Mitigating commercial fraud risk without limiting growth

With the swift digital transformation that occurred over the last few years, businesses have had to adapt to stay competitive and keep up with customer expectations. As a result, for some, putting in place additional identity verification and fraud detection solutions fell by the wayside. Fraudsters capitalized on this.

Experian’s 2022 Global Identity and Fraud Report found that more than 70% of businesses – the highest percentage ever – say that preventing fraud is their top concern. If lenders are not putting the right measures in place now to protect themselves and the businesses they serve from fraud, the problem may grow into a more difficult situation to manage as fraud goes undetected and it becomes harder to recoup losses.

This creates a challenge for banks to ensure that businesses get access to the capital they need to mitigate fraud while still providing an optimal customer experience. Banks can achieve this balance by using innovative data and technology to properly verify identities and detect fraud in real time in order to drive current and future portfolio growth.

A multilayered approach to fraud prevention

It’s important for lenders to ensure they have the right data, technology and analytics to help detect, identify and treat fraud. However, amid economic uncertainty, it’s even more crucial. As circumstances change for businesses, lenders need the right insights that help protect themselves from fraud now and in the future without hindering their ability to make real-time decisions for their customers. A multilayered approach is key.

Fraudsters are constantly evolving while new fraud schemes emerge and change at lightning speed. Meanwhile, many of the processes lenders use have shifted to digital over the last few years, bringing more challenges to the fraud prevention front. More antiquated fraud solutions were too broad and inefficient, making it harder to recognize and tackle fraud as it occurred, not to mention identify fraud already in their portfolios. Modern fraud solutions home in on types of fraud as they exist now and as they evolve.

Whether a business is new or more established, fraudsters are willing and able to capitalize on the loan sizes associated with commercial lending, so lenders need to put a multilayered approach in place to protect themselves and the businesses they serve.

Leveraging innovative fraud solutions

While there is no silver bullet for fraud prevention and mitigation, taking a multilayered approach not only distinguishes types of fraud but provides the right next steps for treatment. For banks to drive growth, they need to have a solution like this in place in order to verify the legitimacy of a business and help identify and mitigate fraud.

Fraud solutions that incorporate advanced data and analytics can help lenders feel confident in detecting and distinguishing different types of entity fraud, including first-party, third-party and synthetic identity fraud that exists both in their portfolio and in new credit applications.

A well-rounded and multi-layered fraud solution will help banks:

Optimize the overall customer experience: Fraud solutions of the past have a history of being time-consuming and inefficient for both the lender and the borrower. Lenders need the ability to distinguish between fraud types quickly and accurately without adding additional friction for their customers. A modern fraud solution can help lenders create safeguards for risky accounts without impacting the experience for those that are low risk.

Leverage blended data about the applicant: As fraudsters continue to target commercial loans, it will be even more crucial for lenders to be able to detect fraud at the point of application. Leveraging blended commercial credit data that includes insights on both the business owner and the business entity with nontraditional data can help validate a business applicant, allowing good customers to enjoy a frictionless experience while stopping bad actors. Nontraditional data may include professional social networks, phone numbers and web domains.

Detect fraud in real time: Real-time insights can make all the difference in mitigating fraud loss. Innovative solutions that provide recent, trended data using attributes like a business’s name, zip code and tax ID can help lenders identify the occurrence of third-party, synthetic identity fraud, loan stacking, as well as inconsistencies in an applicant’s information.

Banks play an important role in ensuring businesses have access to the fair and affordable credit they need for success. As fraudsters continue to find ways to take advantage of lenders and businesses, implementing innovative fraud solutions that incorporate advanced data and analytics into the decisioning process will help minimize fraud.

Brian Bond is senior vice president, business information services, at Experian North America.