answer for that, but I think, since we've got one of the top FinTechs in the space out there, Ryan what is Credibly doing to understand different fraud trends and combat what's happening within the space with fraud?Ryan Rosett: What I can say is that fraud is pervasive right now. And, as we're an online lender, we make decisions in under four hours from app to decision and fund same day. The amount of data alternative data that we're pulling in to make decisions is really quick. And so the risk that there's a fraud application coming through is something that we that you know, I'd say that's largely what we work on.I would say the three largest fraud patterns that we're seeing and you addressed earlier, was an application mismatch. Which is against the verified sources that they listed. And then, we also have just altered documentation associated with the bank statements.And again, that would be something that would be illegal historically, but we're a nonbank lender. And we're just trying to make decisions based on the data that we have. And we want to verify that the applicant is the owner of the business. So those are the types of frauds that we're seeing, I'd say, like a high level and then there are certain things that we do to combat that.So we will call it stipulations to fund. So we may offer to make an offer subject to them supplying additional information. Maybe it's the articles of a corporation. Maybe it's a tax return. And oftentimes, it's not to say whether you're profitable or not profitable, we're looking at who's the owner, who's getting K1s on the tax returns?Those are examples of things that we are looking at. And I know Experian has been an excellent partner of ours in terms of matching and using a number of different data sources that you provide.Dominic DeGuiseppe: How have you seen fraud evolve pre-pandemic to post-pandemic and continue to take shape and take a different shape, from what's been happening as to now?Ryan Rosett: Yeah, that's a good question. So on a pre-pandemic basis today, we're back to the same level of losses. Okay. But the fraud is becoming a little bit more advanced. Okay. Whether it's be it through cyber attacks, whether it's online applications, there's a number of different things that we're working on that we're constantly combating. So it's not it's not something that we put a fix in and then we move away. It's something that we're constantly evaluating, whether it's a submitting partner, or whether we have an affiliate that provides a certain number of lead applications.Those are things that we're constantly measuring to see what the loss rates are, where the fraud is coming from, and then making decisions. So from a pre-pandemic to a post-pandemic, I'd also say that with the PPP, small businesses got a taste of working with alternative lenders through the PPP process, and they became a little bit more comfortable with working with lenders similar to Credibly. So you're seeing like a little bit more comfortability with small businesses having the ability to interface with us and then they're layering in fraud and things of that nature. So it's a constant something we're combating on a daily basis, and it's something that we're thinking about, very often.Dominic DeGuiseppe: Yeah, because when you start to look at it and all the new businesses that are being formed that are coming into the market, working with alternative lenders and FinTech's like yourself, and you guys continuing to shorten the cycle around the app to approval and all the data points that are coming into it. You guys are different than a bank and are able to do those types of things and move quickly. So obviously, with that comes some additional risk; with the FinTech community being tight-knit, how have you been able to benchmark what Credibly is doing against some of the peers that you guys work with in the industry?Ryan Rosett: We have and that's really through public data through asset-backed securitizations; there's reporting relating to the losses that each lender is seeing, of our losses, approximately 10% of our losses we attribute to fraud. The other 90% is, it could be a business that legitimately goes out of business, which happens. So, it's not necessarily fraud. We do benchmark it based on some of our competitors that have asset-backed securitizations and we see the performance in their loss rates and charge costs and things of that nature.Gary Stockton: So, what are you seeing in terms of an amplifying effect on fraud rates with generative AI in the mix and allowing for spoofed content and more access to triangulated private information on business entities?Ryan Rosett: You know, that's a great question. One thing, you're seeing fraudulent IDs. You're seeing IDs that are becoming a little bit more difficult to track and see, because they're creating an identity of someone and they're able to do that through gen AI.So that, that's one aspect. You're also seeing bank statements. We use a number of different bank statements, parsing, and machine learning that looks at these bank statements. It's looking at font type size. There are a number of things when somebody is attributing and oftentimes, sometimes the fraudster is making grave errors also. They're putting data in where data wasn't supposed to be. You're able to detect that really quickly and that's on an automated basis. So that doesn't even touch a human. We see fraud, we kick it out. And, it's declined. So it's a, it's, when we see a, when we fund a fraud application and it's noted as a fraud that we've determined fraud, we then report it we have a, there's a data matching system that we report into so that business owner would never be eligible for. Business financing through an alternative lender. Again,Gary Stockton: Dominic, any closing thoughts?Dominic DeGuiseppe: Yeah, Gary, I would say just in terms of, generally speaking, fraud continues to evolve. There's a number of different things that we're looking at from a business perspective to be able to help our partners. But, Ryan's pointed out a number of those things today, but as FinTechs continue to evolve, fraudsters will continue to evolve and Experian is on our journey to continue to help understand how we can benefit our business partners, making sure that they can combat fraud and keep it out of the business.Gary Stockton: That's great. I think that's a great place to leave today's chat. Dominic, and Ryan, thank you so much for taking time out to share your perspectives on fraud in the commercial space on Business Chat. Thanks for watching, everyone. Related Posts

We're talking B2B marketing data hygiene with Tony Romero from our product team today on Business Chat.

Subscribe To Our YouTube Channel [Gary]: I'm joined by Yvon Desieux, a Senior Director in our product team, and Yvon is responsible for product strategy and driving innovation in lending through the creation of products and applications for commercial lenders.  Sitting next to Yvon is Mike Myers, our Vice President of Product Management here in Business Information, and he leads the product team and AgileWorks Innovation Lab. Welcome to Business Chat, gentlemen. The COVID-19 pandemic spurred a wave of innovation in e-commerce, in restaurant delivery services, in FinTech, digital has raised the stakes. There's an expectation with consumers and businesses that client experiences should be on an even playing field across industries. But when it comes to applying for loans, particularly on the commercial side, those processes can be quite manual. One of the things that speed things along is real-time, financial statement data. What is real-time financial statement data? [Yvon]: Well, simply, financial statement data in real-time is just when lenders are able to access accounting software via the Internet, to power their lending decisions, and our new product offering Experian Datashare, provides this capability with the power of owner permission data. With this permissioning, small business owners are empowered with the ability to leverage their own financial data, to apply for the loans and other services that they need. So, unlike a credit report, permissioning puts the owner in control of what transactional data they share, to qualify for the loans and lines of credit that they need to keep their businesses running. So this consented data provides personalization balanced with privacy for businesses and growth, balanced with accountability for the lenders. What problem is real-time financial statement data solving for lenders? [Yvon]: The feedback that we've received falls into four-tier categories. It's revenue growth creating operational efficiencies, decreasing risk, and creating a better client experience through a modern digital journey that's easy to understand and delivers faster decisions and quicker access to the financing that the small businesses need. Mike, when you talk to clients about digital transformation, what are the things that are keeping them up at night? What are they most concerned with? [Mike]: I think all of our clients, to some degree, are going through a technical transformation, or we often call a path to modernization, and Experian is in the same boat. You know, it's hard to stay on top of technology and really leverage the cloud and be able to get new products, new services, new capabilities to market quickly. Some of the biggest challenges our clients expressed to us are how do we operate in what's become a very different environment over the last year, year, and a half with COVID. Things have moved at a much more rapid pace, as far as digitization. So the interactions with their clients have changed. It's become a bit more impersonal. It's become a bit more quick and with a sense of urgency, and many clients are struggling to do everything online and do it at a breakneck speed. This is often where API's and with different technologies, we can keep pace and help our clients integrate data, access data, and ultimately render decisions to their end-users in a much quicker and more time-efficient way. Can you talk a little bit about Experian's API Hub and getting access to our data? [Mike]: The API economy has been here for many years, and our clients are integrating our data and, you know, putting it into their systems so their users can access data real-time. And Datashare is one of those services where this data can be integrated into our client's systems. And there's no drop-off, there's no manual, or swivel chair type activity where you're going to multiple systems. It becomes a much more efficient process. And not only the client wins, but also an applicant gets a much more rapid decision and can go ahead and power their business. Can financial statement data play a role in helping emerging and underserved businesses grow? If so, how? [Yvon]: Yeah, for new and small businesses that haven't yet established business credit and rely on the owner's personal credit profile for lending decisions, Datashare gives them the ability to share their financial statements and show the financial health of the business. This expanded data can be used, in the decision-making process in addition to the standard bureau data to create more approvals. By permissioning data, these businesses are able to move out of an unscorable or subprime, hard money loan bracket,  into a space that helps them qualify for more traditional loans and lines of credit, with better rates in terms. [Gary]: Mike, I've got another slide here; businesses of color, have been severely impacted by COVID. You can see some of these stats here. 30% of black business owners say that access to credit is the biggest challenge in the next 12 months. 47% said they didn't apply for financing because they did not think they would be approved, only 37% received all of the financing they sought. Recently on a CBA webinar with a Experian, Janelle Williams from the Atlanta Fed was saying that 83% of the PPP loans went to white-owned businesses, but only 1.9% went to businesses of color. How can Experian DataShare help underserved businesses of color? [Mike]: Yeah, Gary, you're really touching on a key point here. You know, small businesses, power our economy. They make up the majority of businesses out there. And based on that recent stat you and Yvon just discussed about new business startups. There's more than ever, and we all have to do a better job of making sure there's an equal playing field when it comes to accessing capital, whether it's trade credit or financial packages, to help them manage their cash flow. And that became more evident than ever again, with the pandemic and the sudden shift in the economy. It became more and more challenging for many small businesses to manage their cash flow, pay their employees, and really see a path forward. So data share is exciting in a number of ways. What excites me is that it now combines a historical process that was done in a much more offline manual way. And now can be done in real-time. And if you start combining that with historical payment information, historical public record filings, in addition to real-time financials, you have a winning combination that can provide a clear view of a small business's financial status and real-time view. So not only the historical, which is a great way to predict future payment behavior, but also the most current accounts receivable accounts payable information that can really help you understand what their future holds. How can DataShare deepen the relationships between lenders and the small businesses that they serve? [Yvon]: Datashare drives operational efficiency. So, it allows the lenders to receive the financial statement data in a standardized format. This is regardless of the size of the business or the source of the accounting data. It drastically reduces the level of manual effort required to underwrite a loan. And it automates much of the time spent on the administrative tasks associated with the lending process. So this means that relationship managers and underwriters and credit teams are going to spend less time creating reports and gathering documents and chasing clients. And they're going to be able to spend more time holding,  we hope, value-driven conversations to deepen the relationships they have with their clients and help those businesses grow and expand in line with their needs. [Gary]: So those small businesses are going to experience greater efficiency, ease of doing business with their lender. The lender has more time to devote and work more closely with those clients, but also maybe the underserved businesses, the unscored businesses, they have that additional insight to see really how that business is doing and how they can grow that relationship with them. Am I right? [Yvon]: Yeah, absolutely. Time is the big commodity, and speed kills. So what Datashare allows lenders to do is negate all of the wasted time and effort spent onboarding and processing clients. And they can dig into that live transactional data, and get to understand the business, and perhaps share insights with the business owners that even the owners don't know. So, it allows both sides to work more efficiently and more profitably. [Gary]: Are you seeing a change in perception on the part of the business owners of today? I mean, a lot of the Millennial business owners they're used to mobile technology, they're used to delivery services on-demand services. Do you see a change in perception in permissioning, access to financial statement data? [Yvon]: Yeah, actually, we have. We typically see adoption rates as high as 90% when it comes to small businesses that are actively looking for financing. So these are motivated clients who typically go with a lender that can provide the quickest time to cash, and Datashare typically cuts down that time to about 65%. We live in a rapidly developing world where digital adoption is at an all-time high, and the same is true for small businesses. As we shift from the stacks of paper and filing cabinets, both lenders and borrowers see the benefits of leveraging technology to make their organizations more efficient and profitable. The annual review process is one pain point that we've heard a lot from clients. Is this something that could help clients minimize some of that pressure, that's a real stressor on bandwidth? [Yvon]: Yeah, absolutely. Datashare automates the monthly, quarterly, or annual review process. So when a small business permissions their data, lenders are able to choose the data refresh frequency, that is also permissioned. So, combined with covenant monitoring Datashare is able to flag accounts that fall out of an agreed risk threshold, which saves the credit team valuable time having to review their entire book of business and allows them to strategically focus on problem accounts and mitigate risk before it gets out of hand. [Gary]: So, any further thoughts on how Experian DataShare can help lenders or the small businesses they serve? [Yvon]: Yeah. Our focus will continue to be on finding ways to automate processes and provide insights into the financial statement data that we acquire. We'll continue to receive feedback from the clients that we've partnered with and integrate that into our roadmap to create new products and services that will benefit both lenders and the borrowers that they serve. [Mike]: Yeah. I would add Gary that we're at a really interesting time. You know, there's the speed and the in-depth view of a small business's financials at our client's fingertips that can help equal that playing field and open up financial opportunities for businesses of all shapes, sizes, and colors, and Experian Datashare helps with that. Combine that with our historical trade and public record data, and you've got a winning solution for both our clients who are offering the financial vehicles, as well as the applicants, the small businesses out there that need help. And that historically may have been on the outside looking in. Now they have an opportunity to share their financial situation, a picture that can help them move their business forward and access capital when they most need it. [Gary]: Well, this has been super informative, guys. I want to thank you for taking the time to come on Business Chat. And if you would like to learn more about how real-time financial statement data can help small businesses, Experian recently published a free ebook perspective paper. We'll provide a link and a QR code for you to download. If you have any questions, of course, feel free to reach out to your Experian account representative to get a conversation started about helping small businesses grow through innovative solutions like Experian DataShare. Thank you very much, gentlemen. Download Perspective Paper Learn more about alternative data Related Posts

Identity Fraud in Commercial Applications We recently sat down with two Experian experts to talk about commercial fraud trends and gain an understanding of why commercial fraud is on the rise, and what organizations can do to combat the problem while at the same time grant credit to growing businesses.  What follows is a lightly edited transcript of our interview. Watch Our Business Chat Interview Subscribe To Our YouTube Channel What follows is a lightly edited transcript of our conversation. [Gary]: Hello and welcome to Business Chat I'm Gary Stockton with Experian Business Information Services, and today we're going to talk about Commercial Entity Fraud with two of our experts. [Gary]: Patricio HernandezBarron is a Product Marketing Manager here in Business Information Services, and he covers the commercial fraud space. Chris Gerding is a Consultant and he also focuses on commercial fraud. Welcome to business chat guys. [Gary]: The two of you recently collaborated on a perspective paper called Identity Fraud in Commercial Applications, and the piece asserts that there's been rapid growth in commercial fraud in the past few years. So, Patricio, if I could ask you, how are B2B companies affected compared to business to consumer companies in battling fraud? [Patricio]: Let me start by saying that both commercial and consumer or B2B or B2C companies are both affected by fraud, whether this is first-party fraud, third-party fraud, or synthetic fraud. They're both affected. Now, where it becomes different is the type of solutions that are out there in the market for them to solve it. There have been a lot more advancements on the consumer front, and it makes sense, consumer trends move a lot quicker compared to the commercial side of things. [Patricio]: But, in 2020, it's been considerably harder for fraudsters to get through the filters on the consumer side. So (fraudsters) being smart, they've started to focus on the commercial lines of business, which they already know that they're a little behind in terms of the sophistication of consumer lines. So, it's opened a potential opportunity gap for fraudsters to get through and businesses can't wait any longer. They need to raise their game and make that parity between consumer and commercial lines of business in terms of the fraud mitigation strategies. [Gary]: What's the scale and size of the problem of commercial fraud? [Patricio]: It's a big problem. A recent report published by the Association of Certified Fraud Examiners stated that 5% of business revenue was lost to fraud. 55% of respondents we asked said that as of 2019 fraud attacks have increased. So there's a clear problem right now, whether these businesses are recognizing these losses as bad credit or as fraud losses, that is the first thing that they need to focus on. [Patricio]: And the thing is, many of our customers would tell us, “we don't have a fraud problem”, but it was because they weren't recognizing and discerning between credit losses and fraud attacks. So that is the first thing that they need to focus on, start differentiating and categorizing those losses differently so they can start looking into it. The other thing that I'm sharing around this topic is many times businesses tighten their credit decisioning in hopes to reduce those losses. But that was counter-intuitive because they were making it harder for potentially genuine customers to make it through the application process. And yes, the fraudsters were passing this filter or no filters but were passing this credit scoring with no problem because they knew the data that would be required, and there were again, no fraud filters in place to stop them. [Gary]: So, Chris, can you talk about some typical scenarios in which businesses, especially small businesses are typically attacked by fraudsters? [Chris]: Small businesses and any business have a lot in common with consumers. There are modes and fraud scenarios where both are vulnerable. And businesses typically have both financial assets and competitive information at risk. They could be phished; they could be socially engineered, and this is exactly what we read on a consumer basis when we hear about how to avoid fraud. [Chris]: Second, leakage of sensitive information over the other channels can result in direct fraud, like account numbers, pins, obvious targets. However, they need to misrepresent their identity in many cases. And the contact information such as the firm name, the address, the owners, or officer's personal details, this kind of information when compromised leads to potentially bigger and harder to detect, harder to stop fraud schemes. Consumers can be defrauded like businesses, but these are the more big-ticket business-specific categories that you're seeing here on this slide. [Chris]: These three represent a good slice of the many ways businesses are defrauded and small businesses with some vulnerabilities associated with not having millions and millions to spend on fraud defenses would be vulnerable to some extent. The equipment financing and leasing firms can be defrauded either out of funds or especially vehicles and heavy equipment. We see cases not many in the news, but you do hear about these, where, if you pass the finance companies fraud screen, fraudsters can successfully apply for financing and potentially come away with, I mean, a car would be on the low end of this, construction equipment for or combined for major capital items. Then they disappear. [Chris]: Number two, fake invoices are a very easy way comparably to collect perhaps smaller amounts, but these can be forged documents sent in under the wire and they are paid sometimes by very busy accounts payable people with very few defenses in place, and something that we're going to talk about later,  fraud payments figure very largely in commercial fraud. Payments that are not backed up by good funds and intentionally sent it to cover a balance on an account are a very big part of commercial fraud.  Fraudsters may actually make multiple payments, playing the timing game so they keep the account and the account balance alive and growing, or the credit balance on the account so that they can perhaps get more from the fraudulent credit relationship that they've built than the intended credit line by this timing and submission of payments.  They can do this for several industries. They can do this for all different kinds of payment items themselves. They could be done with forged paper checks, electronic payments, and sometimes counterfeit payments themselves. [Gary]: Patricio, turning to you, would profit be impacted by implementing fraud prevention filters? I would imagine that would hinder some profitable growth? [Patricio]: It's a tricky one because, you know, there's this big misconception that by applying fraud filters, that's going to affect your profit or affect your number of applications going through. And it is true to an extent by applying fraud filters, you will see fewer applications going through. But affecting your profit, it's the complete opposite. It's actually going to reduce the losses that you'll be incurring, and I briefly touched upon this in your previous question, but what many companies do when they're not able to differentiate between credit losses and fraud losses, they tighten their decisioning in their credit applications. Those potentially good customers don't make it through, but fraudsters make it through with no problem at all. Because the decisioning system that they have for credit purposes does not do much for mitigating the fraudsters. [Patricio]: Many times, these companies don't invest in fraud solutions until they've gotten this big hit from a fraud attack, at that point, it's already too late. So, I would say that the best thing to do to help your profit is to be proactive because fraud can affect your profit if you get impacted. If you're proactive about it, you can protect or reduce those fraud losses that you're currently seeing as overall fraud, or losses that could be a fraud and not just credit losses. [Gary]: What's the number one step that commercial business, especially a small business can take to combat this wave of commercial fraud? [Chris]: Awareness must be built into the culture and it must be built into the solution and how the firm deals with the solution because there's no way to solve the fraud problem with a turnkey black box, turn it on, and forget it, we don't have that. And we may not have that for many, many years. [Gary]: Can you tell me more about the first payment defaults and how lenders are addressing that problem? [Chris]: We spoke a bit about payments in general as a fraud channel, but this is a particularly aggressive form of fraud or credit abuse. And it happens when the borrowing party just never ever makes one payment on the account. They may utilize the entire credit line and they just don't ever pay. So when the first payment is in default, there's a high suspicion that this could be a fraudster. There's a little ambiguity, as I said, but the credit and the fraud dimensions are rather close. They're rather parallel, in terms of how they are dealt with. [Chris]: What are we doing about accounts that are very brazen and do this on the first payment due?  We evaluate the risk at the time of enrollment. This is very important, we don't know, who's not going to pay us the first time. So we need a tool that evaluates, in this case, we offer a score, a commercial first payment default score, which is very high performance and very friendly to the combined mix of consumer and commercial data that a firm might have. Second,  it pays to look at the risk of the entire portfolio for first payment default periodically.  Again, is done with a score, it could be the same score I mentioned. In the third category, if it's necessary,  the host firm may wish to use scoring the individual payment item, the check, the online payment as a fraud evaluation, which is done by a different set of scores to manually perform systemic checks. [Gary]: So Patricio what are some of the most common misunderstandings in fraud prevention products? [Patricio]: Fraud filters will affect the number of applications that you are able to approve. As we mentioned before, it does affect the number of applications that you'll see come through, but it will help increase your profit by incurring fewer losses. Again, fewer fraudsters make it through equals fewer losses coming into your system. The second one would be that most fraud can be solved by verifying the identity of the user. And sure, it's because third-party fraud solutions are very popular, but that's not going to help you with all types of fraud. That's why you do need a layered approach for mitigating what's going to come through the door because, at the end of the day, you don't know what type of fraud you're going to be seeing. [Patricio]: By implementing a solution that will verify the identity of the user, that's not going to help you fight all types of fraud. In fact, stand-alone, you will do very little to mitigate first-party fraud and likewise with synthetic fraud. So again, if the way to solve fraud is not with a one size fits all approach, it's layered whether you have the resources and the capacity to implement a geolocation verification, or verify the validity of the data or verify the identity of the business owner. These are all things that are just going to prevent and help you weed out the different types of application fraud that you could see (coming) through the door. [Gary]: Chris, what can small businesses do to engage with Experian and minimize their fraud exposure? [Chris]: We love to talk, especially to small businesses on a very global scale in terms of their business operations and where it is that we might be able to help them. They may come to us with a great deal of awareness that they have a fraud problem and they kind of know where it is, but they look for a specific solution. Other small businesses may come to us with general concern. And in those, and in other cases, we are happy to sit down with them and do what I would call a free consultation and look at their information and make some suggestions. [Chris]: What we do is we offer solutions, but we like to add to that the knowledge of the particular client's situation, so that they become wiser and they become enabled by the kind of services that we provide, and they become enabled by the information we can bring to them upfront so they can make a wise consumer solution as it were. [Gary]: Well fraud in the payment protection program or the PPP program is all over the news. What do you make of that?  Are these fraudulent applications affecting lenders, even though the losses would be absorbed by the government? [Patricio]: While many of these lenders know and think that the loss of the potential losses would be absorbed by the government, the reality is that it's uncovering many gaps for these lenders. First, we understand there's a greater volume of applications going through their systems. So what many of these lenders have done is either turn off, completely turn off their fraud mitigation systems, or they've reduced the amount of vetting that they do, because they're not too worried because they know that the government is going to absorb those losses because of the volume of applications that they see. Now, the problem with that is that if they completely turned off the system, now they have potential fraudsters within their portfolio, or on the other hand, if they lessened the amount of filtering that they do, and yet still some fraudsters make it through, it's going to be very hard to weed out those fraudsters down the line. It's just putting more risk to your overall portfolio, and, people, once they're in there, they've already uncovered some gaps in your underwriting process. So again, just down the line is going to be very hard to weed out these fraudsters that made it through your portfolio, [Gary]: Chris, anything to add? [Chris]: That was a good summary. I would add only that the other side of the coin is when you put many, many tens of millions of good Government money into the hands of fraudsters, you're sort of inflating the entire credit system. You're allowing bad people to get what appears to be credit for good loans until they're discovered. Many of these will probably not be discovered. So you're kind of adding bads to the system and calling them goods. And that's never good for all of us. [Gary]: Well, this has been very helpful guys.  I want to say thank you very much for coming on Business Chat and sharing your insights. Related Posts