Firms can cost-effectively check the backgrounds of companies and their guarantors with a customizable, reasonably priced tool.
Posted Oct 3, 2005
Experian launched a commercial fraud tool today to help companies prevent other businesses from stealing their identities. Commercial Fraud Insight draws on multiple databases of millions of U.S. businesses and consumers to deliver high-level alerts and detailed information to deliver one report, which can be accessed via the Web, CPU, or automated batch processing.
Loan fraud losses exceed $35 billion annually, but soft fraud loses are more hidden. Twenty to 30 percent of all commercial loses can be attributed to some type of fraud, and the average business fraud loss is three to 10 times larger than consumer fraud loses. "Sometimes they just assume their client went bad on them. It's often just looked at as bad debt or bad decisions," says Carolyn Hardin-Levine, director of commercial fraud solutions for Experian. "To identify something as a fraudulent activity, it has to be reported that way. A lot of fraud goes undetected."
Not only is stealing a business's identity more profitable for the imposter, it's also easier, Hardin-Levine explains. "All you really need is the Yellow Pages--the name, address, and phone number." Plus, the Internet helps them gather even more background information. It's also hard to distinguish a new, emerging business from something made up.
There are several trends in the commercial fraud space, according to Hardin-Levine. The most obvious are identity theft, in which someone takes someone else's existing identity, and fictitious identity, in which someone makes up a business. Others include bust out, a premeditated type of fraud in which an individual establishes a relationship with a company to earn a line of credit, pays on time for a few months, gets a line increase, maxes that out and leaves. Takeover bust out takes place when a business buys a small, well-established business and busts out through that means. Ecommerce allows frauds to sit at the computer and tweak different combinations until they are approved.
"Commercial Fraud Insights identifies all the different fraudulent sources using multiple data sources to make sure information is truthful, applying intelligent analytics to identify fraud," Hardin-Levine says. The tool simultaneously looks at all the application data, both business and individual, and validates it for accuracy against criteria including business information (names, addresses, and phone numbers); consumer data (Social Security numbers, dates of birth; residential versus business addresses); business tax ID data; and the client's own pervious historical application data. This becomes increasingly important as consumer imposters are moving into the more profitable commercial world, Hardin-Levine says. "We're seeing the migration of personal ID theft being used as a personal guarantor" and although consumers are protected against most identity theft, many businesses are not.
"Consumers are well protected by enacted federal law. The type of law that covers business is all designed around litigation," says Maggie Scarborough, research manger, corporate banking, for Financial Insights (an IDC company). The tool can help businesses feel safer in their dealings with new partners, she says. "Especially for financial institutions, there has for a long time been the desire for extending their territories out to areas where they don't have brick and mortar. They've spent a lot of money putting in analytic solutions to prove the individual is with the company and they're a guarantor."
The tool also can be especially helpful to small businesses. "Take any business that wants to do business with a partner that they don't know. The most they do is Google them or try to get credit information, not challenge them to this identity," Scarborough says. "We've been waiting for a long time to see fraud solutions get out the business segment that aren't built by institutions."
Scarborough also applauds the tool's customization capabilities and "reasonable" pricing structure. The reports come in three sections, so companies only have to delve as deep as they need to make decisions, allowing them to receive fraud alerts that are most meaningful to a particular market, business, or client. Pricing is based on volume and depth of analytics, with the most robust reports starting at approximately $3.50, which Scarborough says will allow businesses to justify spending "The philosophy in cost justifying the use of this is, you are drinking as you need it."
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