Business Spotlight: Point Predictive
Point Predictive is a San Diego, California based firm that has been fighting fraud since 2014. Auto Digest spoke with the co founder.
Securing Dealership Assets in the Digital Era
The issue of financial and loan fraud is often regarded as something that is out there, but would never pose a substantial threat to a dealership's everyday business operations. As efficient and complex artificial intelligence makes itself more available to the general population, the ability of fraudsters to acquire funds from businesses is also on the rise. Thanks to the digital transformation, would-be fraudsters don’t even have to show up in person to pull off the stunt and instead can deploy many fake applications every hour to businesses across the United States. In fact, in some cases, dealerships in the U.S. have reported that nearly one in three loan applications is malicious. That is an all-time high, historically, and at a previously unseen pace and scale that can cause significant damage to a business's bottom line if gone unchecked. Point Predictive specializes in not letting this happen, which is increasingly necessary.
A Booming Industry
To quantify this issue, some concrete numbers may be helpful. Auto lenders experienced nearly $7.7B in exposure in 2021, which was a 260% increase in falsified documents from 2020. The average worth of a car that is purchased under falsified documents is about $21,000. This means that if a dealership does take a hit, and is unable to recover the said vehicle, then they will need to sell at least another 8-10 cars to make up for that loss.
Where is this coming from?
The research done in the field of auto lending fraud shows that many of these fraudsters have gained the skills to conduct the crime during the pandemic. When people began to understand the opportunity of PPP loans, the criminals took a chance and created fake pay stubs, entire fake employers, and committed both organic identity theft and synthetic identity creation (which is a whole other conversation) to access this government funding for a business, and sometimes person, that did not even exist. After that program ended, the folks responsible for that fraud did not want to lose their source of income, so they naturally began to look at other “revenue streams.” That explains the meteoric rise in the business since the pandemic, and as news spreads on how easy it is, it only accelerates the process. There are likely chat rooms on the dark web that take an aspiring fraudster through every step of the process.
"Fraud is not confined to where you currently live. Â Fraudsters are all over the world. They migrate to new countries when they are shut down in another." - Frank McKenna, Co-Founder of Point Predictive
Welcome to the Party
There are two types of fraud. The much less common type of fraud is third-party, Â which means a criminal diligently fakes identity, pay stubs, utility bills, or bank statements and takes out a loan that they never intend to pay. The much more common type is first-party which is where a real person means well and has the intent to pay back the loan but intentionally lies about their income, length of employment, or other financial metrics. This can enable someone to get a car when otherwise the lender would have denied them. More often than not this puts the bank and even car purchasers in a bad spot because they over-extended themselves financially. First-party fraud is 70% of the instances reported, and will likely continue to be a bigger problem.
Stepping up to the Challenge
Point Predictive, a San Diego, California based firm has been wrestling with fraudsters since its founding back in 2014. Auto Digest spoke with Co-founder and Chief Fraud Strategist Frank McKenna who has been in the fraud detection game for years and has experience with over 250 banks and lenders who have called upon him to aid in their mission to protect would-be scam victims. In fact, the most interesting statement that he made to Auto Digest was that the idea behind Point Predictive was from organic demand from companies in the auto industry that essentially requested leadership and centralization in the market, and no one was able to command that conversation until 2014. Point Predictive has since seen substantial growth, and currently employs about 45 people whose goal is to fight crime. Talk about a fulfilling work environment.
“A vision without a strategy is just an illusion”    -Lee Bolman
Point Predictive harnesses a patented technology that they call AINI, which fuses artificial intelligence with natural intelligence. Since so much of fraud is social engineering and is a representation of a lying human, those fighting it cannot rely solely upon mathematical algorithms to determine who is legit and who isn’t. Point Predictive has a team of human experts with industry experience that work with the system architects to create a sort of technology that accounts for both usual and predictable lies, but also ones that are much more difficult traditionally for a computer to notice. It identifies in real time 5 types of fraud: income, straw buyer, employment, fraud on collateral, and identity. Auto lenders are their core market, but they have assisted in other industries. They have access to a large data consortium as well, which gives them another leg up in their battle to protect both buyers and sellers from criminal activity.
"Knowledge is important.  The number of years of experience is not.  That is why I believe 50% of great fraud managers’ success is due to knowledge." - Frank McKenna
The world-class team created at Point Predictive is providing an honorable service to those of us in the auto industry. When thinking of fraud, even if your local dealership is not the target, those financial impacts are felt throughout the market, not to mention the employees within said scammed business that rely on the success of that store. As digital thieves continue to use more and more tools at their disposal to pull off larger and larger heists, companies like Point Predictive dig the trenches and mount the defense.
Thank you to Point Predictive for raising awareness of the issue, and keep an eye on the headlines for more fraudulent activity across all industries, not just automotive. The same tactics will be applicable elsewhere.
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