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VPN
Learn how integrating IP address analysis into credit scoring can help detect fraud and assess credit risk.
Learn how integrating IP address analysis into credit scoring can help detect fraud and assess credit risk.
The rapid development of the IT sector opens up a wide range of opportunities for fraudsters.
Belonging to Cheq, 11.3 percent of all inbound traffic is fraudulent. At the same time, 13% of criminal activity is in the finance sector.
To prevent fraudsters from revealing their identity, they resort to encrypting the IP address.
There are a variety of ways to accomplish this goal. One of the most popular ways to connect to the web is via a VPN.
A Virtual Private Network, or VPN, is an online anonymization tool.
It allows users to simulate their connection to the web from various locations where they are not actually located.
A VPN creates a secure connection and is initially designed to serve a legitimate purpose. For example, it is appropriate to use it when uploading to the Internet via public Wi-Fi networks. This step will prevent cybercriminals from accessing your data.
VPN is used to ensure user privacy on the Internet. It provides a number of features, among which are:
1. Guaranteeing data security. This takes into account usernames and passwords, financial details, individual messages, etc.
2. Tracking protection. Internet providers, search networks, marketers, and other third parties will not be able to track a user's activity online.
3. Bypass geographical restrictions. With the help of VPN it is feasible to change the country of outgoing traffic. With this technology, users can see content that is not available in the region of their actual location.
Some premium VPN services are capable of turning a user's internet invisible to third-party entities. Free tools guarantee less security and privacy.
However, careless of the cost, the main goal of using a VPN is the same – to hide the IP address and make the online session inaccessible to third parties.
The core function of a VPN is to change the user's IP address, which serves as a unique identifier for a device on the network.
An IP address can be used to track a person's location, making it a target for those who wish to remain hidden. By using a VPN, users can create a secure connection that conceals their true IP address from potential fraudsters.
Among other things, this method of anonymization is often used to arrange loans fraudulently. After all, an IP address can provide a lender with many data points about a potential borrower.
Modern fintech companies are more and more turning to alternative sources of information to evaluate potential borrowers. IP address is one of the informative sources of such data.
IP address information is used in combination with other information obtained as a result of location analysis. This is one of the checks performed by alternative data providers.
Thanks to this, credit organization can detect VPN use. If a borrower hides their real IP address for no apparent reason, it can be perceived as a sign of fraud.
In addition, a progressive IP lookup solution can provide lending organizations with other capabilities:
Compare the IP address geolocation with other addresses. For example, with the one listed on a loan application. Or with a location that was identified through digital footprint analysis.
A mismatch of data is a reason to suspect fraudulent actions on the part of the applicant.
If the applicant uses a secure connection, this comparison cannot be performed.
Establish the exact location of the borrower. The lender can find out exactly where the applicant is at the time of application to the financial organization.
Analyze the applicant's region of residence. Numerous statistics prove that the region of residence, namely its economy, directly affects the level of default on loans.
The United States is indicative in this matter. Each state has a different percentage of unscrupulous clients.
Using a VPN allows the borrower to hide their real location. Therefore, such an analysis would be unreliable.
If the location analysis process reveals that the applicant has encrypted their IP address, this may lead to certain consequences:
1. Such a borrower will be deprived of a loan.
2. They will be offered less favorable credit terms.
So, what is VPN connection?
It is a private, encrypted connection between the user's device and a VPN server. It is designed to ensure privacy on the web. However, it is often used for illegal purposes. This includes fraudulent loan applications.
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Alternative Data as a Game-Changer for Online Lenders