Consumer finance practitioners tell the story: Black industry fraud is becoming more high-tech

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Chinese consumer finance practitioners said that the biggest risk they face in the entire business chain comes from "black industry" - organized criminals try to illegally seize lenders' funds through fraud. In the severe offensive and defensive battle, consumer credit companies that serve secondary customers are more likely to be targeted by black industries than banks.

The reason is simple: private consumer credit companies that provide small and micro financial services cannot directly push out users that banks are unwilling or unable to serve. They do business with these people - while they bring them profits, they may also bring higher risks.

Lexin is one of these consumer finance companies, which offers installment purchase services for goods and education products to college students and young white-collar workers, as well as blue-collar workers, through its two platforms, Fenqi Le and Tiqian Le. They are usually unable to borrow money from banks due to lack of credit history or poor credit history.

Xiao Wenjie, founder and CEO of Lexin, told Tencent Finance that the company he led, which was one of the earliest to provide consumer financial services to Chinese users, had encountered a "very sophisticated" fraud: sophisticated identity theft and credit fraud in the name of others. Xiao is the founder and CEO of Lexin.

Xiao Wenjie accepted an exclusive interview with Tencent Finance while attending the 2017 Boao Forum for Asia Annual Conference.

Xiao Wenjie said that practitioners in the illegal industry often trick customers into providing identity information and opening bank accounts and mobile communication accounts in the name of providing job opportunities - these are all necessary information that users of consumer finance platforms need to provide to obtain services.

Usually, black market operators will also obtain users' full information in the name of entrusting a third party to conduct background checks. "Whatever he asks you, you should answer truthfully." Since background checks are usually one of the necessary steps to join a new company, customers who are kept in the dark are often unaware of the situation and are very cooperative.

When consumer loan companies conduct phone verification for loan applicants who have submitted a full set of information online, the users usually "will say 'yes' and answer all the questions well." The result is that "the scammers get the money and run away."

In addition to these routines, the black industry's fraud methods are becoming more high-tech and intensive: for example, black industry practitioners have applied for hundreds or thousands of mobile phone cards, "using special number-keeping tools to keep them there" - recharging them according to the minimum consumption every month to ensure that the mobile phone cards are active online, making it easier for them to carry out fraud on various consumer finance or micro-loan platforms.

In addition, Xiao Wenjie also cited media reports that some black industry practitioners "drive buses to rural areas to collect ID cards" for fraud. Since many rural users - commonly known as "white households" - have no loan or credit records, it is easier for them to succeed in loan fraud. Xiao Wenjie said that black industry practitioners "use ID cards in batches to apply for loans on various platforms. Some platforms even lose tens of millions a day. This is normal."

To deal with black industry fraud, this consumer finance platform has established a data system called "Eagle Eye" to analyze the consumption habits of users and establish a risk control rule library to prevent risks. For example, one of the many rules is that using the same mobile phone to log in to different accounts to place orders "may be a typical risk."

In the early years, when mobile Internet business was booming, the focus of the black industry was usually on the large user subsidies given by "money-burning" companies such as Didi and Meituan. "But after the emergence of Internet finance, it was like hitting a gold mine and finding that more money could be defrauded."

Xiao Wenjie said that one of the biggest risks of working in finance is that financial business itself is risky. "You want to earn interest from others, while others want to earn your principal." The devil is always one step taller than the saint, and the war of offense and defense in the field of consumer finance over loan fraud continues.