Avoiding Fraud in Digital Account Opening

Numerated Marketing

August 11, 2022


As lenders continue to digitally transform their business banking segments, many have concerns about how implementing technology will affect the rate of fraud. Some have even avoided adopting new tech due to the fear of an increase in fraudulent applications. Implementing digital applications increases the risk of fraud, however with the right technology in place, lenders shouldn’t avoid innovation. The Numerated digital account opening experience has built-in verification tools to help detect and prevent fraud in the small business segment, so lenders can continue providing best-in-class online services. 

How Lenders Are Avoiding Fraud in Digital Account Opening
We spoke with our Vice President of Bank Products Michael Desimone to learn more about the fraud risks associated with digital account opening and how lenders are working to prevent it within their institutions. 

According to Michael, “Fraud has been and will continue to be a source of risk for lending in general and the advent of digital lending and account opening additionally provides for easier execution of synthetic identity theft or ‘faceless fraud’. It is important to understand that there is no silver bullet when it comes to fraud prevention, but there are a number of strategies a lender may employ to deter and detect fraud within the Numerated platform.”

Duplicate Businesses and Identity Verification Services
The Numerated platform includes multiple fraud and identity verification tools, such as LexisNexis Instant ID and Experian Business IQ, that are included in the standard product templates. These tools provide independent validation with many identical data points that provide extra assurance for entity validation. The Numerated platform can also integrate with additional identity verification services so that a lender may continue to use a service they have had success with previously.

Risk Flags
Numerated uses risk flags executed by our proprietary rules engine to automatically compare data collected in the application with information provided from third party sources to identify risk. There are multiple standard risk flags included in our product template. For example, one of the risk flags is the review of an individual’s identification issue date, since a recently issued driver’s license or other government issued identification may suggest a higher risk of fraud, due to recent consumer identity theft. Numerated additionally stops duplicate applications based on a lender’s parameters to assist in limiting system attacks.

Strategic Processes
Lenders may choose to use other strategic processes to prevent fraud, for example limiting withdrawals after an account opening, or requiring loan proceeds be funded into an account at the same lender’s institution. Since fraud usually occurs in the first 90 days following account origination, additional tools can also be used in conjunction with a lender’s core or system of record to monitor transaction activity and provide insights into potentially fraudulent activity for a period of time following account opening.

Choosing a Digital Account Opening Solution that Mitigates Risk
As more fintech competitors enter the market, traditional financial institutions will largely be compelled to offer more digital solutions. In doing so, they will need to evolve their risk mitigation practices and tools in order to stay relevant and current in deterring fraud. Preventing fraud in digital applications starts with choosing the right technology partner. 

Lenders that are leveraging the Numerated platform can easily prevent and detect fraud when it happens. Learn more about how you can get started with Numerated’s digital account opening solution, here.  

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