It’s a cliche, but that doesn’t mean the phrase is any less true in payments: indeed, time truly is money. So when ID verification processes, beyond being expensive and technologically complex, are also time-consuming, the amount for services rendered shown on the invoice belies true costs. IDology CEO John Dancu explains how transforming ID verification can reduce those costs, and furthermore turn ID checking into a revenue generator.
Dancu participated in a full-on Q&A with PYMNTS.com this week. See what the CEO had to say about the expanded costs of manual ID verification; the benefits of automation; and how prepaid and mobile in particular can benefit from some new innovations.
PYMNTS.com: Let’s start off by setting the baseline: what’s the typical ID verification experience like for consumers at places without automated solutions?
JOHN DANCU: Not having an automated id verification solution in place creates a poor customer experience. Without automation, the verification happens through a manual process. Consumers might have to fax in documentary evidence such as copy of a utility bill or driver’s license which is cumbersome and inconvenient. Businesses might also reach out to their consumers by phone, or in the case of business owner verification, other nearby businesses to verify the business and its owner, conduct extensive internet searches and more. All in all, manual verification processes are time consuming for both parties, slow down the business rate and make it harder to stop fraud.
PYMNTS.com: What has IDology done to transform this experience? What’s the technology, and how has the consumer experience changed?
JOHN DANCU: IDology has transformed this experience by offering solutions that quickly and easily proof an ID to see if it’s real and can also determine if someone is who they claim to be. This is done through our ExpectID product suite, which provides a comprehensive identity verification solution to CIP pass individuals and will automatically escalate transactions to a higher level of verification, referred to as knowledge based authentication or out-of-wallet questions, when needed. We have transformed the identity verification market because we give our customers all the control to manage their process based on their level of risk. We provide a flexible rules-based engine that gives business owners an easy way to escalate transactions. This provides the business with more opportunities to approve identities without increasing processing times or requiring manual reviews. And the consumer experience is more user-friendly compared to having to fax in a copy of a utility bill or some other sort of documentary evidence.
PYMNTS.com: For people that are familiar with CIP, talk about the impact IDology’s products have had on CIP compliance.
JOHN DANCU: Every business, especially in the prepaid card industry, has different risk tolerance levels and identity requirements that need to be met to be considered a “pass.” For example, a business might have higher requirements for different programs or channels or issuing bank rules. Our solution is designed specifically to help businesses manage the identity verification process based on the different risk tolerance levels within their company. We believe in giving businesses the tools they need, along with best practices advice, to manage and change their verification processes as their market demands change. Based on our unique escalation features, our customers can apply different levels of verification, including dynamic knowledge-based authentication, to match the level of risk involved. Being able to match the level of risk is really important not just for compliance sake but to prevent fraud. Because we have a lot of fraud analytics available within our product, our solutions go beyond CIP to also help reduce fraud. The overall impact has dramatically improved the approval rates associated with CIP while minimizing the amount of manual review required to pass these consumers and stopped fraudulent transactions.
PYMNTS.com: I’ve seen IDology partner with a lot of prepaid card providers as well. Is CIP automation a big part of that niche?
JOHN DANCU: Yes, it is a huge part. For many prepaid card providers the focus is on approving more cards at a faster rate while also meeting the different compliance regulations of their issuing bank. IDology’s solutions help companies in the prepaid market to grow their cardholder members by verifying the identity of those applying for a card in a quick and easy way. IDology’s solutions are designed specifically to address the thin file demographics of the prepaid industry. Because of this, we find more people than other identity verification services and thus issue more cards. Our goal is to bridge the divide between compliance and revenue by helping program managers comply with their issuing bank’s rules without slowing down the rate of approvals.
PYMNTS.com: For merchants who sell big ticket items that need verification services, what does IDology do in that space?
JOHN DANCU: We have several merchants using identity verification in their own business to reduce the amount of fraud in their business. Whether it’s at the point of sale or within a fraud department, incorporating identity verification process for big ticket items, merchants are able to stop shipments based on suspicious activity to reduce their losses. Our solutions go beyond basic address verification or identity matching technologies. Our analytics and fraud prevention features allow merchants to understand specific identity attributes and make smarter, faster decisions on how to handle a transaction.
PYMNTS.com: How does the rapid proliferation of mobile payment services impact the ID verification space?
JOHN DANCU: Mobile payments are impacting the identity verification space in two ways. The first is being able to provide merchants with a solution that works across all of their consumer-not-present channels, including mobile devices. All of IDology’s solutions can be deployed through a mobile device – even presenting out of wallet knowledge based authentication questions to consumers on a smartphone.
The second impact relates to the underwriting process of merchants applying to be able to accept mobile payments. Merchant acquirers must meet all the compliance regulations of CIP and OFAC for their applicants. And they need to be really careful of fraud since the merchant acquirers assume the financial responsibility of the transactions the merchant initiates into the network. IDology’s solutions can be integrated into the online account verification process to verify new merchant accounts and provide the opportunity to escalate to knowledge-based authentication when necessary. IDology’s knowledge-based authentication solution is used to present a real-time dynamically generated quiz to determine someone is who they claim to be. As a result, acquirers are able to process more applicants, reduce the amount of fraud and lower their overall underwriting costs.