How Identity Resolution Can Drive Profitability While Fighting Fraud

Fraud Prevention for Lenders: How Identity Resolution Can Foil Fraudsters and Propel Profitability

Consumer lenders are navigating a complex and dynamic landscape shaped by shifting consumer needs, intensifying competition and increasingly sophisticated fraud schemes. It’s the latter many lenders say is most daunting to manage. To that end, a robust fraud prevention program rooted in centralized identity management can — and should — be viewed as not only effective but essential to stay ahead of the curve.

By fortifying defenses against fraud to better stop it at the point of origin, this approach can enhance the overall customer experience by reducing friction, and accelerate speed to conversion — which can ultimately boost profitability. Let’s take a closer look to understand what’s at stake and how to position your organization for success.

Lenders face market headwinds

Current market conditions are applying familiar pressures in different ways, forcing lenders to find new opportunities to make their mark and win.

Consumer credit needs and appetites are changing

Consumer cash flow is tight and lenders’ balance sheets are taking a hit. In January 2025, recent research from TransUnion® and others showed unsecured personal loan (UPL) delinquencies increased to 3.69% (+12 bps vs. prior month), while positive Aggregate Excess Payments (AEP) were down 1.4% compared to a year ago (Jan. 25 vs. Jan. 24).¹ Most consumers said they were optimistic about their future finances but concerned about the current rate of inflation as grocery, gas and clothing prices weigh on household budgets.² If they increase any spending over the next three months, they said it’s likely to be on monthly bills like housing, utilities, insurance and credit cards. Even more troubling is 28% of consumers said they expect to be unable to pay at least one of their current bills or loans in full.³

Given the economic environment, demand for credit (including debt consolidation loans) is poised to increase, and more than 30% of US consumers plan to apply for new or refinance existing credit within the next year.⁴

Lenders seeking to capitalize on this opportunity must be well-positioned to do so. Consumers have high expectations for organizations to protect their digital identities while delivering convenient, omnichannel experiences. In fact, 59% of consumers reported they’re likely to switch companies to get a better digital experience.⁵  And prime plus consumers, those with credit scores between 720 and 799, are becoming less credit hungry. They’re less motivated by promotional outreach and more discerning when choosing financial providers. To attract and retain them, a safe and seamless borrowing process is essential.

Competition continues to strengthen and deepen

The consumer lending market has always been competitive, but with a steady influx of new lenders, particularly FinTech companies, the battle to win consumers is more intense than ever. These new entrants often have significant financial backing and lower overhead costs, enabling them to offer competitive rates and innovative services. Lenders must differentiate themselves by providing superior customer experiences.

Identity fraud is everywhere, all at once

These days, it seems most every financial services conversation includes either a mention of fraud or the discourse is entirely about fraud — and for good reason. The risks and realities of fraud are an everyday concern for lenders and consumers alike; for instance:

• 75% of business leaders indicated fraud increased or stayed the same in the past year⁶
• Nearly 47% of Americans experienced some form of financial fraud in the past year⁷
• In Q4 2024, 35% of Americans said they were notified details about their identities and/or online accounts had been stolen in a data breach, up from 28% last year⁸

Lenders face an ongoing assault of schemes that continue to increase in complexity and sophistication, threatening to undermine operations and erode consumer trust. Identity fraud, such as using stolen and synthetic identities to commit new account fraud, account takeover credit abuse and other unlawful activity, is most common. It typically starts with data harvesting, the unauthorized collection of personal information with the intent to commit fraud. Here, the phone channel — your call center — is particularly vulnerable. Sophisticated social engineering tactics (like vishing⁹ or pretexting¹⁰) can unwittingly manipulate employees into divulging or compromising confidential information. Protecting customer accounts and your employees with the right authentications is paramount in this environment.

Reduce identity fraud with an integrated approach

US data breaches increased 15% year over year in 2023, with the average breach risk severity (the ability of a breach to enable identity fraud) increasing 11% for the same timeframe.¹ These are the highest metrics we’ve measured to date and they continue to increase. Lenders that start with the assumption customer account credentials are compromised and work to more effectively ensure confidence in the authenticity of the people they deal with earlier in the process are better positioned to excel.

Foil fraudsters at the front door

A more proactive and holistic approach to identity verification starts with centralized fraud rules, and employs enhanced identity and risk signal data deployed through integrated technology to ensure systemic consistency and accuracy. The fundamentals here include:

• Centralized identity resolution and management: Unified, holistic views of consumer identities better enable lenders to detect and prevent fraud earlier and more effectively at any access point — without impacting customer experiences.
• Continuous risk evaluation: Combining risk signals from identity, account and device linkages with multi-factor authentication (MFA) tools like OTPs or biometrics and AI-driven algorithms can protect accounts from account takeover and new account fraud without causing undue burden on customers.
• Better authentication of risk signals: By running continuous risk assessments, customers are authenticated with the appropriate amount of friction to better ensure protection and trust without unnecessary frustration from false positives.