Online lenders face deepfake threat

Online lenders invite prey for scammers hoping to make a quick buck by disguising themselves as legitimate loan seekers from afar.

A study conducted in October by LexisNexis Risk Solutions found that fraudulent attacks against digital lenders had increased by 8.2% over the previous 24 months.

Some online lenders — including Elevate Funding and Credibly — say not so fast. They take a number of innovative security measures, including deploying technology that can spot fabricated photos, so-called deepfake videos and legitimate images that have been falsely linked to an incorrect date, time or location.

This is an important step as fraudsters try to trick lenders into thinking they have property, licenses, assets, equipment and more that they don’t.

Traditionally, online lenders have used site inspection companies to verify the existence of a business customer or their assets. These companies charge a fee to send someone from their network to take photos on-site at a company.

This process takes time, which is contrary to the high-speed world of online lending, where credit is generally more expensive but faster and easier to obtain than traditional bank loans.

“Depending on the remoteness of the merchant’s location, there can be a long wait” for the site inspection company to do its job, said Ryan Rosett, founder and co-CEO of Credibly, which makes loans based on small business data.

It granted over $350 million in loans in 2019. Its average loan size is around $55,000. Lending volume was up 30% year-over-year, according to the company.

“For someone in Alaska, it might take 48 hours,” Rosett said. “In the rural areas where we work, time kills business. These traders need the money right away.”

It can also be intrusive for a stranger to walk into a business establishment and start taking pictures. Employees may begin to wonder if the business is struggling and whether they should look for new jobs.

“A lot of businesses don’t want their employees to know they’re asking for a cash advance,” said Ken Peng, chief marketing officer at Elevate Funding, which provides working capital to small business owners with a history of struggling. financial. or bad credit. It lends about $1.5 million per month and funded 1,400 merchant advances in 2019.

The one-to-two-day turnaround time for human site inspectors can also irritate business referrers who might miss a commission, Peng said.

“It was just a huge thorn in our side,” he said.

These and other lenders now use software to verify the authenticity of photos submitted with online loan applications.

Find the fraud

When Elevate receives a request for a merchant advance, its underwriting team assesses the risk based on the merchant’s track record and cash flow. Elevate can predict that a business will make sales of $14,000 in the next three months and offer to advance $10,000 of that. Once the borrower accepts an offer, there is a post-underwriting process which includes a series of checks.

Any loan over $10,000 requires a site survey, which includes taking pictures of the business and its license to prove it is legit, open, and operational. Elevate uses technology from Truepic to perform these site surveys.

Elevate sends a text to potential borrowers with a link to the Truepic interface, which asks them to take pictures of specific things like their credit card terminal, signage, inventory, business license, carrier license, and the physical environment.

Photos are routed to Truepic, which runs 22 fraud detection tests. These include an analysis of the phone used, to see if it has been jailbroken or rooted, processes that could allow a phone to be manipulated.

A compromised phone “doesn’t necessarily mean you’re a bad actor, but it definitely means you have access to different tools on your device that could allow you to do bad things,” said Craig Stack, Founder and Co-CEO. by Truepic. .

Truepic forces users into a controlled capture environment, so they can’t upload an existing photo or video – they have to take a new one. Truepic captures the authentic location of the user’s device and the real time.

“The millisecond they press the shutter button, we grab that image and our server logs the universal time and date and pings local cell towers and Wi-Fi networks for location,” Stack said. . “So if you try to spoof this metadata, we immediately flag it as a mismatch.”

It produces a report showing which photos or videos passed its tests, which failed and why, and sends it to Elevate within 10 minutes.

The quick turnaround “helped our referral partners to be really excited to be able to fund a deal potentially the same day, instead of having to wait another day,” Peng said.

In the Elevate apps, Truepic reported several photos that were taken from other photos that already existed online, such as Google images. He found a few that were not at the location indicated by the borrower, but at a business at the end of the street.

In such cases, Elevate will come back to the merchant and ask them questions.

“We don’t just say, ‘Hey, you’re committing fraud,’ but often we approach them and ask them for an explanation, and then they just don’t respond or they give us an excuse,” Peng said. “Then we will let them know that due to risk factors, we will not be pursuing the case.”

Like Elevate, Credibly relied on human site inspections to verify physical locations and assets and recently started using Truepic. He usually gets a response within 10 minutes.

Physical site inspections used to cost $75 each, but Credibly pays $50 for each Truepic check.

The casual borrower who doesn’t know how to use smartphones struggles with Truepic, Rosett acknowledged.

“But for anyone who can navigate on a phone, it’s super intuitive,” he said.

A fintech for fintechs

Stack launched Truepic five and a half years ago with the idea that seeing is no longer believing when it comes to the internet.

“It was a bad problem at the time,” he said. “The situation has gotten much worse over the past five years, and it tends to get worse over time. Deepfake technology is a runaway train.

Thousands of apps help people manipulate an image seamlessly, he said.

It’s “not just Photoshop editing,” but “changing an image’s metadata,” Stack said. “Think time, date, location. It’s okay if it’s an image of your kids playing on Instagram. A big deal if you’re a business looking at a photo and spending associated dollars to this photo.

The company has nine patents and eight more pending on its technology, Stack said.

“We believe the current third-party site inspection process is broken,” he said. “It’s slow, it’s expensive for the business, it’s not customer-centric. In a world where we’re all addicted to Amazon Prime, Uber and Postmates, no one wants to hear, “Be home next Thursday because we’re sending a stranger with muddy boots home” or “Drive your car with the cracked windshield. 20 miles to our favorite body shop. “

Truepic started by working with the insurance industry. Many carriers use technology to ensure claimants are in possession of an item, and that it is in the condition they say it is, before the company issues a policy.

“There’s a certain threshold where many insurance companies will roll the dice and hope the insured is telling the truth about a scenario,” Stack said. “Now they are able to deploy our technology via SMS and know for sure.”

From insurance, Truepic has expanded to working with warranty companies and automotive original equipment manufacturers.

A year ago, the company began working with alternative lenders, and it has become its fastest growing segment. He incorporates two or three a week, according to Stack.

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