How Departmental Collaboration Enhances Fraud Prevention
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GUEST BLOGGER
Anjum Madan, CFE
Senior Fraud Analyst, Ironcloud Finance
Most organizations understand that collaboration is a pillar of a successful company, yet in practice, it often does not happen. It is important and necessary to have goals and targets because they push your organization to perform at a higher level. However, without communication and collaboration between teams, the metrics can unknowingly pit departments against each other.
In a previous role, the marketing and fraud departments were often at odds. For example, this particular company offered short-term loans to clients in the subprime space. Because of low credit scores or other detrimental factors, these clients weren’t eligible to borrow from banks or other institutes that offer competitive lending rates. The marketing team’s success was measured on the proportion of loans that were approved and then funded because their most important goal was to lend out money. Customer nonpayment was not unusual for subprime loans, and approximately 25% of these customers had not made any payment in the three months after they received their loan.
We analyzed this sub-set of customers and found that there was a significant number who had high-paying jobs, such as doctors and lawyers, with great credit scores. In the fraud department, this raised a red flag and brought up a big question, “Why would these customers approach a high-interest online lender to get funds when banks would be willing to lend them funds at a more reasonable rate?”
Without a true understanding of who our audience was, we had been giving out funds to these “great” customers. Their credit score was high and their history did not show defaulted payments — sounded like a dream come true. Turns out, of course, that those applications were submitted fraudulently. In order to combat this, we implemented rules to deny customers who had exceptionally good credit scores. Over time, this meant that the proportion of loans with no payments dropped to 15%. However, the decrease in acceptance and conversion rates exasperated the marketing department.
In retrospect, if the two departments had worked collaboratively, both would have been more effective. If we, as the anti-fraud team, had sat down with our colleagues in marketing to understand who the target customer was, we would have discovered the trend earlier and built better rules to deny the fraudulent applications. In addition, the marketing team would have seen the bigger picture and accepted the short-term decrease in acceptance and conversion rates. Eliminating these fraudulent loans increased the ability to fund lucrative accounts, making the marketing team more effective.
In the words of Hellen Keller, "Alone we can do so little; together we can do so much."
Fraudsters are smart, and in order to win big against them, we need to work together and work smarter, both within our organizations and as a network of anti-fraud professionals. Today I challenge you: reach out to the marketing division of your company. Create a true understanding of an ideal client that both teams can agree on. Educate the organization on how fraud prevention will help everyone achieve their departmental goals, making sure that the marketing team, especially, understands that attracting clients is only profitable if those clients bring in revenue.