Credit Application Fraud

This crime is costing banks billions of dollars and countless hours as they chase down people who don’t even exist. - Accenture


Attackers use stolen and fabricated PII to deceive banks

Credit application fraud occurs when an attacker uses stolen personally identifiable information (PII), to apply for a credit card, loan, or other type of credit. They may even exploit the financial system to create a synthetic identity, i.e., a fictitious person, which is even harder for financial institutions to detect.

Other terms for credit application fraud: synthetic identities; identity theft; new account fraud; credit card origination fraud

Detect malicious credit applications before they turn into fraud

Shape’s advanced fraud detection can flag and prevent attackers from applying for credit online under assumed identities, whether the fraudster uses automated or manual methods.

Shape Solves Credit Application Fraud at a Top 5 US Bank:

  1. Average cost of a fraudulent credit application: $1000
  2. Existing fraud detection tools had a 1/60 false negative rate
  3. Shape prevented over $3 million in fraud in the first month of deployment

20%
Forbes estimated that 20% of all credit losses are due to synthetic identity fraud.

Attackers Exploit Fundamental Banking Processes

Reliance on static PII

Attackers typically only need a victim’s social security number, address, and date of birth to apply for a credit card in their name. This type of PII is regularly available on the darknet from data breaches at organizations like credit bureaus and tax prep firms.

Automatic Credit File Creation

Creating a synthetic identity just requires an attacker to apply twice and with two different lenders. The first application will fail due to lack of credit history, but the record-check itself will start a credit file with a credit reporting agency. Then, the attacker’s second credit card application with a different issuer will typically succeed due to the existence of a credit file.

Periodic Limit Increases

Synthetic identities are often granted low lines of credit, typically $100-$500, due to the lack of credit history. Fraudsters may make small purchases and pay them off each month, establishing positive credit history and earning period limit increases. Once the credit limit is high enough, the fraudster will cash out, leaving the lender with thousands of dollars in losses.

Latest Research

Live Briefing

On April 26, Shape’s lead financial threat analyst will reveal key insights from protecting banks from credit card application fraud.

Report

Accenture outlines key banking trends, including the rise of synthetic identities.

Stop Loaning Funds to Fraudsters

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