Out of Wallet Checks - Fraud Library

The Fraud Practice eCommerce Fraud Consulting Services

Out-of-wallet checks are intended to validate the consumer’s identity by asking them questions that are derived from his past credit or public records. Most typically using credit reports. Typically includes five to ten questions in a multiple-choice format.

AKA. Out of Pocket, Out of Wallet,

Enter your search terms Submit search form

Web www.fraudpractice.com

Expensive but effective, big influence on user experience ...

Out-of-wallet checks are intended to validate the consumer’s identity by asking them questions that are derived from his past credit or public records. Most typically using credit reports. Typically includes five to ten questions in a multiple-choice format.

How Good Is It? 

As a general tool, the out-of-wallet checks are very effective at establishing consumer identity. Although you have no guarantees using this service, you do have some good ammunition in fighting a charge-back. Only the most severe cases of identity theft would be able to pass this check.

          The pros and cons of out-of-pocket checks are:

• Good tool for establishing consumer identity

• Best practice technique for credit issuance

• Does not translate well for international orders

• Does not require you to get a credit score

Considerations When Implementing or Buying This Functionality    

• Can be costly to use.

• Requires a lot more intrusive information from a consumer, some may be very reluctant to give this much information unless they are buying something very expensive, or they are requesting credit.

• Does require that you integrate questions either directly into your web page checkout process, or the use of third-party pop-up verification screens.

• Typically requires SSN and/or date of birth. Some of the more recent services are using the last four of the SSN with DOB.

Estimated Costs – Typically this service is offered on a per-transaction basis. Because it requires the use of a credit report, costs tend to be significantly higher than using a fraud-screening service.

Alternative Solutions – Verified by Visa, MasterCardSecureCode, reverse address and reverse phone number look up

Vendors – Experian, Equifax, Transunion, RSA, ChoicePoint, Lexis-Nexis

How Does it Work?  

Using the credit report the service will create questions based on the consumer’s past spending history. For example:  

What is the name of the bank/financial institution you financed your car with in 1997?

a)  Chase Bank

b)  Mitsubishi Motors Credit

c)   Land Rover Credit

d)  Ford Motor Credit

Typically there are five to ten questions with about a 50/50 split on recent versus past activity. Questions usually come from a variety of points such as car loans, home mortgages and credit cards.

How Do I Use the Results?  

The consumer answers all of the questions and the service informs the merchant if the identity was verified (that is, whether they pass or fail). It is possible to utilize a service such as this without getting a credit score. If the consumer fails, you can route them to another channel to try and convert the order, or you can have them mail in payment.

If someone fails this process, make sure you only send correspondence, either mail or phone to the address and phone listed from the service you used. Don’t send it to the address the new consumer used unless it happens to be a full match to the one on the service bureau record. This is important to ensure you are not aiding an identity theft perpetrator.

Building This In-House 

N/A

Property of The Fraud Practice, all rights reserved, no unauthorized duplication, reproduction or distribution without the express written permission of The Fraud Practice.