On an almost weekly basis news about breaches dominates headlines. The prevalence of attacks has created an ever-growing pool of stolen credentials that are routinely used to open fraudulent accounts, take out onerous loans, or max out cards.
To deal with this problem, experts at Visa have come up with a way to use artificial intelligence and machine learning to reduce the stress felt by banks in trying to determine what applications are fake and which are real.
Melyssa Barrett, Visa’s vice president of Identity & Risk Products, explained in an interview that studies show 13 billion data records have been lost or stolen in global breaches since 2013 and there have been $10.2.billion in combined estimated losses in new account fraud ($3.4 billion) and account takeover ($6.8 billion) in the US in 2019.
Visa said it created the Advanced Identity Score to reduce the amount of digital identity fraud.
The company described Advanced Identity Score as an effort to combine “Visa’s artificial intelligence and predictive machine learning capabilities with application and identity related data to generate a risk score for new account applications to help reduce fraud, prevent negative impact to brand loyalty and trust, and eliminate operational costs due to remediation.”
“Visa’s mission to connect the world and enable individuals, businesses, and economies to thrive is more important than ever with COVID-19 affecting communities and all parts of the economy,” said Melissa McSherry, senior vice president and global head of Data, Security and Identity Products and Solutions at Visa, in a statement.
“As consumers, financial institutions and merchants focus on controlling expenses during uncertain times, the cost of new account fraud in terms of money and time lost can be significant,” McSherry added. “Advanced Identity Score offers financial institutions a powerful tool to use on top of existing systems and processes to prevent identity related fraud. This is the latest example of the value that Visa brings with its scale and expertise in combining data with AI to deliver advanced services that benefit participants in the digital economy.”
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According to Barrett, application fraud directly affects a financial institution’s profitability, its customer experience, and its uncollectible debts. It also affects the average time a US cardholder needs to spend resolving new-account fraud, which is now up to 15 hours, Barrett added.
The fraud loss and operational costs of remediation leads to a poor customer experience, reputational risk and direct impacts on revenue.
“Our customers not only wanted a solution that focuses on security and customer experience but really built in some of the regulatory requirements in order to make credit decisions and minimize the friction associated with onboarding and underwriting a new account across all of their delivery channels,” Barrett said.
“In a lot of ways, what we have tried to do is ensure the solution we’ve provided is brand agnostic. It’s not just looking for Visa cards specifically but really looking at the consumer overall to ensure that their identity information has not been compromised or there are suspicious activities associated with it.”
Right now, most financial institutions have to use a variety of different tools to address identity fraud and these often make life difficult for customers while also producing a number of false positives.
The Advanced Identity Score harnesses Visa’s artificial intelligence expertise and combines it with a comprehensive data set that issuers can use to predict application fraud. The system provides a two-digit score that is then passed on to financial institutions that are requesting information within their underwriting process.
Barrett said the Advanced Identity Score is the only fraud solution harnessing virtually all US approved/declined bank card application data and account level fraud data to detect and prevent potential fraud.
With the Advanced Identity Score, financial institutions can potentially decrease the number of new accounts opened with stolen identities, protect consumers against synthetic ID or account takeover fraud, and help eliminate a poor customer experience.
Visa said its artificial intelligence system pores through data points like fraud and suspicious activity, bankruptcy data across consumer identity elements, and application velocity while also using information from third-party data providers, law enforcement agencies, government agencies, and self-reported data from consumers.
One of the ways the Advanced Identity Score reduces friction is by improving confidence, Visa said. Financial institutions struggle with the losses stemming from account fraud, identity fraud and bust outs, which are when people max out a credit card with no intention of paying, according to Barrett.
“Being able to optimize the new account opening process will allow financial institutions to confidently advance good applications through an automated fashion while also ensuring that they can minimize the number of manual verifications and certainly automate portions of their declines as well so they can be a bit more confident,” Barrett explained.
She added that the system also allows the issuer to provide information so that the consumer can contact an institution to find out what’s in their consumer report and ensure that if they are a victim of identity theft, that they get information as quickly as possible.
Issuers will ideally use the system before pulling information from credit bureaus, allowing them to save time on applications from people who have already been tied to fraud or suspicious activity. Within a few seconds, issuers get responses back on queries that include all of a person’s past activity.
“With more than 14.7 billion data records breached since 2013, many of which include sensitive data such as name, tax ID number, and address, new account fraud has been a consistently growing challenge for financial institutions,” said Julie Conroy, research director of Aite Group, in a press release.
“Financial institutions are looking for solutions that can help effectively detect synthetic and stolen identities at the time of application. The consortium data and sophisticated analytics that power Visa’s Advanced Identity Score promise to make it a valuable addition to financial institutions’ control framework.”