Identity Detection of the Future: Behavioral Biometrics, Tokenization, and FIDO for Fraud Prevention
When companies use identity data effectively, they deliver a highly personalized, frictionless journey that offers the right products to the right customers at the right time. They’re also able to optimize fraud prevention while minimizing any irritation for customers.
During a webinar, Adam Gunther, Senior Vice President and Senior Technology Officer at Kount, and Tim Sloane, Vice President of Payments Innovation at Mercator Advisory Group, discussed how identity data can be used to smooth the payments process and drive business. They also discussed new trends, including biometric data and tokenization.
Digital Identity and Fraud Prevention
Fraud is often an afterthought, according to Gunther and Sloane.
“We have a saying in our team, that 5% of CEOs have a fraud problem, and 100% of CEOs have a revenue problem,” Gunther said. “Nobody sits around the boardroom focused on how to reduce fraud.”
“Most merchants that handle onboarding of new customers are not thinking ahead of where the ball is going to land,” Sloane noted. “They’re thinking, ‘I just need to open the account and protect the account. And everything will be great. I’ll get to know that accountholder better and better over time, and will use customer data for marketing purposes, for advertising purposes, for engaging, and selecting the right products to show to that customer,’” Sloane said.
Understanding who customers are as soon as they come in and open an account is critical. “The benefit of using identity is that you can start analyzing it sooner,” Sloane said. “Not only to drive revenue but also to start to think about where fraud is creeping in and how to manage that right up front.”
Knowing more about their consumers also allows companies to improve their interactions with them and, as a result, increase customer lifetime value.
By using an inventory of customer data, companies such as Kount can verify customer identities by matching device use information to personal information from Equifax. Kount uses device data that includes order history, IP addresses, email behavior, and other signals. Then, it matches this with Equifax customer data, such as name, address, phone number, employment, payroll, credit history, income, and wealth. The idea is to match a digital identity to a physical identity that has already been confirmed by Equifax.
Gunther described Kount’s identity solutions as a new way of connecting previously separate business wings—marketing and fraud detection. “Bringing in data such as household incomes and different wealth propensity to spend, we get semiannual anonymized data feeds across a number of sources,” he said. “Connecting that data back to the point of purchase, we can help better onboard users and improve how businesses interact with consumers in a variety of ways. We’re injecting identity data across every area of the customer lifecycle.”
Many marketing and fraud detection teams within companies are currently working in silos. And that lack of communication isn’t beneficial to the company. “When you take a look at companies that have full-blown digital marketing teams, it’s amazing how often they’re not connected to the payments or fraud prevention managers that are executing the processes that could help that marketing team—if they only took a look at what they’re doing,” Sloane said. “But quite often, it goes through the silos, and those silos don’t come together.”
The Ever-Changing Landscape
The payments industry is moving toward passive authentication by examining how consumers behave with their devices. “We know how tight you hold the device,” Gunther said. “Corroborated with other data, and signals, we have a high level of confidence in confirming the identity of the customer.”
The way people hold their devices, the speed at which they type, and the way they type are not easily faked, and such attributes can act as “automatic” identifying information. “We expect that behavioral biometrics will have a huge impact on that whole process of identifying the customer from the time they hit your website,” Sloane said. “Biometrics will make it much more difficult to commit fraud and will open new opportunities for marketing.”
Kount is working on combining modern cryptography and data through its new tool, Digital Identity as a Service. In this model, a company confirms a person’s identity once, through traditional means or biometrics, then creates an encryption token on the customer’s device. When a customer uses the device to pay, that token acts as proof of possession of the device.
This approach is part of a broader move away from using passwords to verify identity.
Most people have different accounts online, with various passwords and authentication processes. As a result, customers face problems creating and remembering multiple usernames and passwords. In response to this problem, a group of companies launched the FIDO (“Fast IDentity Online”) Alliance in 2013 as an industry association to help reduce the world’s over-reliance on passwords. The idea is to use voice, fingerprint scanning, facial recognition, or a security key for standardized, password-less identification.
According to Sloane, FIDO is a huge step forward in customer experience and in streamlining identity detection for merchants. Kount is actively involved in the FIDO Alliance and combines FIDO procedures and cryptography to achieve its identity solutions.
By and large, payments companies need to take a more holistic view of identity data, by using more innovative types of information and by taking down the silos that hold data. Wise executives will see that personalized, frictionless shopping experiences are the future of the payments space.