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Identity Document Verification as a Lowest Common Denominator Risk Management Technique

Sarasota, FL, November 20, 2014 / By: David Montague, The Fraud Practice LLC

Identity document verification has evolved as a risk management technique by making use of advancements in technology leading to quicker and more accurate verification that a document is real, and an improved consumer experience thanks to streamlined document image capture via webcams and mobile devices. As a result, this risk management technique is more accessible and can be used by all kinds of organizations doing business in the Customer Not Present channel.

There are several industries where identity document verification is used extensively, especially as it relates to KYC and AML compliance requirements, as well as the need for strong identity authentication and verification. While these industries use identity document verification frequently, there are many online merchants and other organizations that can benefit from using this technique, even if only for a subset of their transactions. This is because identity document verification is a technique that can be applied in virtually any country or region and provides risk signals even when traditional identity data, such as connections between a name, phone number and address, is not available for a particular consumer.

In this sense, identity document verification can be used as the lowest common denominator for assessing risk on a Customer Not Present transaction. That is, for almost any transaction or consumer, an organization knows that they can rely on identity document verification to assess risk, even if the consumer is coming from a region where the organization does not have access to reliable tools or data, and even when other identity fraud screening checks are unavailable or provide inconclusive results. Below are two very common scenarios organizations doing business in the CNP channel encounter and examples of how identity document verification provides value as a lowest common denominator risk management technique.

When Consumer Data is Unavailable, Outdated or Inconclusive

When doing business online it is important to establish an electronic identity (e-identity) or profile for each customer based on the identity information the consumer provides. Due to the high degree of anonymity online, it is wise to authenticate and verify this information with other sources, but accurate data isn’t always available. Often there can be inconsistencies in data or there is no data available for consumers who have moved recently, cohabitate with non-family members, are transient or use only a prepaid mobile phone with no mobile or landline subscription service. These are just a few reasons among many why reliable data may not be available for a particular consumer.

Most organizations encounter these issues from time to time and are then left with the decision to either blindly accept the order or turn it down. When identity data lookups cannot provide a reliable risk signal, either because the results are inconclusive or data just isn’t available, identity document verification provides another means of confirming ownership of data and relationship between data points. One of the strengths of identity document verification as a risk management technique is that as long as the consumer has a valid ID, passport or even a utility bill, it can almost always provide a signal of risk and verify the association of a name and address.

When a consumer’s provided identity information cannot be confirmed by other means organizations can look to identity document verification as it provides a way for the consumer to prove they live at a given address while performing identity document verification confirms the document is not forged. Issues with lack of data or accurate data persist even in regions where there is decent overall coverage of identity information that can be authenticated, but the issue becomes more prevalent in countries and regions where there are no or few sources of data for performing identity authentication.

When Reliable Data and Other Fraud Prevention Services are Hard to Come By in a Country or Region

One of the more difficult aspects about expanding sales internationally is understanding how to effectively manage fraud in new markets. The high risk signals and patterns that are seen domestically may be far different from what is seen in new markets abroad. Furthermore, the third party vendor services and signals that are utilized for risk screening domestically may not all be available or as useful in the new regions where the organization is expanding sales. For example, the vendor or data source a merchant uses for name, address and phone reverse lookups may not offer this data or service in the new target regions. It is not uncommon to find organizations using one provider for the United States, another for Europe, a third for Latin America and so on.

In this context, identity document verification can benefit organizations in two ways. First, identity document verification can be applied globally with some providers supporting the verification of identity documents from every single country. When gauging demand in new markets it may not be worthwhile for the merchant to purchase and integrate a regionally specific identity data provider, but organizations already using identity document verification can apply this technique worldwide. When organizations do get access to identity data in a particular country or region, they quickly find that the quality and reliability of that data is not as strong as in North America or Western Europe, and in being able to rely on identity document verification as a lowest common denominator risk management technique the organization can confidently close more sales.

Second, organizations that are doing business all over the globe are often applying several different identity authentication and verification techniques while using different services across many different countries. Because identity document verification can be applied globally, it allows for more consistent operational processes and transaction flows for consumers worldwide. As a lowest common denominator fraud prevention technique, identity document verification allows organizations to expand their reach with a streamlined workflow similar for all markets, instead of using a multitude of data signals and services, which vary in accuracy, availability and effectiveness.

Identity document verification can benefit many different types of organizations as it enhances identity fraud detection, especially in markets where available risk management services or access to identity data is limited. For maximum coverage and global applicability, it is important to consider not only the total number of countries covered by an identity document verification service, but also the variety and total number of documents that can be accepted. For example, there are many countries and regions where a large portion of the population does not have a passport, and a service that can also verify national ID cards, banking or billing statements will provide far greater coverage. Michael Hagen, CEO, IDchecker Many organizations today only think of identity document verification in the context of banking, financial services and other businesses that use this technique to meet KYC and other compliance requirements. While many of these types of businesses rely on identity document verification as a primary risk screening and verification technique, many other online merchants and businesses can benefit from using identity document verification as a secondary form of screening only when required. Because of its global applicability and ability to provide an indication of risk when identity data is otherwise not available for a consumer, identity document verification is something organizations can fall back on as a lowest common denominator risk management tool. Identity document verification may not be a technique organizations want to apply on every transaction, but it is a great resource for any CNP merchant to have in their arsenal as it can often be applied and provide an indication of risk when all other identity checks are unavailable or are inconclusive.


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