Is Identity Fraud Jeopardizing Automotive Retailing Profitability?
A dealership survey from eLEND Solutions revealed significant increases in dealership identity fraud and losses since the pandemic – with nearly three quarters of a $Billion in identity fraud losses annually; Dealers weigh in on causes and a possible solution.
The pandemic changed a lot of things in the auto industry – and that is particularly true when it comes to fraud, which is causing more and more losses for dealers, not to mention an unwelcome distraction to the business of selling cars. While fraudsters are getting more creative, economic conditions and increasing digitization of the car buying process are amplifying brazen fraud.
In short, auto dealerships have a target on their back when it comes to fraud. So, to get a more immediate snapshot of fraud’s impact on U.S. dealerships, particularly identity fraud risks, eLEND surveyed over 700 auto dealerships.
The numbers are huge and expected to grow: It is no surprise that the majority of dealerships (88%) acknowledge that the auto retail industry has seen an increase in identity fraud since the pandemic. But, more surprising, is that a whopping 84% of respondents have directly experienced identity fraud at their dealership since the pandemic, with a third saying they have seen an over 20% increase in identity fraud related activities since the pandemic.
In a dealer survey conducted by eLEND Solutions with over 700 dealers, 79% experienced an identity fraud related vehicle loss at their dealership. Forty percent of those dealers reported a loss of one to two vehicles; but, more alarming, are the 60% of dealers who reported a loss of three or more vehicles.
The culprit? Digitization. 95% say the increase in fraud is directly related to the increase in the digitization of the deal and remote buying experiences, with 86% saying that as more of the transaction moves online, identity fraud will increase and become harder to prevent.
What are dealers doing about it? This is one of the surprise insights of the survey, and perhaps the most concerning. When asked how their dealerships were protecting against identity fraud risks, the top 2
responses were “photocopying the driver’s license / ID” (64%) and the “Red Flags Rule” (56%). Only 33% cited the use of any ID verification technology as part of their risk abatement strategy. Dealerships who exclusively use these unsophisticated, compliance-driven fraud prevention controls are putting themselves at risk and making their business an easy target for fraudsters.
Conclusion: As fraud schemes become increasingly difficult to detect, and more challenging to prevent, the need for advanced fraud protection grows. As more of the transaction becomes digital, embracing ID verification technologies, that includes forensic authentication of the driver’s license document in conjunction with matching data extracted from the document against hundreds of databases, and automated processes, can easily help dealers minimize fraud risks before it becomes an expensive problem. In the past year alone, eLEND’s Identification Solutions flagged over $1Billion in potential sales for its dealer customers whereas driver license documents provided by customers could not be verified for authenticity.
About eLEND Solutions
eLEND Solutions™ (formerly DealerCentric) is an automotive FinTech company providing a middleware solution designed to power transactional digital retailing buying experiences for the retail automotive industry – helping dealers sell more cars! Faster! The platform specializes in hybrid credit report, identity verification, and ‘pre-desking’ solutions, accelerating end-to-end purchase experiences – concluding with a transactable, fundable deal structure.
