Last year, losses from digital identity fraud alone stood at $43 billion , impacting 40 million US adults. The previous year, over 27 million Indians experienced identity theft, according to Norton Report. Then there was the famous case of Dhani where Sunny Leone was served a show cause notice for a ₹2000 loan she never took, which went on to become the touchstone of identity theft in digital credit.

Lenders need eyes in the back of their heads to cope with new-age lending

The embedded finance revolution has pushed lenders down the value chain, away from the customers. Now it is non-bank apps that majorly source customers, making due diligence a shared responsibility between banks and non-banks. However, the risk of non-compliance bears far more heavily on the regulated entity. BNP Paribas’ $8.9 billion fine and HSBC’s $1.92 billion fine for KYC/AML non-compliance confirms it. Besides monetary loss, the lender faces the more menacing threat of reputational risk. And taking legal recourse is economically unviable unless the amount involved is greater than $1 million.

With increased outsourcing and third-party participation in lending customer journeys, risk has increased manifold for lenders. 

KYC (Know Your Customer) is proving a critical gatekeeper for financial institutions world over, to safeguard against financial frauds, terrorist funding and money laundering. KYC lapses even if it’s on part of non-banks or third-party service providers, eventually come to bite the lender. This is because the onus of answering questions of customers, regulators and courts rest on the shoulders of the licensed entity. Hence, irrespective of where the loan originates, lenders need an onboarding solution of their own.

Identity decisioning: Banks’ Achilles heel in digital lending

The cost per dollar of online lending fraud is growing at a faster rate than e-commerce and retail fraud, according to Lexis Nexis. From image manipulation to synthetic identity creation — fraudsters are getting innovative at ripping off lenders. Lenders are responding to this with tough screening processes that end up rejecting good customers as well. Besides this, here are few other challenges lenders face in mitigating fraud. 

• Difficulty in striking a balance between the warring sides of convenience and compliance

• Inability to adjust workflows instantly — either to prevent further losses or optimise KYC policies

• Poor risk intelligence owing to disparate data and complex rule engine architecture

Sentinel: The business rules engine making millions of fraud predictions, daily

At FinBox, we build products that empower lenders, non-banks and enterprises to participate in complex lending value chains without compromising their control over fraud and compliance risk. This is one of the reasons why we built Sentinel — a no-code business rules engine . Its capabilities in identity decisioning gives lenders the best of both worlds — fraud minimisation and user-friendly onboarding journeys. 

Sentinel helps risk teams and business users at lender organisations create policies and define workflows to govern onboarding decisions — be it, KYC, compliance, or fraud management — without touching the code. 

1. Leverage a host of powerful alternative data sources for for identity decisioning

2. Set alerts for real-time fraud monitoring 

3. No more dependency on IT teams for creating, editing, or deploying a policy

4. Automate decisions based on historical and real-time data to check fraud and maximise approvals 

5. Track performance of rules, policies, and workflows 

6. Stop fraud in a click — for instance, users can rollback to a previous rule(s) if something went wrong with the production rules

7. Access advanced intel such as scorecards and   risk trends to identify and mitigate fraud

8. Test and validate changes to your workflows easily and ensure error-free updates

9. Run Canary and  Champion/Challenger analyses to see how rule changes would impact approval rates 

With Sentinel, risk analysts can let the good customers in faster and keep bad ones out, without hassle or failures. To know more about our business rules engine Sentinel’s identity decisioning capabilities, get in touch with us .