Why fraud is on the rise for first-time buyers in the U.K.

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While sophisticated computer algorithms are increasingly used in the fight against fraud, criminals are still exploiting various loopholes to access consumer card and bank details, particularly for those opening new accounts.

Fraudsters have begun turning their attention to first time buyers in the U.K., particularly the millennial population in the 25-34 year old range who are buying property in the more affordable suburbs of major cities.

In the first six months of 2019, fraud against first time buyers increased by 35%, with criminals exploiting the fact that this generation are often forced to buy property in shared blocks, according to recent data from Experian.
“First-time buyers living in blocks with communal and shared mail boxes are at risk, as their post could be more accessible to fraudsters,” said Nick Mothershaw, director of Fraud and Identity Solutions, at Experian U.K. “This allows criminals to gather much of the information they need to make a fraudulent application.”

Major card issuers Mastercard and Visa declined to comment on Experian’s findings. A U.K. Finance spokesman told PaymentsSource that it is becoming common for criminals to use a range of methods to obtain information about their victims, including intercepting mail, and those who live in multi-occupancy buildings or have external mail boxes need to remain extra vigilant. The spokesman suggested that one option for negating this kind of fraud is for customers to contact their issuer and arrange to collect cards from a local bank branch.

Experian’s study also found that 25-34 year olds as a whole are 78% more likely to be the target of fraud, a finding which Mothershaw said is thought to be related to this generation’s propensity for sharing more personal information online, via social media and other outlets.

However, despite the increasingly broad range of methods which criminals are utilizing to commit fraudulent activity, both Experian and U.K. Finance remained bullish about the future. U.K. Finance said its investments in advanced security systems succeed in preventing £6 in every £10 of attempted card fraud.

Mothershaw suggested that one of the reasons for the steadily climbing fraud rates each year is not necessarily because more fraud is taking place, but because systems are getting better at detecting it through the use of machine learning.

There has been some recent skepticism within the global financial community about artificial intelligence and fraud prevention, with a recently published study from Brighterion — based on interviews with 200 financial executives across the United States — suggesting that 36% of financial institutions which use AI do not believe it is capable of preventing fraud before it happens.

However, Mothershaw insisted that machine learning technologies have made a difference so far, particularly in terms of helping businesses and financial institutions be more efficient and accurate in identifying fraudulent applications.

“It helps to reduce the level of false positives, where a genuine is customer is referred as potentially fraudulent and then investigated by the organization’s fraud prevention team,” he said. “Machine learning technology looks at the results of applications, whether they were found to be fraudulent or not, and then uses this information to build models to make more accurate decisions in future. The more information it has at its disposal, the higher quality decisions can be made.”

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