New Point Predictive Podcast Series “To The Point” Launched
Episode One, Fraud Trends & Insights from Frank McKenna, Explores Fraud Prevention in Auto Lending
In episode one of Point Predictive’s exclusive “To The Point” Podcast series, recorded at the 2023 Point Predictive Auto Lending Roundtable, Frank McKenna, Chief Fraud Strategist at Point Predictive and author of the popular “Frank on Fraud” blog discusses a wide range of issues around the state of auto lending fraud with our host for the series, Jeff Goldberg. Topics included
- The Importance of Income Verification: Gain insights into the discussions among top lenders at the event regarding income verification and its role in loan underwriting. Discover how Point Predictive’s income past product integrates with other fraud solutions.
- AI’s Impact on Fraud Prevention: Frank sheds light on the role of AI in the fight against fraud. Learn how AI can be used to counter sophisticated fraud tactics and assist fraud analysts in improving efficiency.
- Key Findings from the 2023 Fraud Report: Get an overview of the newly launched indexes on affordability risk, identity risk, and income risk from the Point Predictive fraud report. Understand the challenges faced by lenders in the evolving fraud landscape.
- Frank McKenna’s Motivation in Fraud Prevention: Learn about the driving force behind Frank’s passion for fighting fraud and protecting individuals from scams.
You can listen to the full podcast episode or read the transcription of Episode 1 below.
Transcription
Title: Fraud Trends & Insights from Frank McKenna
Description: Frank McKenna, Chief Fraud Strategist at Point Predictive discusses fraud trends that are impacting lenders, what he’s hearing from lenders in the industry, and how to “fight fire with fire” when it comes to fighting fraud.
Intro:
This is “To The Point”, a Podcast from Point Predictive.
Jeff Goldberg, Host:
I am Jeff Goldberg for Point Predictive here at the 2023 Auto Lending fraud round table joined by none other than Frank McKenna, chief Fraud strategist with Point Predictive. Frank, great seeing you here today. Uh, I know you’re a humble guy. I’ve known you for a while, but we’ve talked to many, many people who say Frank is a legend. Frank is the man. So it’s great to be sitting here with you today. Frank, tell me so many different things discussed today. What, what is the, are there any things that really stand out to you that’s happening in the industry right now that get your attention?
Frank McKenna, Chief Fraud Strategist:
Yeah, I think the thing that stood out to me was all the conversations that we were having around income verification. So a lot of lenders that were here were talking to each other about what do you do around income? There’s been a whole ecosystem point, predictive fits into it with our income past product, but there’s a whole ecosystem of products and solutions out there that lenders want to kind of use all of them together or some subset. So all, a lot of discussions on how do you optimise the use of all those products to together, not necessarily point predictive alone, but they’re coming to the consortium and all the experience to kind of find out some best practises. And that stood out to me, I think as one of the big things that I was a little bit surprised with, that I was that much focused on income.
Jeff Goldberg:
How come? Surprised why?
Frank McKenna, Chief Fraud Strategist:
Um, surprised because usually in past years it’s really been focused around synthetic identity as a kind of a hot fraud. I think lenders were trying to figure it out, um, and trying to figure out what to do about it. Uh, that was less of a topic this year than income. So it surprised me that it played a more important role than it has in the past.
Jeff Goldberg:
What is your sense of what the overall sentiment is in the room about, uh, you know, there was so much talk about, uh, fraudsters of course getting more savvy, leveraging technology in really, really smart ways, um, and that the problem just gets, keeps getting tougher. Uh, what’s the sentiment out there in your sense? I think
Frank McKenna, Chief Fraud Strategist:
The sentiment that I saw was optimism. I think there was a lot of optimism in the room because of the collaboration like the consortium brings and the collaboration with other fraud fighters. Just being able to pick up the phone when you have a tough question to answer and talk to somebody else that maybe has gone through the same thing and has a way to resolve it. So I saw a lot of optimism, but I also saw a lot of, um, I wouldn’t call it doom and gloom, but there was the pessimism about how futile sometimes it can be fighting against these fraudsters. Because they’re growing, they’re changing their tactics and they’re being, uh, doing things that are more and more well hidden. So I think there was a, a bit of that, but there was overall optimistic and upbeat.
Jeff Goldberg:
And, and when you hear people expressing any sort of, um, you know, concern, pessimism, whatever it is, they’re probably going look to you for some reassurance. For some guidance. What do you tell them?
Frank McKenna, Chief Fraud Strategist:
Oh, I tell them this is; I call it fight fire with fire. Yeah. So there’s more fraud, there’s more use of AI to do evil things. You have both of those. You’ve got humans that can fight the fraudsters and you’ve got AI that’s available through Point Predictive, through other means, like generative ai. Even like Chat GPT and some of the other tools can be used for good as well. So my reassurances are just to do the same things that the fraudsters are doing. We can do the same thing and we just need to collaborate. And I think that was the message I had this morning when I, I gave my presentation.
Jeff Goldberg:
Let’s talk about AI just for a moment. That was kind of the central point to your presentation this morning. It has sort of hit the world intensely over the past couple of months. What are some specific ways in which you believe not only that fraudsters can leverage AI and generative AI, but also specific ways in which it can be fought back, fight fire with fire, like you say.
Frank McKenna, Chief Fraud Strategist:
Yeah, that’s really interesting. And it’s all new, right? We’re dealing with something that came out about six months ago Chat GPT, or generative AI, that was when it really kind of got on the scene. So it’s in its infancy and people haven’t figured out all the ways how to use it, but we’ve seen some use cases of frauds that have become really popular. Voice cloning is one, the ability to take someone’s voice snippets off the internet off of video or record them, and clone that voice and use it in ransomware attacks. That’s the prime way that we’re seeing.
We’re seeing huge cases come out of China and some here in the US involving millions of dollars of fraud stolen through ransomware attacks and voice cloning. Other types of fraud that we’re seeing is, using avatars and actually video clones. We saw one where somebody who actually lives in China was able to do a fake video clone and convince somebody to wire transfer them over a million US dollars in local currency, using a complete clone of a video through FaceTime.
That’s another way that they figured out. And other use cases (include), faking documents and pay stubs. We see websites out there where you can actually create an AI version of a pay stub. So you don’t have to actually know Photoshop now just do a prompt and say, I want a pay stub that makes it look like I make a million dollars a year. That simple. Make it very, very turnkey. That’s the way it’s being used for bad.
For good we run the innovation team at Point Predictive and we’re doing a lot of really cool things with generative AI. Like automated rule creation. You can create sophisticated rules by merely saying or typing in what you want into our Case Manager. So if you say, “I want (you) to write me a rule where the fraud score risk is high and it’s (most likely) a synthetic identity”, it’ll write out all the code to make that rule run.
We’re also using the generative AI to help people understand information about a borrower’s income and occupation and how much they should likely make. So if you’re a cashier from Walmart, using generative ai, can we go out and pull that data and tell what all cashiers that work at Walmart in this city make? …And we’ve been able to do integrate tools like that. So generative AI has a lot of promise to help the fraud analyst be more efficient and effective on their job.
Jeff Goldberg:
And I would imagine gives you a lot of hope and excitement for what’s to come.
Frank McKenna, Chief Fraud Strategist:
Absolutely. I think generative AI and AI in particular, it’s a transformative event. Maybe the most important event for business since the internet. And that’s going to open up a lot of opportunity, a lot of fraud, a lot of risk, but people that embrace it are going to be the winners. You can’t fight this- this is happening and it’s not going away.
Jeff Goldberg:
Right. Buckle up cuz it’s coming! You bring up income misrepresentation. I want to talk briefly about the 2023 Point Predictive fraud report. What are some findings from that fraud report that was, from Point Predictive of course, that caught your attention and that you want to get the word out about?
Frank McKenna, Chief Fraud Strategist:
Yeah, I think the thing that caught my attention was we launched, in that report, three new indexes that I think are going be super helpful to the industry. The first was an affordability risk index, which is calculated using all the data that we have at point predictive all 135 million applications that we’ve received since 2017. And it provides a uniform, identification called an index each and every quarter that tells us whether affordability is affordability, risk is climbing or decreasing. It’s a good industry benchmark for figuring out if borrowers can afford the cars they’re getting into. So we launched that index, we launched an identity index that takes all the identity alerts that we have at Point Predictive and tracks how identity risk is trending over time. Really interestingly: out of that, and this is something that really caught my eye, is that identity risk since 2017 has risen by close to 50%. And that was a key finding out of the report is identity risk is, is climbing pretty dramatically.
And the third thing that we did was an income risk index, which tells us how likely are people misrepresenting their income on auto loans. And we saw that as well as climbed significantly too since 2017. It took a little dip last year, but really insightful to watch the data speak for itself. And I think that’s what we, we found with these three indexes.
And then the final thing I would say is fraud reporting that we found out of the fraud trends report, we actually saw identity fraud increase substantially last year, primarily through dealers. Dealers are getting hit with a lot of fraud and we actually saw income misrepresentation fall a little bit. So there’s been a shift in the types of fraud people are engaging in for auto lenders.
Jeff Goldberg:
Do you think that trend will hold up?
Frank McKenna, Chief Fraud Strategist:
Um, I think the trend is going to go. I think lenders are going make a counter attack and I think what we might see is income come back up and employment come back up. So I don’t know if it’s a longstanding trend, but I’d imagine lenders are going to fight back a little bit and it’s going to turn the tables <laugh>.
Jeff Goldberg:
Uh, you know, we could talk, uh, on and on about all this stuff, Frank. But I want to ask you, you and I were talking earlier today about what motivates people when it comes to their passion, their profession. People look to you for answers and resources and guidance. What is it that drives you? What is it that motivates you in, in this industry, Frank?
Frank McKenna, Chief Fraud Strategist:
Yeah, it’s really interesting because I’m kind of unique, like when I started my career I didn’t know what I wanted to do. It was like I had no idea. And I was a customer service agent. I was a teacher, everything, you know, I did everything. And it wasn’t until I got my first job in fraud in 1990 when I got that first day on the job and they handed me a list of accounts to review for fraud and I called that first customer and I found a fraud and I knew I’d found my career. And so what drove me was just that excitement that I get every single day of finding a fraud, of helping somebody find a fraud of helping a family member stop a scam. The human side of fraud and the exhilaration you get when you are able to stop it is what drives me. And I’ve never looked back and <laugh> I don’t think I ever, I never will. I know now, but I’m, I’m, I’m glad I’ve had opportunities to take other careers, but I’ve always stuck with fraud.
Jeff Goldberg:
Well, I know there’s a lot of people who are very happy that you got into fraud and that you’re sticking with fraud. So Frank McKenna, Chief Fraud Strategist with the Point Predictive (speaking) from the 2023 Auto lending Fraud Roundtable. Thanks so much, Frank, we appreciate it.
Frank McKenna, Chief Fraud Strategist:
Yeah, thank you Jeff. This was a fantastic event. Glad you got a chance to talk to so many people and interview me for this and I appreciate it. Absolutely.
