In an age where everything from leasing an apartment to verifying tenant credentials happens online, PropTech platforms are revolutionizing the real estate landscape. But along with convenience comes risk. One of the most insidious threats today? Synthetic identity fraud. It’s not just an IT issue—it’s a business problem that could cripple property management companies if left unaddressed.
What is synthetic identity fraud exactly? It’s when fraudsters combine real and fake information to create new, fictitious identities. These aren’t stolen identities in the traditional sense. They’re fabricated ones that often go undetected until the damage is done.
So, what does this mean for PropTech? And how can platforms protect themselves—and their users—from this growing threat?
The Rising Threat to PropTech Platforms
According to TransUnion, synthetic identity fraud is the fastest-growing type of fraud in 2024. That’s a staggering trend that should raise red flags for any technology company in the property sector. As more renters apply for homes and apartments using digital forms, bad actors are finding ways to sneak in under the radar.
These synthetic identities often pass initial checks. Why? Because they blend legitimate elements—like real Social Security numbers—with fake names, birthdates, and addresses. They slip past weak verification systems and get approved for leases, often never intending to pay.
The result? Property owners are left holding the bag. Vacant units. Lost revenue. Legal hassles. All because a ghost tenant made it past the gate.
How Synthetic Identity Fraud Works in Real Estate
Here’s a simplified version of how synthetic identity fraud can infiltrate PropTech:
- A fraudster creates a new identity by combining real data (e.g., a stolen SSN) with made-up details.
- They build up a credit profile slowly by applying for small loans or credit cards.
- Once the synthetic identity is well-established, they apply for rental housing.
- If approved, they may make initial payments to appear trustworthy.
- Eventually, they disappear without fulfilling lease obligations.
It sounds like something out of a movie. But it’s happening in real life. And often, detecting synthetic identities isn’t easy until it’s too late.
The Financial Fallout for Property Managers
The damage goes beyond unpaid rent. In 2021 alone, financial institutions reported around $182 million in suspicious activity linked to synthetic identities. That’s just the banking side.
For PropTech platforms, the ripple effects can include:
- Increased eviction costs
- Lost revenue from vacated units
- Legal complications
- Damaged relationships with landlords and investors
- Reputational harm
And the fraud is only becoming more advanced. FiVerity reports that fraud tactics have evolved significantly, with criminals using machine learning and AI to fine-tune their fake personas.
Why It’s So Hard to Catch
Synthetic identity fraud is slippery. Unlike stolen identities, synthetic ones don’t always trigger alerts in credit bureaus or fraud detection systems. The Federal Reserve warns that these fake profiles can look completely legitimate, tricking even seasoned professionals.
Here’s why they’re hard to spot:
- No clear victim reports the fraud
- Fraudulent behavior may be delayed until trust is built
- Identity components (SSN, name, DOB) often check out in isolation
It’s the perfect storm. And PropTech companies relying on outdated screening methods are easy targets.
Regional Impacts: Global Growth, Global Risk
This isn’t just a U.S. issue. According to Experian, 62% of UK businesses and 56% of U.S. businesses plan to invest in synthetic identity fraud prevention this year.
Why? Because no region is immune. The Asia-Pacific region saw a notable increase in synthetic identity fraud cases from 2022 to 2023. As PropTech adoption rises globally, so too does the appeal for fraudsters looking to game the system.
How to Defend Against Synthetic Identity Fraud
Now that we know the threat, what can we do about it? Here are smart strategies PropTech platforms should consider:
1. Multi-Layered Identity Verification
Go beyond basic credit checks. Use:
- Device fingerprinting
- Biometric verification (e.g., facial recognition)
- Cross-referencing utility and employment rec
2. Behavioral Analytics
Track how users interact with your platform. Unusual patterns—like filling out a rental application in seconds—could indicate automation or fraud.
3. Partner with Fraud Prevention Tech
Consider partnering with third-party tools specializing in synthetic identity detection. These tools often use machine learning to flag inconsistencies humans might miss.
4. Employee Training
Fraudsters evolve. So should your staff. Educate leasing agents and platform admins on what red flags to look for.
5. Continuous Monitoring
Verification shouldn’t end after onboarding. Monitor accounts throughout the lease term. Sudden changes in payment patterns or contact details can be early warning signs.
Real-World Case Examples
- Rental Application Scams: A leading U.S. property firm recently flagged over 120 suspicious applications in one quarter. Most were traced back to synthetic identities built over several months.
- Government Aid Abuse: The GAO also noted synthetic identity abuse in government benefit programs, reinforcing that housing platforms are not alone in facing this threat.
Looking Ahead: Tech as the First Line of Defense
The threat is clear. But so is the solution: smarter tech, smarter humans. PropTech companies can no longer rely on traditional tenant screening or credit checks. Synthetic identity fraud demands a more comprehensive, proactive approach.
Because once the fraudster is in, it’s already too late.
The good news? You don’t have to face this alone. From machine learning algorithms to next-gen ID verification tools, there’s a growing ecosystem of defense tech ready to help PropTech companies stay one step ahead.
The bottom line: If you’re in PropTech, it’s time to take synthetic identity fraud seriously. Your platform’s security, your users’ trust, and your bottom line depend on it.
