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What Every Dealer Should Know About Identity Fraud

Thirty seconds. That’s the time it could have taken a dealer to properly cross-check a customer’s identity before a luxury SUV was stolen. Unfortunately, the dealer is not alone. Identity fraud in the automotive space has spiked in recent years. 

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The issue will become front and center as the demand for online car buying continues to grow. Today, a vast majority of consumers want to have the ability to start or complete a car purchase online. In this environment, where dealers can’t directly interact with the customers, fraud activity and losses are likely to get worse.   

Much of this trend comes from the availability of compromised consumer data. To make matters worse, studies show that fraudsters have shifted their focused to less fortified, high-value targets — including automotive theft — as banks and other industries have enhanced their protections.   

This puts auto dealers in a precarious situation. On the one hand, the loss of a vehicle is too great to put off strict identity verification controls. On the other, dealers have quotas to meet and a well-orchestrated sales process that isn’t helped by undue friction.  

To validate identity quickly, and to minimize friction while ensuring vehicles are sold safely, dealers need to rethink their validation process.  

First, dealers should not rely on credit reports or ID scanning as the sole means of identity verification. Dealerships should evolve their authentication approach to become less reliant on traditional methods. 

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Second, dealers need to diversify their authentication efforts. This includes the use of enhanced identity verification tools that can verify additional identity elements such as cell phone, email, past addresses, etc., which are more difficult to falsify.    

Strong identity verification platforms should be able to perform these tasks. Dealers should keep in mind the importance of real-time capabilities as well as specific feedback on the data, so that those on the showroom floor can respond quickly and be able to clear up any potential discrepancies.    

Dealers should also be proactive in their diligence and conduct basic identity verification before allowing a test drive. This will help dissuade potential fraudsters. 

It’s important that dealers act now to put these checks into place, particularly as quarantine measures soften. It’s almost guaranteed that fraudsters will be looking for a quick, high-value score. Hopefully, dealers will have the right tools in place before more theft can occur.

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