Reduce Fraud Losses

Optimization Engine Helps Mortgage Lender Prevent More Fraud and Reduce Losses

Fraud Exposure

the total amount of fraud attempted (fraud prevented + fraud losses)

Fraud Prevention Rate

the percent of fraud exposure you prevent from occurring (fraud prevented / fraud exposure)

Indicators

elements of a fraud targeting strategy used to identify fraudulent transactions. Indicators can be alerts, business rules or scores

PII

Personally Identifiable Information - any data that could potentially identify a specific individual

Background

A mortgage lender uses a combination of an internal fraud score, business rules and 3rd party alerts to rank every loan application they receive by fraud risk. Their Fraud Exposure has has been steadily increasing and now averages $9MM per month. They are also experiencing a decline in their Fraud Prevention Rate, which is down to 65% from 74%, resulting in annualized fraud losses of $38MM!

The Process

The lender securely transfers an application-level data file with no PII data included. The data is processed through the Optimization Engine and within seconds results are provided showing fraud detection performance for every 50 point segment for the internal fraud score, each of the 30+ business rules, each of the 5 vendor alerts, as well as fraud score & business rule combinations, fraud score & vendor alert combinations, and business rule & vendor alert combinations. The results also provide incremental performance, ranking all indicators based on incremental fraud detection and clearly identifying the best indicators and those that do not provide any incremental value. Reports and output data are delivered to the lender who determines the changes to make to their fraud targeting strategy based on business objectives.

Results

Using results from the Optimization Engine the lender takes the following actions:

  • combines internal fraud score with vendor alerts to more accurately target fraudulent applications with fewer false positives
  • eliminates 7 business rules that are creating additional fraud reviews, but are not identifying incremental fraudulent applications
  • eliminates 1 vendor alert that is creating additional fraud reviews, but is not identifying incremental fraudulent applications

These actions resulted in the following benefits:

  • increased the Fraud Prevention Rate to 78%, saving $14MM annually in fraud losses
  • saved $2MM annually by eliminating 1 vendor expense that was not providing incremental value
  • reduced false positives by 20%, improving operational efficiency and the overall customer experience

Optimization Benefits

“Your existing data, tools and resources have tremendous value. Optimize those before you spend more money on new solutions and resources.”

Fraudsters are constantly creating new schemes. Optimization provides consistent metrics you can track over time and quickly identify new fraud trends and where they are coming from, helping you minimize losses from new attacks.losses from new attacks.

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