Underwriting with certainty: Closing the loopholes fraudsters exploit

The transition from physical forgery to sophisticated digital manipulation is well underway, with application fraud presenting a growing threat in consumer lending. Armed with tools to generate counterfeit documents, identity data harvested from breaches, and synthetic identities, fraudsters are increasingly capable of overwhelming traditional detection defences during both digital and manual onboarding.

Generative AI has become a powerful force multiplier, making document forgery and salary staging accessible to almost anyone. Equifax IDVerse data shows that as of May 2025, 68% of attempted fraud involved digitally generated or edited artefacts - a 100% increase in just 12 months. 

When near-perfect counterfeits of resumes, payslips, and bank statements can be produced in seconds, the human eye can no longer be relied upon as a safe gatekeeper. Shifting to direct-source data addresses this challenge head-on, closing the critical loopholes fraudsters exploit and restoring certainty to the underwriting process.

"Shifting to direct-source data addresses this challenge head-on, closing the critical loopholes fraudsters exploit and restoring certainty to the underwriting process."

The liability of application fraud

Employment income data is central to every lending decision, yet relying on conventional verification methods - such as three months of payslips or bank statements - has become a significant operational and reputational liability.

For financial institutions, this liability manifests in two critical areas: credit and compliance risk. Failing to intercept fraudulent applications can lead to fraud losses and inflated bad debt levels, while also risking regulatory sanctions and the erosion of consumer trust. Conversely, overly rigid controls can lead to friction, slowing the Time-toYes, inadvertently declining quality applicants, and driving up the operational cost associated with false positives.

Conventional practices are particularly vulnerable to several evolving fraud tactics:

• Document forgery and AI alteration: With GenAI, sophisticated document forgery is accessible at scale. These fakes bypass standard manual checks, contributing to a landscape where average reported financial losses for large businesses have surged by over 200% in 2025 compared to the year prior¹.

• Salary staging: Applicants or intermediaries may artificially inflate bank balances through ‘recycled’ deposits. By passing funds through an account to mimic regular pay cycles, they create the illusion of multiple income streams or stable employment that does not exist. This is often paired with doctored payslips, where digital tools alter figures to align with fabricated bank transactions, making the fraud exceptionally difficult to detect via traditional review.

• Unsafe transmission: Sharing sensitive information via unencrypted email creates an insider threat risk and leaves data vulnerable to the surge in credential stuffing and phishing - tactics recorded in 60% of the incidents reported to ASD’s ACSC in FY2024-25².

These risks are amplified by a professionalised cybercrime-as-a-service economy. Lenders are no longer defending against isolated bad actors, but an industrialised model where specialists sell ready-made malware and infrastructure to anyone, enabling malicious activity at an unprecedented scale.

Building a modern defence with direct-source data

The most effective way to combat application fraud is to eliminate the opportunity for human intervention and the need to provide documentation. Shifting to a direct-from-source data model helps transform the underwriting process into a fraud-resistant workflow.

• A single source of truth

Instead of chasing payslips that are susceptible to tampering, lenders can access payroll data directly from contributing employers and payroll providers. This direct-source model provides an accurate, up-to-date record of employment status and income that is refreshed every pay cycle.

Because the data flows directly from the source to the credentialed financial service provider (the ‘verifier’), this cuts off the opportunity for an applicant or broker to ‘stage’ salary or doctor a payslip. 

• The multi-layered check

To further strengthen your defence, top-tier employment income verification solutions cross-reference payroll data with superannuation data. This allows for a secondary check when payroll data is incomplete, and to identify discrepancies that might otherwise go unnoticed in conventional verification, closing gaps that could present opportunities for fraud.

Compliance, privacy, and consumer permission

Moving to a digital, source-verified model offers significant advantages:

• Consumer-permissioned access: This model operates on explicit user consent. The borrower provides one-time permission for credentialed financial institutions to access their data directly, eliminating privacy concerns and ensuring alignment with data protection regulations.

• Consistent data output: Unlike the varied formats of individual payslips, direct-source employment income data is delivered in a standardised format. This consistency supports fairer lending decisions and creates a clean, defensible audit trail for regulators.

• Accurate calculations: Using verified data allows for more precise debt-to-income calculations, helping to mitigate the liar loan risk and supporting responsible lending obligations.

Establishing digital trust with Equifax

Managing fraud risk requires an unwavering focus on data integrity. Our Verification Exchange employment income verification solution provides financial institutions with the certainty that an applicant’s stated income matches reality - a vital ingredient in establishing digital trust. 

“For lenders looking to defend against application fraud while streamlining workflows, the priority is establishing digital trust at the earliest point of contact.”

As Australia’s first automated solution to use payroll data as a direct, verified source, Verification Exchange consolidates payroll data from contributing employers and payroll providers into a secure, cloud-based digital vault that is updated every pay cycle. By replacing manual reviews of borrower-supplied documents with direct-from-source information delivered in seconds, it effectively closes the loopholes that fraudsters exploit.

For lenders looking to defend against application fraud while streamlining workflows, the priority is establishing digital trust at the earliest point of contact. This approach helps mitigate risk before it enters your ecosystem, facilitating growth through improved operational efficiency, faster approvals and a superior consumer experience. 

Would you like to see how a direct-source data model can reduce manual review times in your application workflow? Contact the Equifax Verification Exchange team today.