How big is the fraud problem in retail credit?

The Credit Stress Report 2020 Q4 is out
March 18, 2021
The Credit Stress Report 2021 Q1 is out
June 24, 2021

It is big, at least three and a half billion Rand big.

At XDS we have analysed the entire credit population over a period of two years and developed a lead indicator to identify consumers who are likely to initiate a potential fraudulent event. We use this indicator as a proxy measure of how many consumers take on credit with no intention of honouring that commitment. The results of our analysis were startling.

Over the last two years almost half a million accounts with an exposure of more than three and a half billion Rand, across the retail sector, were opened with, in our view, no intention of repayment.

So, who are these consumers who open these accounts with no intention of repaying? Well, across retail, the gender split for perpetrators is equal but interestingly disproportionate at a sector level. For personal loans, these consumers are twice as likely to be male whilst for retail apparel the consumers are twice as likely to be female. We see similar interesting patterns emerging across age cohorts of these consumers relative to the sector. The vast majority are single and earn below twenty thousand rand per month and there was no discernible geographical concentration with levels proportionate to the population density in each area. Notably whilst all retail sectors were affected, the highest values were noticed in personal loans and the highest volumes in retail apparel. Our most concerning finding was that even where consumers have successfully committed this fraudulent event, they can and do open additional accounts elsewhere and repeat the same action.

Our analysis goes much deeper, identifying many more characteristics of these potentially fraudulent consumers, that we will use in our fraud scorecards to profile and identify the consumers. With the economy remaining strained, these and other types of fraud are likely to continue increasing.

Talk to us at XDS if you would like to know how you compare to the industry, if these consumers are targeting you, or about our Fraud prevention suite of products.
We would love to hear from you to explore how we can be of service in providing meaningful insight to assist you in managing your risk in these uncertain times.