Last week, Qualia joined ALTA’s Coalition to Stop Real Estate Wire Fraud. Qualia is the first (and currently the only) digital real estate closing technology platform to be selected for the coalition. The Coalition aims to raise awareness of real estate fraud and deliver concrete steps to help consumers avoid mortgage closing scams and wire transfer fraud. We believe more technology providers should follow and join in these efforts.
Education, awareness, and urgency are paramount to helping consumers avoid life-altering fraud incidents. It’s also important for businesses to consider their role moving beyond “educator” to “protector.” A recent FTC study revealed why consumer education may not be enough in today’s digital environment and why businesses must take steps to better protect consumers.
The study, released this month, indicates that millennials are 77% more likely than any other age group to lose money to a scam that started with email. This statistic is startling. Why are millennials (who are considered “digital natives” and inherently more tech-savvy) falling victim to email fraud more than other demographics?
The Millennial Security Paradox
The answer may lie in the fact that millennials — who have come to expect the near-ubiquity of digital transactions and who have seen some of the largest data breaches in history take place —have developed a paradoxical awareness and apathy for online security.
What does that mean exactly? One school of thought poses that millennials have grown up in a world saturated with technology and thus view data security threats as an inherent risk associated with technology advancements. “Millennials have never really known a world without technology and data, and they might see data breaches and misuse as unfortunate, but normal,” a Gallup contributor wrote. Despite the news of breaches and data misuse, millennials view it all as an unavoidable aspect of our digital reality.
Despite this cynical viewpoint, millennials are also surprisingly the most trusting of all generations when it comes to data security. According to a recent Gallup report, across all generations, millennials are most likely to say businesses and institutions can be trusted to keep their personal data secure. This could be due to the fact that millennials have had mostly positive and secure experiences with businesses and institutions of which they transact with on a daily basis. The threat of an attack on their personal data security feels far off due to the sheer volume of transactions they’ve completed safely with no incident. Meanwhile, baby boomers are more wary of digital transactions, opting instead for traditional payment methods.
This adds up to a general awareness of data security threats among millennials, but no real worry that these threats will impact them on a personal level.
The Effects in Real Estate
Statistics from ALTA coincide with the paradoxical awareness + apathy equation. According to a March 2019 study of recent homebuyers, 42% of respondents ranked real estate transaction theft as not concerning despite the fact that 73% of respondents said they were warned by their title company, real estate agent, or lender that real estate fraud could be an issue.
Real estate wire fraud continues to be a top concern plaguing unassuming homebuyers. FBI data show that in 2018, 11,300 victims in the U.S. lost nearly $150 million due to real estate wire fraud. The biggest growth in scams comes from business email compromise (BEC) scams in which a cyber criminal imitates a business email to encourage a homebuyer to wire money directly to a fraudulent account. (For more on BEC scams and their impact in the real estate industry, watch Qualia’s interview with NBC earlier this year.)
The Businesses Response: Urgency and an Investment in Secure Technology
The data proves that homebuyer awareness and education alone is not enough to end the accelerating incidents of real estate wire fraud. It’s up to real estate professionals and businesses to create urgency around this issue by supplying concrete statistics about the threat of real estate fraud and actionable steps to avoid it.
This urgency can make the threat more “real” to a generation of homebuyers who have developed a level of apathy to data security threats; however, it’s also up to businesses to consider the communication channels they utilize and to level-up their technology to meet consumer expectations for reliable and safe information exchange.
New portal-based communication channels are rapidly replacing traditional email communication as a mechanism for secure information exchange. These portals typically offer two-factor authentication that greatly mitigate the risk of outsiders attempting to imitate a title or escrow business and trick a homebuyer into wiring money to a fraudulent account.
For example, Qualia’s Connect platform (a secure, app-based communication channel for homebuyers to send information and track the progress of their closing), seamlessly integrates with Qualia’s title & escrow software and replaces the use of email all together. This protects homebuyers from wire fraud incidents and delivers the same transparent and convenient experience they expect from their other digital transactions.