Identity fraud costs the Australian economy more that $1.1 billion every year[1], and finance sector companies and telcos suffer the largest share of the annual losses of $420 million a year. The finance sector invests a lot of money trying to prevent or detect ID fraud ($1.35 spent for every dollar lost) – higher than any other sector.

Yet ID fraud is a growing problem, with Baycorp Advantage’s own analysis showing a 2/3 increase in the rate of possible ID fraud detected over the last 12 months.

We need stronger tools to prevent ID fraud. Until now, we simply haven’t had the depth of knowledge to prevent ID takeover – an emerging, big concern for many financial institutions and telcos. We haven’t known how many (preventable) ID frauds have gone undetected, being simply written off as bad debt. And we haven’t had reliable, industry wide data on ID fraud typologies that can be used to drive better ID fraud prevention at the application stage, before the risk exposure is taken on by a credit provider.

A new study – the ID Fraud Analytic Study – is underway to answer these questions.

Uniquely large, historical and industry wide data sets have been developed over the last five years through the hard work of 35 banks, finance companies and telcos that are members of Baycorp Advantage’s Fraud Focus Group.

These data represent a significant investment by finance sector in Australia and by Baycorp Advantage. They are also the largest untapped fraud resource in the southern hemisphere with the potential to provide powerful insights that will allow us to build much more robust tools to prevent ID fraud – especially ID takeover - at the application stage.

We are using leading analytics capability and applying these tools to the fraud data assets, mining them for insights that will help prevent fraud. As part of the Study, Baycorp Advantage has drawn on outstanding expertise from our own Solutions Group as well as Deloitte Forensic, a world leader in financial crime detection and intelligence.

Understanding ID fraud prevention is a capability that matches the capability needed for strong electronic ID verification, and Baycorp Advantage is now moving to be recognised as Australia and New Zealand’s market leader in this field.

Questions we hope to answer through the Study include:

• What are the predictors of ID takeover at the application stage?
• What are the correlations between the patterns of fraud between different industry sectors?
• What is the level of currently undetected fraud?
• What is the relationship between fraud and bad debt, skips and clearouts?

The Study will help us provide valuable insights for preventing ID fraud directly to members of the Fraud Focus Group in Australia. The data will also make a robust argument for fraud and risk managers who wish to make the business case for better fraud prevention solutions.

One important outcome of the Study will be a more powerful, more predictive set of fraud prevention tools for ID fraud at the application stage. These more powerful tools will be rolled out in Australia and New Zealand during 2006.

For information about the Study please call Chris Gration on +61 2 9951 7540 or email Chris.Gration@baycorpadvantage.com or call Suren de Silva on +61 2 9951 7610 or email Suren.Desilva@baycorpadvantage.com