Fraud. It’s bad for any company. But unfortunately, fraud has become a big issue in many facets of business—and especially during the consumer income verification process.
How does this type of fraudulent activity happen? Consider the case of a consumer applying for a loan. The consumer may be asked to provide income verification documents such as a pay stub or end-of-year statement. Ideally, the information contained within the pay stub or statement will highlight whether or not the consumer is creditworthy. There’s just one problem, though: Fake pay stubs and similar collateral can be easily (and cheaply) purchased online.
Regrettably, many nefarious companies are willing to create fraudulent look-a-like forms like pay stubs and W-2s. These forms can fool human eyes and even AI-based systems that aren’t expecting fraud. What’s the result of all this fraudulent activity? In many cases, it’s a “yes” answer to a loan application that should have been a “no”.
It’s not difficult to imagine all the repercussions that could come from lending to an unqualified applicant. Neither is it difficult to imagine all the benefits that can come from streamlining an income verification process. These include fewer “bad loans” made, more accurate approvals accepted, and heightened peace of mind for everyone involved.
If your organization depends on income verification practices, you don’t have to sit still for fraud. Taking just a few steps will help you reduce the chance of being affected by fake application information.
1. Reduce your reliance on consumer-driven statements and documents.
Bankrate notes that according to online lender Prosper, around 11% of lending documents are in some way falsified. In other words, around one-tenth of all the applications you receive could contain incorrect information. One way to reduce that amount is to validate everything you receive from applicants.
Taking secondary measures to validate data just makes sense. You’re basically just double-checking for the good of your company. For instance, you can still ask for a pay stub. Just be certain to use other ways to back up what the pay stub says.
The bottom line is that you can’t rely on the validity of everything a consumer tells you. Plus, people can make honest mistakes such as inputting the wrong number. Having methods to corroborate what you’re told gives you a way to spot potential fraud quickly.
2. Verify all income through a third-party provider.
Want to completely remove the need for consumers to upload salary-related document images? Partner with an income verification provider. Income verification providers are set up to retrieve salary information from trustworthy sources. Since the information comes from a source like a payroll solutions provider, it can’t be manipulated by a consumer. On the contrary, it should be a dependable snapshot of pay data.
As income verification company Truework explains, handing over income verification responsibilities can be good for all parties. For example, Truework gives consumers access to their income verification reports. That way, they can request changes if they notice disparities. By aiming for full transparency across all touchpoints, Truework minimizes possible snags.
With your third-party income provider doing all the heavy lifting, your team can focus on creating a better customer experience. You can confidently make more loans and make them faster, too.
3. Create a systematic application process throughout your organization.
Once you have your income verification method airtight, think about addressing other parts of your application process. Set aside some time to investigate all the touchpoints along the customer application journey. Are any of these workflows choppy? Inconsistent? Does everyone in your workforce follow the same application journey or are there outlying processes?
Your goal should be to create systematic application approval journeys that can be repeated and measured. Having routines is essential because routines lead to fewer mistakes. They also make it simpler for your new hires to learn the protocols that they’re expected to follow.
As you begin to construct very deliberate workflows, you should begin to see even fewer incidences of missteps or fraud. Additionally, you may be able to increase the speed of your approvals. Consumers are sure to respond with appreciation, which means you may get more repeat loans.
4. Update your tech stack to tighten data security.
So far, the fraud we’ve been talking about has been consumer-centered. Yet fraud can come from both external and internal sources. A full fifth of all data breaches can be traced to insider causes, says WatchGuard.
This doesn’t mean that you shouldn’t have faith in your employees. However, your responsibility is to protect your organization and its reputation. Therefore, look long and hard at your tech stack. Do all your systems neatly integrate with each other (and your third-party income verification provider?) Or are there areas where security is lacking?
Switching to a more robust technology can enable you to avoid the chance that an employee could manipulate data. The right system can even give you the chance to limit certain workers’ access to private information. You’ll never have to wonder if your data is protected if your tech stack is supremely secure.
No lender wants to give money to a consumer who is unlikely to be able to pay back a loan. If you’re not 100% sure that your income verification and related processes are working, change them now. You’ll put an end to preventable loan approvals linked to fraudulent reports and documents. And you’ll open the door to happier customers, happier employees, and a stronger reputation.
