Experian launches synthetic identity detection service
The credit bureau Experian is launching a service called Sure Profile that it says will help banks detect synthetic identities before lending to, or opening accounts for, fraudsters.
Synthetic identity fraud, where crooks invent realistic-seeming identities out of scraps of real ones (for instance, one person’s Social Security number, another’s mailing address) has plagued banks for years. Cybercriminals typically use a synthetic identity to establish credit that they then use responsibly for an average of six years before going dark. Lenders often never realize they gave money to a fraudster with a fake identity. All they know is that they have a loan in default that they eventually charge off.
Aite Group estimates this type of fraud costs U.S. lenders $10,000 to $15,000 per incident. Auriemma Insights estimates the losses are $6 billion annually. According to McKinsey consultants, 85%-95% of loan applicants identified as potential synthetic identities are not flagged by traditional fraud models.
“Synthetic ID fraud has been on the rise for years,” said Alex Lintner, group president for consumer information services at Experian. “It puts both lenders and consumers at considerable risk.”
When a lender who subscribes to the Sure Profile service pulls a credit report, the company will quickly conduct a series of data checks and apply machine learning to the data to determine if the applicant is a real person. The process is necessarily fast: Experian’s service-level agreements with lenders often require response rates that are measured in milliseconds. Experian issues about 2 million credit profiles a day, or 700 million per year.
Several other vendors, including ID Analytics and LexisNexis Risk Solutions, as well as the credit bureaus Equifax and TransUnion have offered technology for detecting synthetic IDs for some time. Lintner said Experian has filed several patents covering its methodology, which he declined to describe in detail but said involved the use of data assets other companies lack.
“Our gestalt as a corporation is different than other bureaus, and therefore these other data assets don't exist in our two major competitors,” Lintner said.
Experian will pay a bank for any losses that come from a synthetic identity that the company verified as real. However, because it’s almost impossible to verify that a credit loss came from a synthetic identity, the lender has to trust Experian to report its own error well after it has made its determination.
One question is, are credit bureaus best qualified to do synthetic identity checks? In the Consumer Financial Protection Bureau’s complaint database, the largest category of complaints consistently relate to credit bureaus. So far this year, 73,728 people have complained about the credit bureaus, and 51,624 of those gripes have been that there was incorrect information in a report.
Lintner said Experian has a system for fixing errors in credit reports that he compares to a robot vacuum.
“We find those errors through analytical methodologies, and we eliminate them,” he said. “We’ve gotten kudos from the CFPB.”