But it doesn’t end here. Increasingly, fraudsters have upped their game and are using synthetic IDs instead. In the US, these IDs combine real data, ie. a child’s stolen social security number, with a falsified name. These synthetic IDs are easily purchased on Craigslist or other online platforms and can be used to apply for loans, credit, and other transactions.
Nobody is safe, as these synthetic IDs are used everywhere. One sector that is increasingly falling victim to this kind of fraud is the multifamily industry. Applicants use fake IDs to register for an apartment, and once they have piled up bad debts they just leave and move on to the next victim with a different fake ID. According to Checkpoint ID, the leading ID verification service for the US multifamily industry, 75% of management companies with less than 30,000 units, and a whopping 100% of management companies with more than that number of units are victims of fraud. This translates into millions of dollars in annual losses for the industry from bad debts and skipping.
CheckpointID today announced – exclusively via this column – that it has closed a $1.5M Series A funding round led by multifamily backed RET Ventures, a sign that the industry is taking the issue of synthetic IDs very seriously. It is an ID verification service that creates point-of-transaction transparency with customers prior to apartment tours and move-ins. Multifamily owners and operators can securely verify all guest IDs through a simple iPad scan. CheckpointID is one of the fastest growing new companies in the space, going from 21,000 units deployed in January 2018 to over 125,000 units by December 2018. Today’s funding will help the company expand its team to meet increased demand for its product.
“Three percent of all apartment tours begin with a forged ID, which allows potential renters to hide everything from bad credit to a criminal history. This endangers not only the touring agents but also everyone living in the entire multifamily property,” said CEO Terry Slattery.
Terry explained to me that their technology works both against front (where you use stolen information and an image of the criminal) and back forgery (a more sophisticated form of forgery where the criminals attempt to write code matching that of the identity victim’s original ID) by scanning the barcode on the back of a guest’s ID. They use machine learning to match the information in a scanned ID across proprietary databases, delivering a ‘pass’ or ‘fail’ result in a few seconds.
The solution can also be used to verify the identity of other stakeholders in the multifamily life cycle, such as maintenance workers, delivery people or suppliers. This enhances the physical security of the buildings and their inhabitants. The broader solution is that the technology can work for any vertical where ID verification plays an important role, such as car rentals, VRBO, and banks. The company’s ambition is to start with multifamily and expand in time to many other sectors.
Another benefit is the data that CheckpointID brings the multifamily community. By providing aggregate data analytics on apartment tours, they allow the operator to segment prospective renters to better understand who is looking and, eventually, what types of people decide to rent. Under fair housing laws, operators can’t ask prospects for information such as their age until they become a resident, and this is a fair housing friendly way to give the aggregate data on prospects back to the multifamily operator.
Major multifamily organizations are already customers including Bozzuto, Sares Regis Group, and LMC, a Lennar Company. “Checkpoint ID is disrupting the fraud protection process multifamily has been using for years,” said Sares Regis Group Executive Vice President Heather Wallace. “The program solves a known rental fraud epidemic that operators have been facing throughout the country. This solution is helping protect the entire industry against rental fraud and every apartment community in the nation should be using it.”
The tie in with RET makes perfect sense for both sides. Terry told me that “RET Ventures has a great track record of helping multifamily technologies succeed and scale quickly which is why the firm is the perfect partner to help us maintain our momentum and better protect multifamily owners, operators, residents, and their assets.”
“CheckpointID provides the best technology to ensure the safety and security of multifamily operators and their residents,” said John Helm, Managing Director of RET Ventures. “The Company is a perfect fit for our Fund as it brings innovative technology to multifamily owners and is led by industry veterans who truly understand the complex rental space.”
John told me that he has introduced Terry to a number of LPs that are now in advanced discussions with CheckpointID to use their product. RET’s LPs own and operate close to a million units, so 2019 looks to be a year of incredible growth for this startup.
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