Smaller institutions usually have fewer resources and less internal data than large banks to help identify potentially fraudulent behaviors. One way for them to level that playing field is through fraud consortiums, according to a March 2024 report from the U.S. Department of the Treasury. A spate of fraud consortiums started in late 2022 and 2023 could help do just that.
Consortiums are premised on the idea that institutions should share select information about users so others can learn from their experience. One small institution taking advantage of the idea is Portsmouth, New Hampshire-based Service Federal Credit Union. The credit union, which had $5.4 billion in assets at the end of 2024, joined the Unit21 fraud consortium less than a year ago after partnering with the firm to assist in its Bank Secrecy Act and anti-money laundering compliance, says Tyler Pihl, the credit union’s vice president of enterprise risk.
Service Federal onboards about 100 new members a day, and Unit21’s software helps it identify fraud and scammers within its membership. But prior to the creation of the consortium, those data signals weren’t being shared among other Unit21 customers — meaning institutions like Service Federal wouldn’t know that a new prospective member had been blocked by another Unit21 user, says Trisha Kothari, founder and CEO of Unit21. As Service Federal prepares to broaden its account marketing beyond a narrow geography, the consortium will allow Service Federal to receive both positive and negative signals about individuals from other users.
“I can’t watch 100 people a day,” Pihl says. “So we have lots of alerts set around that, and if I get consortium hits on those, I now know where to narrow my focus. I don’t kick people out right away, but I’m going to start watching that activity.”
The Unit21 consortium is the third and most recent fraud consortium the credit union belongs to. Pihl says a couple of factors are important when joining a consortium: how data-sharing is managed and protected, and how easy it is to send and receive information. He likes that Unit21’s consortium has a diverse group of institutions, including nonbanks like payment processors, cryptocurrency exchanges, online lenders and fintechs, since his credit union benefits from customer bases that are broader than their military-focused membership.
Unit21’s consortium is currently free and open to noncustomers; consumer data in the Unit21 consortium is protected through a patented hashing algorithm that ensures that all personal information is de-identified. Unit21’s consortium has 75 members; Kothari says some members have received fraud alerts from the consortium about 35% of the time before they receive other fraud signals and prior to any monetary loss.
Other consortiums also report striking fraud detection statistics. Sonar, a consortium started by antifraud platform Sardine, has been around since mid-2022 and receives about 100,000 information requests or inquiries a month from members, says Ravindran Loganathan, its cofounder and president. One large bank has reduced scams by 42% when bank customers attempt to transfer funds to crypto accounts, using information gleaned from the Sonar network about these accounts, he says. Sonar is open to all firms in financial services and operates as a paid subscription.
“The future is not continuing to fight the battle of fraud and scams on your own. It’s a team sport. You can spend millions of dollars upgrading your fraud and software stack to the latest and greatest stack, but that’s going to only give you a view of the fraudster through the data you have,” Loganathan says.
Of course, these consortiums only work if members both receive and contribute data — a notion that some would-be and current members resist. Financial institution executives may see this data as a competitive advantage or as benefiting their competitors.
“There’s a collective action problem in fraud: Everyone might want to get fraud signals from everyone else, but not want to share their own fraud signal,” says John Pitts, head of industry relations at Plaid, which runs the Beacon consortium, a free service that can reduce fraud by at least 15%.
Jonathan Awad, the cofounder and CEO of Baselayer, argues financial institutions should want to help each other, given the small number of enforcement actions and investigations the government brings compared to suspicious activity reports filed. Baselayer is a software company that helps financial institutions with business verification and entity fraud identification. Customers are anonymously included in the complimentary consortium. Awad says the consortium stopped over $100 million in repeated fraud attempts in 2024.
One institution convinced of the power of information sharing is Green Dot Corp., wrote Mandy Goettelman, its head of transformation, in an email. Austin-based Green Dot, which had $5.3 billion in assets at the end of September 2024, is a founding member of the Socure fraud consortium, which launched in October 2023. Green Dot, which operates Green Dot Bank, is a major player in the banking as a service space, providing financial services to several nonbank partners and their customers.
Socure’s consortium is focused on first-party fraud, which it defines as the use of one’s own identity to open an account and commit a dishonest act for personal or financial gain, says Ori Snir, head of product management at Socure. Socure consortium members, including firms like Discover Financial Services, SoFi Technologies and Varo Money, have contributed 190 million identities, 350 million accounts and 20 billion transactions. Of those, roughly 4 million identities have been flagged by one or more institutions as committing first-party fraud or “some flavor of abuse,” says Snir. Consortium members need to have a relationship with Socure and the service requires sharing personally identifying information.
Goettelman wrote that Green Dot’s fraud prevention efforts, coupled with the consortium’s information, helped the bank reduce fraud losses by about 35% year over year.
“There is a lot of power in banks and fintechs uniting to help address and solve this increasingly critical issue,” she wrote. “The industry will never be able to stop fraud completely, as fraudsters are constantly evolving their tactics, but our chances of staying one step ahead of fraudsters to protect our customers are improved significantly through collaboration.”
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