2020 Market Guide for Identity Proofing and Affirmation
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Signals and Compliance: Addressing the Problem of New Account Fraud

By Dean Nicolls | May 29, 2020
New Account Fraud: Addressing the Problem

New account fraud isn’t new, but it’s fast becoming one of the biggest problems in the digital banking era, costing the financial services industry billions each year. In fact, 48% of all fraud value stems from accounts that are less than a day old (according to RSA Security) and Experian’s 2020 Global Identity and Fraud Report found that 57% of businesses report higher fraud losses associated with account opening and account takeover than other types of fraud.

This is a problem that must be addressed from many different angles.

There are 15 red flags that banks can watch out for when a new customer is opening an account, according to the Association of Certified Fraud Examiners, such as mismatched names and addresses. That’s why organizations need to adopt a risk-based approach and leverage a number of fraud signals. Naturally, our value prop here at Jumio is based on the capture of a user’s government-issued ID (e.g., passport, driver’s license, ID card) and a corroborating selfie.

But sometimes additional data points are needed.

Address services, including address validation and proof of residence, equips financial service organizations with an improved ability to uncover deeper data relationships in real time by confirming the existence of a given address and/or confirming the subject actually lives at the address captured on the photo ID. At Jumio, we offer two flavors of address services:

  • Address Validation: Determines if the address extracted from a government-issued ID exists in the real world.
  • Proof of Residence: Checks to see if the person being verified actually lives at the physical address extracted from their ID document. In the U.S., if the user moved, we would return whether the address provided matches the most recent address on file.

These services help bankers and their underlying systems become more efficient and smarter while also delivering some other compelling benefits:

  • Meet Compliance Mandates: Some regional regulations require you to validate addresses and establish proof of residence using independent public sources. This is especially helpful in the UK where Financial Conduct Authority regulations require FIs to collect two different documents (one for ID and one for address).
  • Properly Formatted Addresses: Jumio returns a valid and standardized address which ensures that only valid billing and shipping addresses are captured and used in your systems. With this, you can help ensure that any future communications to the new customer by regular mail, such as billing and special offers communications, will be delivered to the intended person on time. This is especially helpful since one out of every six families moves to a new address every year.
  • Single API: Instead of integrating multiple APIs — one for identity verification and one for address validation — you now just use one API.

Here’s how it works:

    1. Extraction: Jumio extracts the user’s address via OCR and informed AI from the photo ID document through one of Jumio’s identity verification services.
    2. Validation: Jumio checks the address against a number of trusted data sources (e.g., USPS, Royal Mail) to properly format and ensure that the address exists in a given jurisdiction.
    3. Normalization: Jumio returns a properly formatted, standardized address, via API, that is compatible with postal authorities.

The most comprehensive way in which to combat new account fraud without negatively impacting the end user experience is with a holistic, multi-layered approach to onboarding. The combination of identity verification and address services helps organizations corroborate digital identities, combat new account fraud and keep their CRM data clean.

Organizations want to have higher levels of assurance when they onboard new customers, but this is becoming increasingly difficult with increasingly sophisticated fraud tactics. Layering in address services helps triangulate a user’s digital identity with higher levels of assurance.

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This content from Jumio is for general information purposes only. Please consult your legal team for advice regarding your particular situation.

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