In this episode of the Used Car Dealer Podcast, Zach interviews Kanchana Sundaram, Senior Director of Product and Innovation at Experian. They discuss how Experian's tech, especially Fraud Protect, is revolutionizing the fight against fraud in the auto industry, the future of auto industry fraud prevention, and Experian's role in safeguarding dealerships and customers.

Zach: Hello, Zach here, and we have a great guest on the podcast today, Kanchana Sundaram, who is Experian’s Senior Director of Product and Innovation for automotive. Thanks so much for joining me on the podcast today.

Kanchana: Pleasure to be here.

Zach: So, as an icebreaker, could you share a little bit about your journey and how you got into the automotive industry?

Kanchana: I've been in the auto industry for, you know, over 15 years now, having worked at GM Financial, working with, you know, the manufacturer Ally Bank, have a really good exposure to the auto lending part of the business. And I actually went over to working at a dealership company. I was working at Dominion Dealer Solutions. So really kind of helping build all of those types of DMS, CRM, you know, digital marketing tools for dealers. And I, I feel like everything kind of started to make sense when I came to Experian. And Experian really is just one of those companies where we're at the heart of everything. We work with the manufacturers, the dealers, all the strategic partners, and lenders. So it's been a really cool journey, and I, I just really feel like auto is one of those industries where you get into it, and it's really hard to leave because, you know, you make a lot of friends, and it's such a fun place to work.

Zach: Definitely. I feel the same way. And could you talk about the shift towards online vehicle transactions and how that's impacted fraud for auto dealers? And what trends are you seeing in the industry?

Kanchana: Well, it's interesting, the Federal Reserve has reported that the highest growing financial crime in the United States is synthetic identity fraud. And what we hear from dealers that we work with is that they're seeing a lot of these cases occur, especially in the use of digital transactions, you know, with the pandemic and, you know, inventory issues and sort of that really opened up that kind of nationwide inventory through digital retailing for consumers, you know, those out-of-state transactions and the digital transactions are definitely a risky area because of the sophistication of fraudsters and their ability to kind of hack the current processes that may be in place with the dealership.

Zach: So tell us about the key features of Experian's newly announced Fraud Protect tool and how does it differentiate itself from other fraud prevention solutions on the market?

Kanchana: Well, Fraud Protect is a tool that Experian Automotive designed in partnership with dealers. So we worked really closely with them to understand, you know, what their pain points were. And one of the dealerships that we worked with had experienced a couple of losses within a quarter of the, you know, the calendar year we were working in. So they were trying a number of different solutions to try to protect themselves. Obviously, there's, you know, a reactive kind of solution where you're spending a lot of energy working with law enforcement, trying to, you know, find and locate where that asset is, recover the asset. And we all know how difficult that is, especially, you know, working with law enforcement, it's not always easy to recover it. So this solution really is a proactive preventative measure that can be put in place specifically to target these types of financial crimes around identity fraud. So, you know, the solution is a very simple solution because that was really one of the important things that the dealership indicated to us. They wanted it to be as frictionless as possible with the consumer. You don't want to slow the role of somebody who's coming in to buy a car. It's exciting. It's wonderful. It's just a journey that we want to make it, you know, as unencumbered as possible. So this is a very light solution for the consumer, to engage with taking a picture of their driver's license back and front. It essentially allows them to take a selfie, which we're all pretty used to these days, and compares the liveliness of the image with, you know, the factors against the driver's license to not only verify that that is a valid driver's license, but that is, in fact, the person, you know, who's interacting with you, that's on that driver's license. And then we also do further verification. As part of the Credit Bureau, we know things about a consumer from an identity validation perspective to be able to say this phone number has been associated with this profile. And so when they enter in their phone number, we match that up and validate that. Yes, this in fact belongs to that person. And it's another factor of verifying that that person is, in fact, the person associated with that identity and not someone who's stolen it and potentially just recently opened up another phone line and is trying to engage with you. And then we've got those deep analytics that we get from working with to be able to say, you know, is this identity potentially fraudulent where we're seeing it being used in a number of places. Are there patterns against it? That machine learning basically comes back and says, hey, this potential fraudster's opened a number of trade lines and is defaulting on them. And so you need to basically take further validation steps against protecting yourself there.

Zach: Wow, it sounds like it covers all ends and a lot of different data points that it's built off. And forgive me, I'm about to use a buzzword. But how does Fraud Protect leverage AI to identify potential fraud risks? And can you provide examples of the kind of alerts dealers would receive?

Kanchana: Yeah, absolutely. I think that, you know, one of the biggest pain points we do hear from dealers is the fact that they're always looking for solutions that are going to make things easier. I have so much respect for dealers or small businesses typically, you know, the heart of a town. They need to be experts at so many things and manage a workforce that has a very high turnover rate in some cases, 75% turnover rate. So they wanted a solution that was gonna not only simplify existing solutions that they had, but really, you know, not be yet another portal. So this really takes a lot of the complexity today and you know, you've got one solution, you're doing a driver's license scan, and you got another solution where you're doing a credit check, and you're doing the fact checks. But you know, those solutions might not necessarily uncover a fraudster who is showing you a profile that they've gotten access to or cultivated. That's a good credit profile. So in order to be able to understand those things, you need to really look deeply into the credit history and other analytics that are not, not even available on the credit file today. So, machine learning really looks across the plethora of all of these sources. And the artificial intelligence really takes, you know, having to spend a lot of time and energy training people on how to read and interpret those scores that come back from across these thousands of data sources. And it integrates right into the dealer CRM. So it's basically a link that can be accessed right off of that customer record and they click on the link and it gives them literally a thumbs up or a thumbs down to be able to tell them, you know what this is, you know, a person that you can continue forward and invest that time in selling the car to them or you know what before you do, you invest that time, maybe you need to take a few more steps to further validate their identity. And you know, some of the time most it was interesting, the very first time we put it in front of a customer at a dealership, they actually took a picture of their driver's license back and front and they had to take their selfie. They walked away. They kind of really could sense from the digital solution experience. Experiencing it with Experian as a trusted source. They were able to really kind of, you know, deter that fraudster who walked away at that point.

Zach: So with nearly 70% of businesses reporting increased fraud losses, and that data point was from Experian, what specific types of fraud are most prevalent in the auto industry? And how does the new tool protect or address these?

Kanchana: Well, we do see that if we look at, you know, financial losses related to fraud and identity theft, the biggest area that is growing and is a growing concern essentially is the synthetic identity fraud along with the first-party fraud and third-party fraud. So synthetic identity fraud is where you have fraudsters that essentially make create a fake identity leveraging, you know, your identity, my identity, their neighbor's identity, and they cultivate these to be good credit profiles. The other two forms are essentially where you don't have any intent to pay. You're either leveraging another person's identity or your own identity and you're coming in and you're essentially not looking to pay back against that loan. And with the prices, the way they are on vehicles today, it really puts the auto industry at a very great exposure compared to, you know, credit card. For example, where you, you know, you've got access as a fraudster to a profile that's gonna, you know, get you qualified and get you approved for those trade lines. The first place you're going to target is someplace like a dealership where you're gonna walk away with an asset that's valued over $100,000 or more.

Zach: So, could you discuss the balance between enhancing fraud protection but still maintaining a positive shopping experience? Making sure it's not too burdensome. How does Fraud Protect ensure it doesn't slow down that sales process at a dealership?

Kanchana: I think that is a big concern for consumers as they're shopping and as they're engaging with digital solutions, they are really adopting those solutions that they trust more. And I think that when you have a solution that's provided by a company like Experian where a consumer can have trust that we're putting in the right investment to protect against the information that's been collected and be compliant and be, you know, in accordance with state regulations that are there to protect customer privacy and their data. Those are important things for a dealership to think about when they are putting a tool in front of a customer. As, as a consumer, you're gonna get more and more concerned about, you know, emailing in your driver's license. For example, you're gonna be more concerned about, you know, somebody photocopying your driver's license and then, you know, looking at the stack of white filing cabinets on the, you know, the floor behind you. You're also gonna be concerned and if a retailer says to you things like, hey, why don't you just take a picture of yourself in front of your house so that we can validate that the address is where you do live.


So those are practices we really want to encourage dealers to avoid and to start adopting trusted processes with partners like Experian, which really do improve the consumer experience and help them adopt, you know, going down the front funnel further in a digital way.

Zach: So what measures are in place to ensure customer data privacy and security when using Fraud Protect because you're dealing with very sensitive, you know, documentation that's required as part of the process?

Kanchana: Yeah, so that information is all done in accordance with, you know, the regulations that are out there today. So Experian has, as I said, invested heavily in making sure that we are working alongside government regulators so that we're abreast of all of the changes that are coming out to protect consumers today and ensuring that our products are 100% in compliance with that and helping the dealer be in compliance with that as well.

Zach: So with the tool being available both online as well as in person for customers, how does it adapt to the different challenges by these two sales environments?

Kanchana: Well, it's the same process. So that's one thing that's always great when you don't have a different process based on how a consumer is interacting with you. And it's so light, it's just a link that can be sent to a customer over the phone or it could be a QR code that they scan sitting on a salesperson's desk and it takes them into the same experience. Four steps and then the output goes straight into the dealer CRM so that they could basically see the output and decide what their next steps are gonna be.

Zach: So, if the dealership doesn't have these sort of tools today, how do they manage and combat fraud without them?

Kanchana: Well, they're exposed if they're only using a credit check today, if they're only using a hard copy driver's license, scanner, photocopying it and storing it, they are exposed because they're not catching those good credit profiles where we're able to look at the history that we have, that learning experience to know that the customer is a potential fraudster.

Zach: And can you share any success stories or like a case study where the Fraud Protect tool has reduced losses for a dealership?

Kanchana: Well, as I mentioned, you know, we had that deterrent that occurred and we had a number of situations where, you know, those engaging with the tool walked away. We also had a situation where, you know, a dealer was alerted to fraud that they wouldn't have known about otherwise. They had a consumer call in and say, "Hey, you know what, my credit was used by your dealership and I haven't engaged with you." And so that was an example of where they had a person who came in and leveraged a stolen identity, which, you know, they have not had incidences like that since using the product as well. And they actually were able to identify that not only did this work in the sales department but also the service department because you had people coming in with expensive vehicles, maybe from out of state sending it into the dealership wanting to get those parts fixed, but without an intent to pay back. And when it sent this identity verification link, they actually didn't fill it out and didn't complete it, which was a huge red flag for the dealership.

Zach: So kind of a futures question. How do you see the landscape of fraud in the auto industry evolving and what future enhancements can we expect, maybe on Experian's side or the industry side at large?

Kanchana: Well, I think the auto industry is fast catching up to other industries where you really have consumers doing far more digital transactions. And I think if you know, if I just look at, you know, myself, my friends, we probably buy at least one thing online a day, if not more. And I think that that's really going to continue to be the way that we engage with retailers is that digital component and we are adopting solutions where we do have trust in them. You know, you're leveraging things like Apple Pay, you're leveraging things like Google Pay because they have security built into them, they're trusted companies. And so consumers are more readily adopting, engaging with them. And we are less and less likely to want to give up our information to unknown retailers. And so you have consumers typically going back to retailers that they know have they have trust in maintaining their data and completing transactions with them. So I think this is really where there's an opportunity for the auto industry to really partner with some of, you know, companies like Experian, for example, that have that ability to put in the investment to protect the consumer data, provide that deep level of analytics to help do that identity verification that protects the dealer and the lender and the consumer in this case. And those are really the places that we're gonna see improvements in the digital technology. And I believe that the adoption will go up as well. When we do have those protections in place for the consumers.

Zach: So how does Experian's broader suite of services complement Fraud Protect and providing kind of a holistic approach in fraud prevention and data management for dealers?

Kanchana: Well, as we continue to grow this product, we will continue to help dealers understand the best place that they want to leverage this product. So today, you know, it can be used at the point of a test drive, it can be used at the point of a transaction, we really left it up to the dealer to determine where it best suits their process today. And, you know, along with both of those places, there are a number of other Experian services that can be easily integrated into the flow, whether we're talking about, you know, understanding what owned vehicles, what vehicles that consumer owns with some of our vehicle history data products to be able to allow that dealer to better appraise the trade that's coming in at the time of the consumer engaging with the dealership or again our credit solutions and the plethora of, you know, from an online prequal to a credit application that happens at the time of the transaction. Experian really is a part of every digital transaction that occurs today.

Zach: And what's coming down the pipeline in 2024 for your team as well as for Experian?

Kanchana: Well, we're working very closely with lenders today. We do have essentially a group that we work with very closely as part of the bureau and there'll be a continued dialogue that's happening with our partners so that we can really help the industry at large work together to protect the industry from the sophisticated fraudsters. I mean, you mentioned AI earlier and we know that those capabilities are gonna get more and more sophisticated. And so it's gonna really take essentially a consortium of coming together and dealers coming together along with partners like Experian to say, how do we best protect ourselves as an industry and also while maintaining the protections of the consumer in this process as well? So I think that's where the future is going. We're really excited to be part of it.

You know, we're excited to help consumers do the thing that we love to do in the United States: buy cars and make that experience as fun and as frictionless as possible with the dealers. 

Zach: But Kanchana, it's been a really interesting episode. You have such amazing knowledge of synthetic fraud, the Experian product. So it's been great talking with you today.
Kanchana: Thank you so much for your time. It's been a pleasure speaking to you as well and you know, good luck with everything.