The Race to Beat Income Fraud

We recently asked Victor Kabdebon, Co-Founder and CTO of Truework, to give us the rundown on all things income fraud—the reality, the future, and how organizations can take action today to set themselves up well to combat it. Victor has played a critical role in standing up Truework’s solution for the multi-family and residential property management industry, specifically in partnership with TransUnion. Read what he has to say:

Income fraud is a big worry in the rental industry. What is the reality?

Without a doubt, this issue is at the top of everyone's mind. I want to share two facts to familiarize people with the challenges property managers face today.

1. Fraud is unequally distributed. Some parts of the country see almost 40% of applications with at least one forged document. Teams in these parts of the country need the right tools and training to fight fraud at scale.
2. Fraud is dramatically accelerated by technology. People can go on TikTok or Google and find ways to bypass fraud detectors with paystub generators and other tactics. If you rely on collecting documents, you’re at risk. With AI, it’s going to become increasingly easy to forge documents that will fool both people and fraud detection technology.

What is the short term and long term impact of fraud for property managers?

Pain is felt across the board, but I can think of three areas we hear again and again.

1. Financially, fraud is a severe burden for any rental portfolio. Evictions and delinquencies in some states can be five or six-figure issues. That amount alone sets a portfolio back and can hurt an entire property.
2. For the applicants, it means delays and lower satisfaction. No good tenant likes to be asked for documents or proof multiple times. Delays could cause delayed move-ins or even cause the applicant to go with another place.
3. Property managers are afraid and dissatisfied with the situation. In areas with high fraud, people fear approving the wrong applicant. The constant second-guessing and fear of making a mistake impact your best property manager's tenure, who would prefer interacting with applicants rather than looking at pixels for signs of fraud on a paystub.

What’s the current state of property management technology?

Property management technology is in an interesting spot at the moment. It is ubiquitous for most customers. It’s rare to hear a multifamily property owner wanting to build their software from top to bottom; there’s just too much to do. So, in this sense, property management software has been a big leap forward in technology. At the same time, this big surface area means that while they are a jack-of-all-trade, few are masters of one, and none are masters of all.

As a result, customers endlessly complain about the property management software they use, and these critical pieces of real estate infrastructure rarely use the best-in-class technology. That is a big hole in the market where new entrants can differentiate themselves. Newcomers on the market have opportunities to distinguish themselves in critical areas.

In our world of income verification and tenant screening, there’s a massive demand for a best-in-class solution directly integrated with property management software. I’m confident that solving that problem alone will attract customers and provide an incentive to switch.

The other thing I’m watching carefully is the ever-evolving relationship between property management software and applicants. We’re exiting a world where property management software was built only for property managers, but now the applicant onboarding experience is becoming more critical every year. We’ve seen the same phenomenon happen in the mortgage market with the advent of point of sales. Having the applicant self-drive part of their application dramatically reduces the cost of operations. I expect the same change in the multi-family space.

Do you think there’s still an uphill battle to adopt technology?

Without a doubt, adopting technology remains a real challenge for property managers.

The battle to convince leaders to buy technologies has been won – C-level executives and leadership recognize the need to modernize their processes and, by and large, have invested in solutions.

However, as you go down the organization, there’s a challenge of adoption and even more challenging proficiency with available tools. It’s not that property managers don’t want to adopt these tools; when you combine high turnover and time pressure, there is very little time for team members to get trained on new technologies. The best solution is to adopt an all-in-one tool that removes the need for people to get trained on multiple technologies.

What is trending right now for fraud detection technology, and what is the future?

I’m biased being at Truework, but I advise every single customer to use source-of-truth income solutions. Find tools that directly give you income or any applicant information from a trusted source. Why is that? It’s exponentially more difficult to defraud an ADP at the scale of a payroll company that runs a tight compliance ship or a bank that spends billions of dollars in layered fraud-fighting solutions than it is to generate a document online. When Truework leverages ADP or a bank get income data, customers benefit from billions of dollars of anti-fraud solutions from all these entities.

Here is the other side of the coin - avoid documents whenever possible. We've found that it's easy to bypass “AI Scanners”. I already said this, but go on TikTok or Instagram and search for fake paystubs. It’s eye-opening.

In case of doubt, verify the information twice using different methods. Think of it like multi-factor authentication applied to information. It may be easy to bypass one level of fraud detection, but likely difficult to bypass 2 or more. If you have reason to believe that a paystub looks suspicious, ask the applicant to connect their bank account and verify the same paystub shows up in their account.

What advice or learning from mortgage would you apply?

If I can bring one piece of wisdom from what we’ve seen in the mortgage industry, it is to avoid the fallacy of doing the "waterfall" yourself, as in, trying to piece together various income providers internally: one for this type of data, one for this other type, and so on. For many of our customers in mortgage, it’s been the source of millions of dollars of wasted investments that could have been solved by simply picking the best technology.

Now, what’s the best technology? Rather than looking at a sticker price, looking at your portfolio's overall cost of ownership will be an eye-opening experience. Cheaper solutions end up costing your team because it doesn’t focus on solving the problem you’re truly after - in our case, verifying the current income, asset, or person.

Lastly, we’ve learned that the businesses that win the most are the ones that are ready to embrace change deeply and upend the status quo. Going with Truework products was seen as taking a risk years ago when we were just starting, but customers who went with us early have benefitted the most compared to their peers who tried to iterate on the same concepts to no avail.