Fraud Mitigation vs. Identity Verification
While there is not necessarily a turnkey solution that addresses fraud, certainly a sound authentication and validation strategy can help combat it. However, for fraud to be effectively managed, a multiphase approach is best – one that encompasses both fraud mitigation (data integrity) and identity verification (proving that the customers are who they say they are). Consider the following scenarios.
Scenario I – Synthetic Identity Fraud Business: A credit card issuer experiences fraud losses when criminals use fabricated account information, usually with a real Social Security Number. The best solution for this scenario is fraud mitigation. Fraud mitigation is centered on the concept of stopping fraud early and often. It usually rates the likelihood of fraud based on a careful review on the input data. It operates like front door security – interrogating credentials and creating one of three scenarios.
1 The request will be turned away outright
2 The Request will require further screening
3 The Request will be quickly allowed to continue.
This creates the lowest amount of identity verification while keeping out synthetic identities – Is this sounding like an optimized approach?
Scenario II – True-Name Identity Fraud Business: Criminals use stolen identities to open new accounts via a lender’s online channel. The best solution for this scenario is identity verification. An identity verification model asks applicants several penetrating questions to which supposedly only the real person should know the answers. The answers are delivered in real-time. “Out of wallet” questions from credit and non-credit sources are the most reliable source. For example, using proprietary information from Equifax’s “The Work Number” service, Equifax can create queries based on current or former employment to ask pointed questions that help verify one’s identity.
Building the right solution requires expertise and direction, but the rewards are clear. Effectively addressing fraud is not a matter of just meeting regulatory compliance requirements (as some customers do through a prevention tool) or just trying to mitigate fraud late in the game (a profitability problem). Addressing and managing fraud is a critical component of customer service overall business success – when you care about fraud you are demonstrating your care for your customers and for your business. A robust solution that marries fraud mitigation with identity verification is a right step in developing meaningful fraud solutions for your business.
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