Heroes in Business - Experian Identity Report with Chris Ryan, What Retailers Should Know About Synthetic Identity Fraud

Episode Date: January 28, 2023

Experian Identity Report with Chris Ryan, Senior Fraud Solutions Consultant discusses What Retailers Should Know About Synthetic Identity Fraud. Special reports with the world's leading experts about the game changing impact of identity and the need to use reliable data the make confident decisions that safely accelerate customer engagement. Interviewed by David Cogan host of the Heroes Show and founder of Eliances entrepreneur community.  

Welcome back to Alliances Heroes, where heroes in business align. To be part of our super community and find out more about Alliances, visit www.alliances.com. One of my favorite parts of the morning, it's the Experian Identity Report on Alliances. The Experian Identity Report on Alliances. We are bringing you these special reports with the world's leading experts about the game-changing impact of identity and the need to use reliable data to make confident decisions that safely accelerate customer management. That's critical. And this week, we're joined again by Chris Ryan. He is the Senior Fraud Solutions Consultant, Decision Analytics, North America at Experian.

And you know where you could reach him? By going to Experian, Experian.com. That's E-X-P-E-R-I-A-N.com. Because you're listening and watching me, David Kogan, host of the Alliance's Hero Show. Don't forget, you could check out past Experian episodes by going to eliancer.com. That's E-L-I-A-N-C-E-R.com and click on Experian. Well, with that, Chris,

we're really looking forward to this segment, learning about synthetic identity fraud and how the right identity solution can help retailers mitigate risk. So with that, I don't think a lot of people really know unless they're specifically maybe in this industry of what exactly is synthetic identity fraud? Yeah, so great question. And thanks again for having me. And thanks for the opportunity to share some information with your listeners today. So when we think about fraud, there's really two sort of broad categories. The first is identity theft. Right. And if someone steals your identity, then that's a very clear outcome. Eventually, the victim finds out, you know, the issue gets resolved and everyone agrees, hey, that was fraudulent. That was not the owner of the identity that presented that presented it. The second general category is what we call first party fraud. And that's someone using an identity that they control. Now, they can use their own. And usually that

entails some process where they accumulate credit or access to credit over time. They behave like a responsible individual. And then eventually they just sort of blow up. They burn through all the credit they have. They disappear and they try to outrun the consequences. Synthetic identity is part of first party fraud because the person who's doing it controls the identity. The difference is it was never a real person to begin with. So there's no outrunning consequences, right, because they're not going to haul you into court. They're not going to garnish your wages if the person doesn't exist. So what what they what synthetic identity perpetrators do is they'll they'll make up an identity and might be fragments of a viable address. It might be a social security number belongs to a younger person, a child or a senior or something that looks plausibly acceptable.

And they'll start to use the identity in very benign ways, plan it in data where it gets picked up for marketing and other uses and later on can be verified through that data source. So they just engage in some consumer activity. And later on, they look for places to borrow money. And they may start with low credit lines and credit that's easy to get. Their verification isn't very rigorous. of being added as a user on a real consumer's account. So the idea is they're trying to get this identity into the credit world where they can then borrow and then do the same thing that other first-party frauds do, accumulate credit, burn it up, and don't repay anybody. But when it's synthetic identity, again, there's no real person to pursue,

which makes it a lot more challenging than other types of first party fraud. Wow. Unbelievable. Unbelievable that this even exists. Right. Yeah. So how does this type of fraud, though, impact retailers directly? Yeah. So that's an interesting question. Right. Two years ago, if you'd asked me that question, I just said not much. Right. The retailer makes a sale. The retailer takes the payment card. The retailer gets paid.

And if it was a synthetic identity that opened that payment card, eventually it's the issuer of the card that takes the loss. But as experience moved more into the payment space, what we found out is that there's a different and troubling story for online retailers. And the challenge that they're seeing is that they're very concerned about synthetic identities being planted as online shopping profiles. So this is one of those identity uses where it's a very low barrier. You know, there's no harm in being a shopper registered for ABCcompany.com until you start making purchases. And then it becomes problematic. But there was a well-publicized issue at the end of last year, early this year, from a person-to-person payment company that also has some involvement in retail, where they offered a cash incentive for people to sign up and they literally gave away millions of cash incentives, um, to synthetic identities.

So retailers started to take notice. And what they're worried about right now is a scenario where a synthetic identity is created. It's used to set up a profile and then the synthetic identity attaches real people's stolen credit cards as ways to make purchases, right? So it's a fast track. It's a lot faster than me building a synthetic identity where I have to go get the credit myself. I set up a synthetic identity at abccompany.com. And if I can buy David Kogan's credit card online, I'm just gonna use that as a payment method. And now all I have to do is outsmart the payment controls to use my synthetic identity to make a purchase. And then of course becomes a problem for the retailer

because they accepted a payment that was fraudulent that they may not be protected from. So, whereas I said two years ago, I would have said synthetic identity isn't a problem. It is if they start using stolen payment cards. And that's what our customers are worrying about. And thereby that increases the price of goods. It does. Very much.

You know, that the losses are baked into what we all pay for for retail goods and services. And the interesting thing there, David, is that that makes it a very collaborative industry. Right. A lot of us are on the same side. And it gives us a great chance to work with with customers because they're generally not afraid to say, hey, here's what we got going on. Do you think this is a risk? Can you help us out? With all of the holiday stuff and the spending and peak shopping seasons, how does that make synthetic identity fraud more difficult than ever to address? Because you've got so much going on at once now. Yeah. So as we were talking about in the lead up to the show offline,

volume is the friend of the person committing fraud, right? There's a limited number of resources that can look at transactions. It's really easy to get lost in all the volume to sort of sneak these fraudulent transactions in under the radar. So the challenge with the holiday season

is that as the volume goes up, you know, if there are these fake identities these synthetic identities that set up shopper profiles that are now equipped with stolen credit card information if they're making purchases that don't rise to the level of suspicion they're going to get away with it right and and in in february you might have had time to look at that. But in the peak of the holiday season, you just might not have resources to get it done. Yeah. The amount of data that has transpired is probably just phenomenal.

Yeah, for sure. So what we want to know now, and this is very important too, is what solutions does Experian offer to help retailers tackle this critical problem? Great question and thanks for the lead in. This summer we launched a product called Experian Link and what Experian Link does is it uses Experian's very robust view of consumer identities that don't just come from a single payment card issuer or lender, but they come from a broad variety of credit and

non-credit data sources. We got a pretty good picture of who people are and all the things that they do in life that create variations in their identity, changes in marital status, changes in address, operating, using a business address. These are all things that people do every day. And Experian has a pretty good view of that. We also have a pretty good view of who is associated legitimately with credit cards because the lenders report that information to us. So what we're able to do in this synthetic identity scenario is take those big universes of shopper profiles, scrub through them and flag those people who we definitely know own the card, right? The identities match. We know that that card belongs to them. This is a person that should meet no friction and no resistance, let them shop.

And then provide more insight on those areas where we think there's some level of discrepancy so that there's more intelligence for the strategies. think there's some level of discrepancy so that there's more intelligence for the strategies when a transaction comes in. Maybe that large electronics purchase raises an additional red flag if there's also suspicion around whether or not that payment card belongs to that person. So that's the approach, right? It's taking that ability to resolve identity and be really strong on the identity side, coupling it with our view of payment cards, and then giving our clients assurances of who the good customers are using payment cards they own and who you might want to take a closer look at. Absolutely. Well, Chris, you help online merchants understand synthetic identity fraud

and how the right identity solution can help them mitigate risk. This has been the Experian Identity Report again on the Alliance of Zero-Zone. Make sure you go to Experian.com that's E-X-P-E-r-i-a-n.com to learn more I'm David Kogan and I've been your host today so make sure you go to

eliancer.com to learn more and see past episodes thank you so much and thank you Chris for being here today thanks for having me but you gotta dance with me too

you know that's part of it there you go