2012: A year of Identity & Fraud, Part One

As the New Year approaches, Latest Thinking takes a look back over 2012 and highlights some of the developments and events in the world of  Identity & Fraud.

In January, an Experian survey revealed that more than half of automotive dealers have positive expectations for their used car sales and aftersales activities over the year.

62 per cent of dealerships predicted that their used car sales activities would grow in 2012, despite 22 per cent stating that a shortage of good quality used cars was the biggest challenge facing their business this year. Just 38 per cent of dealers expected new car sales volumes to increase.

23 per cent of dealers stated that selling vehicles profitably was the key challenge facing their business, while a further 17 per cent stated that identifying and reaching suitable customers was their biggest problem.

55 per cent of dealers believed that they would grow their aftersales activity during 2012. They also revealed that customer loyalty was far greater amongst those that had previously purchased new cars from them. 70 per cent of new car customers returned to the dealership for servicing or repair, compared to just 14 per cent of used car buyers.

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In February, Experian announced the launch of a new version of Hunter, its industry-leading data-sharing fraud prevention system, improving the effectiveness and efficiency of anti-fraud operations.

The upgrade enhanced Hunter’s anti-fraud investigation and collaboration capabilities with more than 30 new and enhanced features. These include integration with Google Maps, automated completion of fraud submissions to CIFAS and greater sharing of fraud intelligence and investigatory capabilities across multiple business units within an organisation.

The integration of Google Maps into Hunter allows fraud investigators to see how the addresses on a number of connected applications relate to each other geographically, through the use of its Street View, Satellite and Standard map views. This enables investigators to spot geographic connections that are not obvious from the data, such as potential fraud collaboration between residents of neighbouring properties located on different streets, and to ensure that commercial properties are not passed off as domestic residences.

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In March, Experian revealed its latest research which estimated £1.02 billion worth of online shopping transactions were abandoned the previous year by UK consumers frustrated by old and inefficient identity measures. One in five of these abandoned transactions were not taken elsewhere as individuals cancelled their shopping attempt altogether, resulting in £214 million worth of net lost revenue for UK retailers.

The study, which was conducted for Experian by the International Fraud Prevention Research Centre and included survey data as well as insights from online retailers and the Office of National Statistics, revealed that 44 per cent of UK shoppers had abandoned at least one online shopping transaction in the last year having become frustrated with the length and complexity of certain older forms of identity verification.

Older forms of online identity verification, typically complex, standalone systems drawing on single sources of information to corroborate identity information, are unable to validate as many individuals electronically as modern services. As a result, genuine customers might be forced to call a contact centre, submit physical documents through the post or visit the store or branch to confirm identity. Alternatively, the organisation might choose to accept a lower level of proof, and risk higher levels of fraud, in order to minimise customer inconvenience.

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In April, Experian revealed that fraudulent applications for mortgages increased by eight per cent in the previous year. This was the fifth year in a row in which the rate of mortgage fraud has increased. 34 in every 10,000 applications for mortgages were found to be fraudulent in 2011, compared to just 15 in every 10,000 in 2006.

The overall rate of fraud at point of application across the UK’s financial services sector increased by four per cent in 2011, to just over 17 in every 10,000 applications. In addition to record mortgage fraud figures, this overall increase was also driven by growth in insurance and current account fraud. 93 per cent of attempted mortgage fraud in 2011 was down to individuals misrepresenting their personal information on applications. Typically these first party frauds involved falsifying employment status or financial information, and – most commonly – attempting to hide an adverse credit history.

Experian’s demographic insight revealed that Mosaic groups Terraced Melting Pot (young, poorly educated individuals living in small towns) and Suburban Mindsets (predominantly middle aged, middle and skilled working class individuals) were both responsible for around 15 per cent of first party mortgage fraud cases in 2011. The young, well educated professionals of the Liberal Opinions were also prone to attempting first party mortgage fraud, being responsible for 13 per cent of cases.

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Latest Thinking will be taking another look back at 2012 on Thursday and Friday this week.