Socure, the provider of artificial intelligence for digital identity verification, sanction screening, and fraud prevention announced milestone achievements for its First-Party Fraud Consortium.
The consortium seeks to unify firms in order to tackle the multi-industry issue of First-Party Fraud by “pooling data and insights which allow them to detect and stop fraud before it takes hold.”
The initiative has reportedly amassed data intelligence encompassing 190 million contributed identities, 121 million of which are “unique identities, 325 million accounts, and 20 billion transactions.”
First-Party Fraud, also referred to as “friendly fraud,” occurs when individuals use their own identity to “commit dishonest acts for financial gain, such as disputing legitimate ATM withdrawals or debit or credit card transactions for goods they never intended to pay for.”
These consumers are succeeding to the tune of billions of dollars, with annual First-Party Fraud losses in the U.S. alone totaling “more than $100 billion, according to Socure’s research.”
The consortium’s data sharing initiative enables members to detect and prevent these fraudulent activities through “analysis of dispute histories, payment denials, and account closures across multiple platforms.”
The consortium, whose founding members include five of the top 10 FI’s in the U.S., as well as FinTechs such as Dave.com, SoFi, Green Dot, and Varo, represents the first time “that major financial institutions, fintechs, payment platforms, sports betting companies, and merchants have united to share data and insights to combat First-Party Fraud.”
Ori Snir, Head of Product Management, Fraud & Identity Solutions at Socure said:
“First-Party Fraud has evolved into a $100 billion crisis that traditional fraud prevention methods simply cannot address. By bringing together the industry’s leading financial institutions and platforms, we’ve created an unparalleled network effect that enables us to identify and stop fraudulent behavior before it can take root across multiple platforms. This is something the industry hasn’t been able to accomplish before at scale.”
The timing is critical, as First-Party Fraud continues to surge.
Mastercard data reveals that chargeback volume reached over “238 million cases worldwide in 2023, with projections indicating a 42% increase to 337 million cases by 2026.”
Card-not-present transaction fraud losses are “expected to rise by 40% to $28.1 billion in the same period.”
Key findings from the consortium reveal that, on average, “77% of members’ customers have overlapping accounts at two or more institutions in the contributed database, highlighting the crucial need for collaborative data sharing to identify patterns of fraudulent financial activity.”
The consortium’s insights power Socure’s Sigma First-Party Fraud solution, which helps organizations:
- Provide real-time alerts to combat exploitation of Regulation E‘s ten-day investigation window
- Detect bad faith disputes before they impact the bottom line
Identify potential payment defaults driven by fraudulent financial activities - Analyze alternative data signals not tracked in traditional credit reports
By expanding industry-wide knowledge around how consumers transact across financial ecosystems, the consortium will help FIs, merchants, investment platforms, Buy-Now-Pay-Later (BNPL) providers, gaming and sports betting, telcos and payment processors “identify First-Party Fraud risk at new account opening, time of transaction and during the dispute resolution process.”