Lending: the 2 things you should ALWAYS ask your customers to avoid fraud in LatAM

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Did you know that in Mexico, financial companies (ie. banks or lending services) were 3 times more targeted by fraudsters? Even worse: according to a study by Lexis Nexis from last year, the amount of money they lost to frauds is 8 times bigger than what other companies have declared. For them, cost of fraud tends to reach an awful 2.39% of annual revenue.

The reason? Historically, most financial companies here in Mexico tend to only verify a user’s identity based on static data from credit bureaus. The problem with this approach? If the personal information has been stolen or is compromised, any actor could use it to open a new account. And with more than 29,000 reclamations registered between January and March 2019 by the Condusef – a 60% jump compared to the same period last year – this approach proved to be seriously outdated. No wonder why Mexican authorities decided to enforce AML/CFT (for Anti Money Laundering / Countering the Financing of Terrorism) regulations through KYC policies more strictly than ever these past years, and why a majority of financial companies have since then opted for deeper checks.

So, if you’re running a lending or a microcredit company here in Mexico, don’t lose hope! Because here’s something you should know: solutions to drastically reduce frauds on your platform exist. This is our specialty here at Mati: during the last few years, we’ve been helping financial and e-commerce companies to reduce their fraud rates online, with an average reduction of 93%. Yep, you’ve read correctly.

Want to know how? Well, the answer is quite simple: it only takes a (good) identity verification process. Implementing this type of process can help you reduce by almost 100% online frauds rates, by detecting the most frequent types of frauds you may encounter as they happen: document is fake, the photo looks edited, your user’s face doesn’t match the photo that appears on the photo shown during the verification process…

But what should you ask your customer-to-be to detect those frauds? Well, we’ve got you covered. From our experience of working with many lending companies, here are the two items you should always ask anyone you’re considering granting a loan to:

#1 An official ID

In Mexico, the INE is well-known and accepted anywhere, and prove to be quite useful. Indeed, OCR technology (which stands for optical character recognition) can extract a lot of information from an official paper! Skip the +50 form fields you used to ask your users to fill up, and just make them upload an ID. Your users (and your marketing team) will thank you later!

Moreover, the Mexican INE always contains the mention of the CURP, ie. the Clave Única de Registro de Población. Each Mexican resident and citizen has his own, and the Mexican government manages a database of CURP numbers. This makes it easy to check if your user actually exists, and if the ID he showed you matches the data logged in the government systems!

Last but not least, getting an ID will also help you to prevent fraud right from the start. Did you know that most of the fraud (+90%) comes from users making modifications to an ID picture? This is something we’ve trained our algorithms to detect here at Mati, and this is what allows us to flag a suspicious user from the start.

This is how Mati works for the end user – simple, accurate, and quick! 

#2 A proof of liveness

Of course, you want to make sure your customer is alive – would be weird if he wasn’t, wouldn’t it? When we say “proof of liveness”, we mean asking your users to do something to make sure 1/it’s the same person that appears on the ID, and 2/this is not a photo put in front of a webcam just to fool you 🙂

The most common way of doing it? Asking your user to film her/his face and to make some movements with it (typically two circles with the nose – yep, exactly the movement you just probably did behind your screen 🧐).

Hmm, looks like the guy on the above is trying to fool you – quite clumsily, to be honest 👮‍♂️

Beyond KYC, with only those two elements, you can start performing more advanced checks that are guaranteed to help you cut frauds here in Mexico. Hmm, your new customer is called Barack Obama or Joaquín Archivaldo Guzmán Loera (yes, that’s El Chapo’s real name)? Ok, Sherlock, something doesn’t look right here.

With the information extracted from the ID and a good technology (let’s say… Mati?), you’ll be able to cross-check immediately and automatically if the user is registered on one of the main watchlists available in the world, or actually exists in one of the official Mexican databases operated by the authorities. Same for credit score checks, or even IP address and DNS records: if things don’t match, better stop the whole lending process! Those integrations and automated checks are the only way to cut out for sure frauds here in Mexico, so better choose a provider that can perform them.

Ready to start reducing drastically fraud on your website? We can help you with that! Book you demo 👋 here

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