Source: Finance Derivative
By Barley Laing, the UK Managing Director at Melissa
According to Nasdaq’s 2024 Global Financial Crime Report $3.1 trillion of illicit funds flowed through the global financial system in 2023.
As a result, it’s not surprising that most in financial services are investing heavily in advanced ID verification technology to protect themselves from fraud and meet Know Your Customer (KYC) and Anti-Money Laundering (AML) regulatory standards.
However, to bolster their ID verification efforts they need to do more, and the best way is by improving customer contact data quality from the outset.
Why is contact data quality so important?
From our experience the quality of contact data is key to the effectiveness of ID processes, influencing everything from end-to-end fraud prevention to delivering simple ID checks; meaning more advanced and costly techniques, like biometrics and liveness authentication, may not be necessary.
When a customer’s contact information, such as name, address, email and phone number are accurate the verification process becomes more reliable. With this data ID verification technology can confidently cross-reference the provided information against official databases or other authoritative sources without discrepancies that could lead to false positives or negatives.
A big issue is that fraudsters often exploit inaccuracies in contact data to create false identities and manipulate existing ones. By maintaining clean and accurate contact data ID verification systems can more effectively detect suspicious activity and prevent fraud. For example, discrepancies in a user’s phone or email, or an address linked to multiple identities, could serve as a red flag for additional scrutiny. This basic capability is more important than ever as identity fraud becomes increasingly sophisticated.
Address verification is the foundation of contact data quality
Address verification – having a consistently accurate, standardised address – is usually recognised as the cornerstone of contact data quality. Once you have access to up-to-date customer addresses it makes it much easier to match and verify identities across multiple sources.
Therefore, verifying the accuracy and legitimacy of an individual’s address should be the first step in any identity related process, with any discrepancies between a claimed address and official records highlighting a potential fraudster.
By catching these inconsistencies early ID verification technology can help mitigate risks, ensuring only legitimate users are granted access to services, protecting both their business and customers from fraud.
Address verification also plays an important role in regulatory compliance, by ensuring that the address information provided meets KYC and AML regulatory standards.
Phone and email verification
As I’ve already touched on it’s not all about having an accurate address, the role of phone and email verification is also vital as part of a comprehensive ID verification process, and therefore in preventing fraud. Particularly when it comes to helping organisations to identify and mitigate possible fraudulent activity early on. Verifying all three contact channels together contributes to enhanced security by filtering out fake or high-risk contact information, improving the accuracy of the ID verification process.
Email verification involves analysing various factors such as the age and history of the email address, the domain and syntax, and whether the email is temporary. After all, new and poorly formatted email addresses are often tell-tale signs of fraudsters. Furthermore, the association of a single email with multiple accounts could highlight criminal activity. It’s only by checking if an email address exists and works, then examining those elements I’ve already mentioned, that organisations can identify possible high-risk indicators.
Phone verification is equally important in fraud detection. By verifying the type and carrier of the phone number, organisations can identify high risk numbers, such as those associated with VoIP services, which are commonly used in fraudulent activities.
Checking the validity, activity and geolocation of a phone number also ensures it’s not only functional, but consistent with the user’s claimed location. And like with email, a single phone number linked to multiple accounts can indicate fraudulent behaviour.
Deliver contact data accuracy with autocomplete / lookup tools
The best way to obtain accurate customer contact data is to use autocomplete or lookup services.
With an address autocomplete tool it’s possible to deliver accurate address data in real-time by providing a properly formatted, correct address at the onboarding stage, when the user starts to input theirs. Tools such as these are very important because around 20 per cent of addresses entered online contain errors; these include spelling mistakes, wrong house numbers, and incorrect postcodes, as well as incorrect email addresses and phone numbers, typically due to errors when typing contact information. Another benefit of the service is the number of keystrokes required when entering an address is cut by up to 81 per cent. This speeds up the onboarding process and improves the whole experience.
Similar technology can be used to deliver first point of contact verification across email and phone, so these important contact datasets can also be verified in real-time.
In summary
The success of ID verification technology, and therefore fraud prevention, hinges on the accuracy and quality of customer contact data. Having such data not only enhances fraud detection, but improves the user experience and operational efficiency. Financial institutions must make sure that data verification tools are used across address, email and phone, alongside their ID verification technology.
