Why Bank Account Linking Won't Stop Application Fraud

In an era where applicant fraud is on the rise, one proposed solution has been linking to bank accounts to enhance security and reduce fraudulent activities. While this approach has its merits, it is not a foolproof solution to application fraud.  Here's why.

1. Privacy Concerns and Applicant Resistance

Renters are often wary of linking their bank accounts due to privacy concerns. They fear that their financial information might be exposed or misused. In addition, landlords can’t require applicants to link their bank accounts. This resistance can lead to low adoption rates, leaving gaps that fraudsters can exploit. If applicants (or fraudsters) opt out of linking their bank accounts – which they almost always do – alternative fraud detection measures need to be equally robust, which is often not the case. So, bank account linking doesn’t prevent fraud. It just compels fraudsters to use a different platform to verify income. In short, bank account linking only works well for applicants with nothing to hide.

 2. Sophisticated Fraud Techniques

Fraudsters are continually evolving their techniques to bypass new security measures. Even with bank account linking, sophisticated fraud tactics like identity theft, account takeovers, and synthetic identity fraud can still occur. These criminals can create fake identities or manipulate existing ones to link legitimate bank accounts to fraudulent applications.

3. Over-reliance on a Single Verification Measure

Bank account linking can be part of a multi-layered security strategy rather than a standalone solution. Over-relying on this single measure can lead to complacency, where other critical security aspects, such as transaction monitoring, anomaly detection, and user behavior analytics, are neglected. A holistic approach is necessary to combat the diverse tactics employed by fraudsters.

4. Incorrect Income Calculation

Bank account linking can provide insight into applicant income, but because only deposits can be analyzed to assess income, any income calculated represents net income, not gross income.  Because most management companies qualify applicants based on gross income, this still requires on-site or accounting teams to manually calculate gross income, which is often both time-consuming and done incorrectly, leading to incorrect qualification assessments.  Further, bank account linking can be difficult for applicants with multiple bank accounts, since permission would need to be granted individually for each account.

Conclusion

While bank account linking can add an additional layer of security to the application process, it does not prevent all application fraud and requires an applicant to share sensitive data. The need for document authentication is imperative because fraudsters almost universally opt out of bank linking and will instead prefer to provide proof documents. The dynamic and evolving nature of fraud requires a multi-faceted defense strategy, one that incorporates a document analysis fraud platform using a multidimensional metadata analysis to identify the deepest levels of fraud.  The best system also incorporates not just robust fraud detection, but advanced document reading so that gross income can be calculated automatically and so documents can be tied to the right applicant and analyzed for completeness.