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How financial institutions can stay ahead of fraud during account openings



The digital transformation that has taken place in banking over the last decade is radically changing how customers interact with financial institutions. More and more customers are opening accounts on a smartphone, tablet or laptop, resulting in a growing emphasis on digital onboarding. According to Cornerstone Advisors, checking account openings in digital channels exceeded branch openings in 2019 and grew to 66% of the volume by the end of 2020. 

Now, as digital account openings become more common, financial institutions face increasing pressure to detect fraudulent activity at the point of onboarding. “It’s more important than ever to know that the customer logging into your online banking application is who they say they are,” says Paramita Bhattacharjee, vice president and product line leader of risk insights for Early Warning Services, LLC. At the same time, she says, banks must also provide a way for customers to get through the application process quickly and with minimal friction. 

One of the biggest hurdles financial institutions face while offering digital account openings is the ability to confidently validate a consumer’s identity. Without this knowledge, banks cannot make accurate decisions about whether they can do business with a particular customer, what privileges should be granted on the account or even what products should be offered. And with fraudsters becoming ever more sophisticated in beating customer identification programs, banks must deploy accurate and reliable solutions when it comes to identity verification. 

The first—and most critical—step in the process is to confirm the information a potential customer is providing. These basic elements—name, date of birth and Social Security number—need to be matched against the ultimate source of truth – the Social Security Administration. Real-time Identity Chek® Service–New Account Scores from Early Warning Services can determine the likelihood that a customer is who they say they are, whether the customer submits the account application via a smartphone, tablet, laptop or in person in a branch. As a Trusted Custodian® over a unique cross-institution data set combined with sophisticated analytical and predictive scores that go beyond rules-based solutions, Early Warning provides both broad and deep coverage with insights into millions of transactions and identities. 

The scores, key factors and summarized attributes garnered from this intelligence database, says Bhattacharjee, give financial institutions the kind of insight they need to open accounts confidently and tailor account offerings while reducing the chance of fraud losses in the process. It also allows them to do this without undue friction.

“Recent research from The Financial Brand’s Digital Banking Report found that unless a financial institution can open a new account or complete a new loan application in less than five minutes, the potential for the customer to abandon the account opening increases to 60% or more,” she says. “Alternatively, faster account openings reduce abandonment rates to almost 25% or less.” 

Verifying that a customer is who they say they are is only the first step in staying ahead of fraud during the account opening process. Financial institutions must also be on alert for application fraud and synthetic identity fraud. Application fraud involves the use of false information to open an account with the intent of engaging in criminal activity. In synthetic identity fraud, the account opener uses mostly factual information, but then slightly manipulates either a Social Security number or date of birth to avoid detection, or to hide from a previous bad credit history. Bhattacharjee says that, according to research from the Aite Group, synthetic identity fraud is one of the fastest-growing types of financial crime in the U.S. 

Real-time Identity Chek Service from Early Warning enables financial institutions to determine a valid identity in real-time as well as determine the likelihood of potential losses within the first nine months of an account opening. Its ID Confidence score gives banks the ability to better detect both synthetic and manipulated identities and determine whether an applicant is presenting their true identity. 

“It is ultimately the responsibility of the financial institution to open the account or not,” Bhattacharjee says. “But we are giving them the data and recommendation of whether we believe that person is who they say they are—and, further, whether they are going to default due to first-party fraud within nine months or whether that consumer will default due to account mismanagement within nine months.” 

The pandemic may have accelerated some of the fraudulent activities that banks are experiencing today, but it’s clear that digital account openings will continue long after the pandemic is over. Early Warning’s technology gives banks the confidence to expand their customer portfolio by helping them verify identities quickly, accurately and in a way that keeps both banks and their customers safe, secure and happy. 

To learn more about top fraud trends in the new account opening process, you can view this on-demand webinar here.  

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Are Sallie Mae Student Loans Federal or Private?



When you hear the name Sallie Mae, you probably think of student loans. There’s a good reason for that; Sallie Mae has a long history, during which time it has provided both federal and private student loans.

However, as of 2014, all of Sallie Mae’s student loans are private, and its federal loans have been sold to another servicer. Here’s what to know if you have a Sallie Mae loan or are considering taking one out.

What is Sallie Mae?

Sallie Mae is a company that currently offers private student loans. But it has taken a few forms over the years.

In 1972, Congress first created the Student Loan Marketing Association (SLMA) as a private, for-profit corporation. Congress gave SLMA, commonly called “Sallie Mae,” the status of a government-sponsored enterprise (GSE) to support the company in its mission to provide stability and liquidity to the student loan market as a warehouse for student loans.

However, in 2004, the structure and purpose of the company began to change. SLMA dissolved in late December of that year, and the SLM Corporation, or “Sallie Mae,” was formed in its place as a fully private-sector company without GSE status.

In 2014, the company underwent another big adjustment when Sallie Mae split to form Navient and Sallie Mae. Navient is a federal student loan servicer that manages existing student loan accounts. Meanwhile, Sallie Mae continues to offer private student loans and other financial products to consumers. If you took out a student loan with Sallie Mae prior to 2014, there’s a chance that it was a federal student loan under the now-defunct Federal Family Education Loan Program (FFELP).

At present, Sallie Mae owns 1.4 percent of student loans in the United States. In addition to private student loans, the bank also offers credit cards, personal loans and savings accounts to its customers, many of whom are college students.

What is the difference between private and federal student loans?

When you’re seeking financing to pay for college, you’ll have a big choice to make: federal versus private student loans. Both types of loans offer some benefits and drawbacks.

Federal student loans are educational loans that come from the U.S. government. Under the William D. Ford Federal Direct Loan Program, there are four types of federal student loans available to qualified borrowers.

With federal student loans, you typically do not need a co-signer or even a credit check. The loans also come with numerous benefits, such as the ability to adjust your repayment plan based on your income. You may also be able to pause payments with a forbearance or deferment and perhaps even qualify for some level of student loan forgiveness.

On the negative side, most federal student loans feature borrowing limits, so you might need to find supplemental funding or scholarships if your educational costs exceed federal loan maximums.

Private student loans are educational loans you can access from private lenders, such as banks, credit unions and online lenders. On the plus side, private student loans often feature higher loan amounts than you can access through federal funding. And if you or your co-signer has excellent credit, you may be able to secure a competitive interest rate as well.

As for drawbacks, private student loans don’t offer the valuable benefits that federal student borrowers can enjoy. You may also face higher interest rates or have a harder time qualifying for financing if you have bad credit.

Are Sallie Mae loans better than federal student loans?

In general, federal loans are the best first choice for student borrowers. Federal student loans offer numerous benefits that private loans do not. You’ll generally want to complete the Free Application for Federal Student Aid (FAFSA) and review federal funding options before applying for any type of private student loan — Sallie Mae loans included.

However, private student loans, like those offered by Sallie Mae, do have their place. In some cases, federal student aid, grants, scholarships, work-study programs and savings might not be enough to cover educational expenses. In these situations, private student loans may provide you with another way to pay for college.

If you do need to take out private student loans, Sallie Mae is a lender worth considering. It offers loans for a variety of needs, including undergrad, MBA school, medical school, dental school and law school. Its loans also feature 100 percent coverage, so you can find funding for all of your certified school expenses.

With that said, it’s always best to compare a few lenders before committing. All lenders evaluate income and credit score differently, so it’s possible that another lender could give you lower interest rates or more favorable terms.

The bottom line

Sallie Mae may be a good choice if you’re in the market for private student loans and other financial products. Just be sure to do your research upfront, as you should before you take out any form of financing. Comparing multiple offers always gives you the best chance of saving money.

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Tips to do some fall cleaning on your finances



Wealth manager, Harry Abrahamsen, has five simple ways to stay on top of the big financial picture.

PORTLAND, Maine — Keeping track of our financial stability is something we can all do, whether we have IRAs or 401ks or just a checking account. Harry J. Abrahamsen is the Founder of Abrahamsen Financial Group. He works with clients to create and grow their own wealth. Abrahamsen shares five financial tips, starting with knowing what you have. 

1. Analyze Your Finances Quarterly or Biannually

You want to make sure that your long-term strategy is congruent with your short-term strategy. If the short-term is not working out, you may need to adjust what you are doing to make sure your outcome produces the desired results you are looking to accomplish. It is just like setting sail on a voyage across the Atlantic Ocean. You know where you want to go and plot your course, but there are many factors that need to be considered to actually get you across and across safely. Your finances behave the exact same way. Check your current situation and make sure you are taking into consideration all of the various wealth-eroding factors that can take you completely off course.

With interest rates very low, now might be a good time to consider refinancing student loans or mortgages, or consolidating credit card debt. However, do so only if you need to or if you can create a positive cash flow. To ensure that you are saving the most by doing so, you must look at current payments, excluding taxes and insurance costs. This way you can do an apples-to-apples comparison.

The most important things to look for when reviewing your credit report is accuracy. Make sure the reporting agencies are reporting things actuary. If it doesn’t appear to be reporting correct and accurate information, you should consult with a reputable credit repair company to help you fix the incorrect information.

4. Savings and Retirement Accounts

The most important thing to consider when reviewing your savings and retirement accounts is to make sure the strategies match your short-term and long-term investment objectives. All too often people end up making decisions one at a time, at different times in their lives, with different people, under different circumstances. Having a sound strategy in place will allow you to view your finances with a macro-economic lens vs a micro-economic view. Stay the course and adjust accordingly from a risk and tax standpoint.

RELATED: Financial lessons learned through the pandemic

A great tip for lowering utility bills or car insurance premiums: Simply ask! There may be things you are not aware of that could save you hundreds of dollars every month. You just need to call all of the companies that you do business with to find out about cost-cutting strategies. 

RELATED: Overcome your fear of finances

To learn more about Abrahamsen Financial, click here

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How to Get a Loan Even with Bad Credit



Sana pwedeng mabura ang bad credit history as quickly and easily as paying off your utility bills, ‘no? Unfortunately, it takes time. And bago mo pa maayos ang bad credit mo, more often than not, kailangan mo na namang mag-avail ng panibagong loan. 

Good thing you can still get a loan even with bad credit, kahit na medyo limited ang options. How do you get a loan if you have bad credit? Alamin sa short guide na ito. 

For more finance tips, visit Moneymax.



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