TransUnion, a global risk information provider, has launched a new “rapid default” model within its IDVision with iovation suite of products to protect financial institutions against rapid default fraud, the company said in a statement.
Rapid defaults occur when a credit card customer increases the balance they are carrying on their account quickly, only to then stop making payments on it within a twelve month time-span. According to the statement, this type of behavior resulted in nearly $1 billion in losses to financial institutions between April 2017 and March 2018.
TransUnion also cites internal research showing credit abuse and synthetic identity attacks – both hard to predict or protect against using traditional fraud prevention models – as the most common reasons for this behavior.
“Credit abuse and synthetic identity fraud are two of the greatest challenges facing financial institutions, causing significant losses which can be difficult to identify through traditional credit risk models, alone,” said Geoff Miller, head of global fraud and identity solutions for TransUnion.
Credit abuse is difficult because fraudsters will take out multiple lines of credit simultaneously, circumventing the traditional credit vetting process. Synthetic identity fraud – a type of eCommerce fraud where fraudsters will spend months or even years building credit with a made up identity before “busting out” with a high-value attack – is also difficult to predict because the accounts match the pattern of a model credit account.
TransUnion’s research also found that the presence of high volumes of credit in these attacks translates into the loss exposure of an identified rapid default customer being 50x more than the average delinquent consumer balance. These huge losses suffered from each individually successful attack makes prevention extremely important for financial institutions.
“That is why the Rapid Default model within the IDVision with iovation solution suite is a game changer – it predicts the risk of a bust-out consumer and gives businesses the ability to take action before losses accumulate. Furthermore, this score can be used to identify consumers with lower rapid default risks, who may now be eligible for credit line increases or other benefits,” Miller said.