As recently reported by AM Online, there’s a growing trend of vehicle financing being completed via the internet.
This creates new opportunities for car dealers, but also runs the higher risk of increased financial crime and fraud.
Showrooms are still an important part of buying a vehicle.
People want to physically see and test drive a car, but also want a quicker and more seamless financing process.
They’re happier arranging finance in the comfort of their own home.
Such an emerging trend provides dealers with the opportunity to enhance the showroom experience.
Staff can focus more on helping consumers view cars, rather than spending time processing finance applications.
While this could boost sales, the faceless nature and speed of internet-based financing can be easily exploited by fraudsters. There are four key risks of financial crime including:
1) Evasion of payment
2) Asset conversion where the vehicle is quickly sold-on, usually abroad
3) Application fraud including falsification of personal information or failure to disclose adverse credit information
4) Identity fraud
These risks are heightened because internet applications enable ‘professional’ fraudsters to be invisible.
They can more effectively use stolen data to impersonate another real person or to create seemingly plausible false profiles.
These are then used to repeatedly make vehicle finance applications, targeting many different lenders.
If they’re rejected, they will alter some of the false information, allowing them to effectively reapply.
By clicking just a few buttons, they are able to continuously make many different application attempts and will continue until successful.
In many instances, the financial crime behind these applications is very sophisticated, with fraudsters using stolen funds to pay deposits on vehicles or administration fees.
This gives their application credibility and gets them closer to getting hold of the vehicle.
It’s not just ‘professional’ fraudsters that are driving application fraud.
The lack of human interaction during the online application makes it easier for otherwise law-abiding people to lie about details such as their salary and employment status.
Falsification of such personal information often means dealers are then faced with the time and costs of trying to recover vehicles or repayments from people that can’t afford them.
Application fraud in motor finance is already on the rise, with the 2018 Cifas Fraudscape Report showing it increased by almost 50% from 2015 to 2017.
Furthermore, our own data – at Synectics Solutions – shows identity fraud accounted for 15% of motor finance fraud in 2017, up from just 5% two years earlier.
Unfortunately, there’s real potential for these figures to rise further, as fraudsters take advantage of growing customer demand for quicker finance decisions.
In a competitive market, dealers know sales can hinge on who can give customers the first ‘yes’ for finance.
Fraudsters are also aware of this and know that in some cases, application checks and due diligence will be minimised to speed-up customer relations.
Add to this a growing number of applications being made, both from genuine and fraudulent customers, and fraudsters know there’s a greater chance of their fake identifies and applications passing low-level screening.
With more consumers financing vehicles online, dealers need to make finance validations faster and smarter.
One of the most effective ways to do this is to draw on cross-sector data and fraud intelligence.
Fraudsters rarely operate in just one sector and will test their techniques and fake identities in many different arears, perfecting these as they go along.
Cifas has previously reported that 32% of offenders making false insurance claims, had also committed other types of fraud in other sectors.
Drawing on reliable and real-time data, which is compiled from across different financial organisations, can enable dealers to quickly spot threats and mitigate risks.
It can mean dealers can accurately and instantly verify identities and check personal data.
This significantly enhances due diligence, without prolonging the application process, saving both companies and consumers time.
As consumers increasingly move online, they’ll demand greater convenience and speed of service.
Dealers and lenders need to be able to streamline both the customer experience and fraud prevention measures if they’re to capitalise on the growing trend of online motor financing.
Author: Mark Haslam, head of product management at Synectics Solutions