Homeppl: How Technology Can Mitigate Fraud and Discrimination in the Rental Market

https://thefintechtimes.com/homeppl-how-technology-can-mitigate-fraud-and-discrimination-in-the-rental-market/
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Due to the uncertainty imposed by the pandemic, many industries around the UK have faced an increased threat of fraud, and the home rental industry is certainly no exception. The rise in the use of false names, phony documentation, and forged bank statements to secure rental properties is leaving many landlords at a major loss.

Alexander Siedes, CEO and Founder, HomepplAlexander Siedes, CEO and Founder, Homeppl
Alexander Siedes, CEO and Founder, Homeppl

Here to provide a comprehensive insight into the scams experienced by the UK home rental industry is Alexander Siedes, the CEO and Founder of Homeppl. He is passionate about the use of technology to create financial inclusion. Prior to founding Homeppl, he was a diplomatic representative at UNESCO and the OECD and formed a number of NGOs across the UK. 

In this guest post for The Fintech Times, Alexander discusses the rising threats faced by landlords, and suggests practical solutions to how said landlords can better protect themselves and their assets against renter-related scams. 

The rental sector is a more significant part of the UK property market than ever; the number of people renting in the UK has doubled since 2002 and now 4.5 million homes are privately rented – that is one in five of all households.

It is also relatively fast-moving – the average shorthold tenancy is just 20 months, while longer-term tenancies are four years on average; in comparison, homeowners stay in the same property for 21 years.

This rapid change within the market means letting agents and landlords are increasingly reliant on high-quality tenant referencing checks – the due diligence run on tenants before they sign a tenancy agreement. Unfortunately, in most cases, these checks are simply not up to the job which is not only leaving landlords vulnerable to fraud while equally (and undeliberately) discriminating against many of those trying to rent a property.

‘Sloppy’ Due Diligence Relying On Outdated Systems

Tenant referencing has traditionally relied heavily on credit files, an outdated and inaccurate way of assessing a person’s financial position.

Many internationals, self-employed people, students, and high net worth individuals don’t have credit files, and therefore, are often required to pay between 50% and 100% of the rent upfront, which runs into the tens of thousands – or find a UK-based guarantor.

This short-sighted process – generally carried out by insurance companies who use the tenant referencing market as a loss-leader to sell rent guarantee insurance to landlords – is not only denying ‘invisible consumers’ i.e. those without credit reports, forcing them to pay rent upfront but its inability to detect fraud or authentic data is also resulting in 8% defaults and 1.6% court possession claims in the private rented sector.

Increase In Tenant Fraud and Repeat Offenders

In the first three months of 2021, 2% of all tenant applications were fraudulent – up from 1.5% in 2020 – and the value of these applications was three and a half times higher than the previous quarter. This has mainly been driven by a rise in amateur fraud (where people lie about their ability to afford the rent) likely as a result of tenants being on furlough or losing their jobs and therefore, living on reduced incomes.

As there is no penalty for a fraudulent application, not only is tenant fraud on the rise, but tenants will attempt the fraud multiple times until their fraudulent application makes it through an agent’s defenses.

A System in Need of Overhaul

In order to combat the increasing problem of tenant fraud, while also ensuring legitimate tenants are not discriminated against, Homeppl has combined the latest referencing data and anti-fraud technology with Open Banking data and behavioural analysis to create a fairer and more accurate way to assess tenants.

The Homeppl system validates the consumer’s identity, their financial abilities, including their employment status, and most importantly their capacity to meet their legal and financial obligations. Using unique fraud detection tests, behavioural analysis, and financial algorithms, as well as Open Banking data, it assesses the prospective tenant’s true transactional ability.

Homeppl runs financial analysis, stress and reaction testing, domain and email tracking, data enriched online searches and document verification to identify fake documents and references, and fraudulent activity, a combination that enables us not only to identify fraud – protecting our clients from financial loss – but to ensure all consumers have equal and fair access to financial and property products.

And the results speak for themselves. The Homeppl system detects that one in 50 of all clients’ transactions are fraudulent, and we have 0% defaults.

A recent example that highlights both the scale of the problem and the importance of having a robust tenant referencing system in place is a fraudulent tenant that our system caught three times.

We first identified the individual when he attempted to rent a property in March, then he tried again with a different letting agency in May, and then in June, he tried his luck again with a third property via a third agency. At each attempt, he had used a legitimate passport, but created fake references and documents and even a phoney employer in an attempt to fraudulently rent the properties.

Luckily, all three agents used Homeppl’s system, which was able to identify the falsified documents and fake employment reference. Our layering technology identified that he had doctored a bank statement, our referencing and enrichment checks revealed the company he claimed to work for had no revenue.

The lack of revenue was not an issue alone, but when combined with the fact that the company email address and website had no history and he’d paid for the company domain himself just days earlier, his application was identified as fraudulent. But, given he has tried three times, he will probably try again, and if he picks a landlord not using Homeppl’s system, he is likely to be successful the next time.

For those letting agents and landlords that are still relying on outdated tenant referencing systems, now is the time to switch. Not only does Homeppl eliminate tenant fraud – saving landlords around £30,000 per default – but also helps ensure legitimate, reliable and financially viable tenants are not discriminated against simply because they don’t fit the ‘tick boxes’ of traditional due diligence checks, meaning landlords can let their properties faster, to creditworthy applicants, improving cash flow and increasing profitability.

https://thefintechtimes.com/homeppl-how-technology-can-mitigate-fraud-and-discrimination-in-the-rental-market/