Loopholes in KYC process leads to many frauds in lending system

IDfy, an integrated identity platform that works to eliminate fraud and establishes trust between entities, has come out with facts that indicate that the exponential growth in the digital lending ecosystem has resulted in the rise of fraudsters and scammers too who try to defraud lenders at every possible opportunity. Experts at the firm had analyzed more than 80 million data points to uncover the most probable frauds rampant in the industry. According to the study, lending companies face key KYC risks and:

◆ 39% of loan applications have name and ID mismatch

◆ .6% of borrowers submit tampered photo IDs

◆ 1 out of 14 borrowers submit someone else’s photo ID

IDfy states that a lot frauds are reported at the stage when the lending journey starts with the onboarding process through ID, documents and financial verifications. The most common among these, according to the study, are:

◆ Face comparison fraud, passing liveness check with a non-live photo

◆ Up to 7% of such cases are flagged

◆ Name comparison fraud where names on the Aadhaar and PAN cards do not match. Nearly 6% of these cases turn out to be fraudulent.

Impersonation fraud where proxying for/prompting the original borrower, especially when OTP is involved

The study also found that of all the IDs accepted during onboarding, the ones tampered with the most are:

◆ Aadhar card 3.11%

◆ PAN Card 3.84%

◆ Voters’ ID 6.78%

It adds that Aadhaar tampering is prevalent in the lending space, and the best solutions that catch it are only ~85% accurate.

IDfy says this can be mitigated if entities utilize technology that not only detects physical tampering but also differentiates between original documents and printouts. While the former can prevent impersonation frauds, the latter captures liveness frauds.