Increasingly, when consumers turn on the TV or check their phones for news, they’re reminded just how vulnerable their information is. In fact, the Identity Theft Resource Center reported 781 data breaches in 2015 alone, and, unfortunately, consumers haven’t seen any signs the issue will slow down this year.
Data breaches are the first step for criminals with intentions to steal and misuse consumer information. Once fraudsters have consumers’ private identity information they then take the next step in criminal activity, often committing fraud by opening fraudulent accounts or taking over an existing account. In essence, fraudsters use the personal information obtained from the breaches to apply for credit or benefits or hijack existing accounts, all while acting as the victims.
Despite the increased news coverage on data breaches, many consumers perceive extra security measures in the account opening process as unnecessary and time-consuming. For example, a telecommunications customer who experiences a long, seemingly overly secure account-opening process may grow frustrated and abandon his account before it's open.
To grow their customer bases, businesses must simultaneously cater to consumer preferences, protect their reputations for keeping customer information secure, and optimize organizational performance. To do this, they need to use a multi-layered approach to fraud prevention that removes friction from the customer experience.
Any fraud detection and prevention measure that acts in the background without customers’ knowledge decreases the likelihood they’ll grow frustrated and the likelihood a fraudster will succeed.
Device recognition tools track the accounts opened and accessed by specific laptops, phones and tablets. When someone attempts fraud on a particular phone, for example, this device is flagged and the next time the account is accessed from the device, the system requires additional layers of authentication.
Making device recognition more efficient, the network sharing of fraud information allows organizations to anonymously tip each other off if someone attempts fraud from a particular device at one company, then moves on to another organization.
Fraud consortiums aren’t limited to sharing information about devices, though. They also allow companies to exchange warnings about individual identities known to be associated with fraud. It may seem odd that competing companies would be willing to help each other by sharing this information, but these networks prove beneficial for all parties involved.
Once companies have access to patterns in actual or attempted fraud, they can use analytics to make their anti-fraud practices more effective. Organizations can tweak their security measures to prevent similar fraud from happening in the future by simply investigating what additional information they could have required to detect fraud or having more insights into the fraudster’s suspicious activities, like accelerated spending or access from an atypical location.
Many consumers view biometrics as sleek, convenient technology for account access. Many companies also appreciate biometrics for improving accuracy and their ability to offer one more layer to anti-fraud programs.
Voice and facial recognition, fingerprint matching, and iris scanning are among biometrics options available to organizations for inclusion in their account opening and account management processes. They supplement more traditional methods nicely, especially in high-risk scenarios.
KBA Isn’t Going Away
While knowledge-based authentication isn’t the most exciting anti-fraud method out there, it’s definitely not out of style yet. Passwords and other personal questions greatly improve account opening and management processes, and they still make a solid foundation for a more complex security system.
When combined with less-invasive fraud prevention and detection methods, KBA strengthens security without overwhelming the customer with required effort. We may see passwords and questions fizzle in the future, but for now they’re staying put.
The Criminal Network
A person’s various social media accounts -- including Facebook, Instagram and LinkedIn -- can give their identity credibility as they apply for new credit or service accounts. A history of posting from the same place across multiple accounts corroborates the authenticity of the accounts, and the length of the accounts’ existence further proves an identity’s legitimacy.
Conversely, holes in someone’s social media accounts can cause their applications to undergo further scrutiny. Unless they plan to misuse an identity years in advance, fraudsters cannot retroactively create accounts to fool fraud detection systems. A series of brand new accounts with inconsistent posts can issue a red flag during the account opening process.
When companies choose a strategic combination of fraud detection and prevention tools based on their organizational objectives and the level of risk associated with certain customer interactions, they make fraudsters’ jobs harder while making consumers’ lives easier.
This doesn’t go unnoticed by either party.