Trusted ID Networks Offer Best Line of Defense Against Fraudsters

Dynamic friction keeps the bad guys out, and trusted identity verification networks (ID networks) keep good customers transacting.

Brad Wiskirchen, senior vice president and general manager at Kount, an Equifax Company, told Karen Webster that using technology and a slew of data points to establish a trusted identity is key to making commerce safer, unlocking digital experiences over the longer term.

Those same technologies, he said, can “adapt” friction to each and every online interaction, a nuance that will be invaluable as various attack vectors gain steam, especially those involving identity fraud.

“The trending data shows that fraud is not going to go away,” Wiskirchen remarked.

Merchants’ cumulative losses from fraud could exceed hundreds of billions of dollars through the next few years – topping $340 billion, he said, citing data from Juniper Research.

Drill down a bit, and the seeds have been firmly planted for that negative impact to merchants’ top lines. Wiskirchen noted that this past year has shown several attack vectors to be on the rise: Card not present fraud remains a favorite of the bad actors, with most merchants having seen an increase in this activity.

Synthetic ID fraud is growing, and more illegitimate accounts are being created than ever before. A majority of merchants, he added, have seen a boost in illegitimate chargebacks and card testing schemes.

“More than half the merchants that we’ve talked to have experienced growth in these attempts, and account takeover fraud is always prevalent,” Wiskirchen said.

There was only a single decline among fraud vectors: bot attacks from the same IP address.

Inconsistent Defenses

The need and utility for dynamic friction and risk control is underscored by the fact that risk management is, at best, inconsistent across issuers.

“The challenge,” said Wiskirchen, “is that the issuers are making decisions based on a very limited dataset. You can count on one hand most of the data that an issuer uses when it makes a decision on a transaction.”  He said the data also doesn’t travel fast enough between issuers and acquirers to help make the right decisions that wind up improving authorization rates.

As a result, card declines increase, leading to a disappointing customer experience, and they stop using the cards and/or transacting with that particular merchant.

Partnering with providers — Kount among them — to manage risk controls will enhance the security of transactions while cementing consumer loyalty.

Dynamic friction, Wiskirchen told Webster, helps address those pain points, as “it is based upon the risk profiles for each business — you want to increase the friction against the potential fraudsters but also simultaneously decrease friction for legitimate customers.”

Kount, an Equifax company, leverages its platform model to access digital and physical identity data to generate customer personas as they transact — and upon displaying abnormal or risky behavior, can be challenged with dynamic hyperlinks and MFA that requires them to further verify themselves.

Wiskirchen said that Kount’s global data network is powered by more than 32 billion annual interactions across more than 250 countries and territories, preventing more than 53 million fraud instances and has helped clients see more than $8 billion in retained revenue.

“Behavioral biometrics helps make a significant impact here,” he said, noting Kount’s use of device fingerprinting and passwordless authentication. Examining the behavior on a consumer’s device, and combining that analysis with other data signals, gives Kount and its partners strong confidence in the identity of customers and helps it to weed out the fraudsters.

The use of artificial intelligence and machine learning-powered technology to identify abnormal ordering patterns has helped retailers such as PetSmart save millions in costs and even bust a human trafficking ring.

And, he said, the wealth of data points also can stop a burgeoning wave of chargeback (or “friendly”) fraud. He pointed to the Equifax acquisition of Midigator, a provider of post-transaction fraud mitigation solutions, earlier this year, where the latter company helps confirm identities, automate the dispute response process and provide the real-time data that can prevent chargebacks.

Wiskirchen also noted that identity data’s usefulness extends far beyond the confines of just lowering fraud rates. “You can use this data to enhance the experience of legitimate customers so that they keep coming back [to transact] over and over again when you reduce friction.”

And, he said, the development of a global identity trust network ultimately benefits anyone engaged in digital interactions — non-profits, charities, health care providers, even interactions with the IRS. The parties that are interacting with each other online can have a high degree of confidence that they are dealing with the appropriate people, because of the enhanced security surrounding these digital persona, he said.

As digital transactions continue to grow, despite the best efforts of bad actors, Wiskirchen said,  “when you dynamically insert the appropriate amount of friction, you reduce your fraud losses and simultaneously increase your revenue growth.”