Fico, the leading provider of analytics and decision management technology, today announced that UniCredit, the Italy-based European banking group, will use an application fraud solution from Fico to help reduce fraud losses on personal loans and improve the customer experience in its Italian banking business.
FICO is also validating the performance of the UniCredit Fraud Score, built for detecting residential mortgage application fraud.
As part of its credit application process, UniCredit will score each loan for its likelihood of being fraudulent. Custom fraud models developed by FICO based on UniCredit's data will be used to analyze personal loans, and models developed by UniCredit and certified by FICO will be used to analyze mortgage loans. FICO will also work with UniCredit to define which criteria to check on each application to detect more fraud, and to regularly fine-tune the models and UniCredit's fraud rules based on fraud attacks. The solution is aimed at detecting both third-party fraud, where the criminal uses another person's identify to obtain credit, and first-party fraud, where an individual takes out credit under his or her own name but with no intent to repay.
UniCredit is a major international financial institution with strong roots in 22 European countries and an international network in approximately 50 markets.
As reported by UniCredit's Risk Management department, "Our main objective was to further enhance our ability in detecting potentially fraudulent applications, while increasing efficiency and effectiveness in our fraud investigations. We needed a solution which could enable us to focus on the credit applications with the highest likelihood of fraud while improving the customer experience. We chose FICO for its international leadership in fraud analytics as well as its ability to partner with us and improve our fraud operations."
"Application fraud is a growing focus for criminals who are being thwarted in such areas as credit card fraud," said Mike Gordon, executive vice president of sales, services and marketing at FICO. "By applying advanced analytics to stopping criminals from opening credit lines with fraudulent intent, UniCredit is taking an aggressive step that should boost the performance of their business and further deter criminal activity. At the same time, UniCredit can approve legitimate credit applications faster, by focusing fraud reviews on only those applications that have the highest chance of being fraudulent."
Separately, Fico, the leading provider of predictive analytics and decision management technology, today announced the availability of an advanced solution for the costly problem of application fraud. FICO® Application Fraud Manager is the first solution combining advanced decision management and investigative workflow capabilities with analytics for both first-party and third-party application fraud. The solution is aimed at helping both private companies and public agencies — across multiple sectors and vertical markets — reduce losses while improving customer service.
While application fraud is reported to cost credit grantors more than $6.7 billion a year in the U.S. alone, published figures may not account for the full scope of the problem. Most reported application fraud is third-party fraud, which involves identity theft — many industry experts believe the bigger problem is first-party fraud, in which the criminal is the customer, who obtains credit (often by falsifying information) without intending to pay it back. This kind of fraud has historically been difficult to detect, and often the losses are characterized as bad debt rather than fraud. In its October 2012 report First-Party Fraud: The Global Battle Against Diabolical Charge-Offs, the industry analyst group AITE estimates that first-party fraud in credit cards worldwide cost $18.5 billion in 2012, and will rise to $28.6 billion by 2016.
First-party fraud is also an issue in mortgage originations, personal loans and other financial services lines of business, as well as in other industries where the extension of customer privileges to people applying under false pretenses costs businesses and governments billions of dollars every year. Identifying fraudulent intent before booking new accounts, delivering products, or providing services will help organizations reduce losses and operational costs, while managing regulatory and operational risk.
Along with FICO® Falcon® Fraud Manager, the world's leading solution for payments fraud, FICO® Application Fraud Manager enables clients to leverage FICO's advanced analytics technologies in the fight against fraud across the customer lifecycle, starting with new customer approvals. The new solution can host multiple models that identify third-party and first-party fraud for specific portfolios, and includes a configurable fuzzy matching algorithm that works with single and multi-byte languages to provide superior results for fraud matching rules. FICO Application Fraud Manager's other components include data orchestration, decision support and case management.
UniCredit Group, a major international financial institution with strong roots in 22 European countries and an international network presence in approximately 50 markets, recently purchased FICO first-party and third-party application fraud models for its personal loans division in Italy. As reported by UniCredit's Risk Management department, "Our main objective was to further enhance our ability in detecting potentially fraudulent applications, while increasing efficiency and effectiveness in our fraud investigations. We needed a solution which could enable us to focus on the credit applications with the highest likelihood of fraud while improving the customer experience. We chose FICO for its international leadership in fraud analytics as well as its ability to partner with us and improve our fraud operations."
The FICO® Application Fraud Manager components can be used with a lender's existing originations system. FICO Application Fraud Manager shares relevant alerts, scores, strategies, decisions and case dispositions across channels, products and lines of business. The solution supports batch and real-time fraud reviews, and FICO offers multiple deployment options based on country/region.
"We've designed this solution to deliver rapid results," said Doug Clare, vice president of product management at FICO. "The flexible component-driven architecture shortens deployment time and allows businesses to add components as needed, and build their way to true enterprise protection. Major lenders using our custom application fraud solutions have reduced their application fraud losses by up to 30% in the first year alone."
"While much of the discussion on fraud tends to center around identity theft and third-party fraud, the weak economy and opportunities to commit fraud at credit issuance continue to drive first-party fraud losses," said CEB TowerGroup research director Jason Malo. "Companies approving requests for credit-based services, whether they are financial institutions, mortgage lenders, retailers or otherwise, need a solution that proactively assesses the likelihood of fraud as well as the creditworthiness of the applicant."