The imperative of intelligent verification

The payments space is facing a multifaceted challenge. Widespread digital adoption brought on by the pandemic pushed consumers online in unprecedented numbers, leading to more convenience in online payments but also opening the floodgates to enterprising fraudsters.

And while contending with the persistent threat of fraud, the industry also needs to stay compliant with anti-money laundering and “know your customer” regulations while bringing in new customers at a rapid rate.

Intelligent and adaptive identity verification (IDV) technology is imperative to operate a compliant, growing business. And this is no easy feat: 54% of leading fintechs identified balancing fraud with friction as the greatest challenge to fraud deterrence in the industry, according to IDology’s Eighth Annual Fraud Report.

Intelligent identity verification technology allows providers to validate consumers earlier in the new-customer-acquisition process. Ensuring that contact information is correct and that consumers can be reached is critical for providers. A provider can establish contactability by verifying information such as email, active phone number and fixed VOIP system while providing consumers fast access to payment tools.

Payment providers need a truly intelligent solution that orchestrates enrollments or acquisitions through layers. Single-source verification often falls short of delivering the comprehensive risk perspective needed to combat the surge in synthetic identities.

By layering risk signals, such as an inactive mobile account, nonexistent email or an address risk signal, providers can better identify seemingly nonthreatening identities early in the identity-proofing process and prevent fraudsters from receiving funding down the line. By screening consumers for risk within a low-friction workflow, providers can create trust with new and returning customers while keeping fraud in check.

Digital identity verification based on diverse data sets from a variety of authoritative sources equips providers to fight surging fraud and quickly validate consumer contact information while locating a greater variety of traditionally hard-to-find identities. With a more complete picture of a consumer’s identity, payment providers can confidently locate more real customers and better serve existing customers.

Consumers, especially thin-file consumers such as millennials and Gen Zers, are looking for more and faster payment options. A growing digital landscape also means that institutions can located and welcome individuals who may not have access to credit, utility payments or other documents that help build public records.

Millennials and Gen Zers are now two of the three largest generational groups in the U.S. but are considered harder to locate in public or credit records because they don’t have lengthy banking histories. Furthermore, millennials are the largest drivers of net new-loan demand and this trend will likely continue for most of the next decade. The mechanisms used to locate millennials can also apply to subsequent generations, starting with the 70 million American in Generation Z.

An effective platform should use multiple layers of identity verification to build a holistic view of identities, especially those more difficult to locate. Identity verification powered by a diverse data set offers better anti-fraud performance while enabling transparency into which layer of fraud verification has been triggered.

A recent study on consumer perceptions of fraud found that 68% of consumers ranked a secure digital process as the most important factor when opening a new account. Conversely, 45% of consumers said they strongly dislike companies that require additional security steps.

To be competitive in a fast-paced digital environment, organizations clearly need an advanced identity verification solution that can drive revenue and deter fraud without adding friction to the customer experience. Payment providers that fail to implement robust identity verification systems will struggle to manage evolving fraudster tactics and expose consumers to unnecessary friction.

Faced with increasing competition and a more crowded marketplace, providers must meet this challenge head-on. Intelligent identity verification technology enables businesses to confidently locate, verify and approve more legitimate customers faster—and gain a competitive edge.

Christina Luttrell is chief executive officer for GBG Americas (Acuant and IDology).

Explore what’s new in the payments space and where the sector is heading in the BAI Executive Report, “Banks are getting more personal with payments”