Security & Fraud

Securing 442 Million Points Of Failure

442 million — that’s how many new bank accounts are opened every year — many of them now via mobile. In the latest PYMNTS Data Drivers, Karen Webster and Mitek GM Sarah Clark dig into the ways that mobile ID verification can help secure the 442 million potential points of failure these new accounts represent.

 

442 million. A large number and not the number of tweets sent out reminding you to vote today.

That’s the number of bank accounts opened in the world each year — for which digital identity is important and for which mobile identity can help facilitate that formerly paper-laden process. Given the staggering volume that comes through in the banking industry, it would follow that securing those accounts would be imperative, especially in the wake of the seemingly innumerable data breaches worldwide.

In the latest installment of Data Drivers, PYMNTS’ Karen Webster and Sarah Clark, general manager at Mitek, sifted through what might be done to protect those hundreds of millions (and counting) of accounts, on a large scale and writ small.

“As with every other trend in financial services,” said Clark, “mobile and digital being used as channels to open bank accounts has been growing exponentially … In the next three years, it’s predicted that there will be 1.8 billion mobile banking users. That is 25 percent of the world’s population.”

Carry that surge toward mobile banking and mobile financial services, she added, and identity verification becomes a big challenge. Halfway through 2016 alone, she stated, there had been 974 known data breaches that have affected half a billion people. And those breaches have managed to grab PII that then goes onto the black market, clouding whether the data in verifying bank accounts when they are opened is “good” data after all.

There is, of course, no global standard on identity verification. There is a body known as the Financial Action Task Force, noted Clark, marked by 37 member countries participating, which has been issuing recommendations for AML and other actions. The notion of using an electronic document, said Clark, has been “essentially embraced globally.” Thus, the rise of technology such as Mitek’s, where the camera can be used to scan an identity document and verify it through the use of algorithms. “That is considered to be sufficient,” said Clark, “for KYC and digital identity purposes in general globally.”

Delving into regulation and directives, Webster took note of 4.1, the directive that takes root on Jan. 1 and that lowers the threshold for AML review throughout parts of the EU. For the banks in the EU, Clark noted the aforementioned task force has been focused on AML. Europe’s adoption of the 4.1 initiative embraces several of those recommendations, with coverage of some payment methodologies, such as prepaid cards. The threshold for verification of remittances and the like has been reduced from €2,500 down to €250. Volume will, of course, increase, especially as more people globally use mobile methods to conduct P2P transactions.

One thorny problem lies with providing verification quickly. P2P, as measured as domestic and international payments, is expected to blossom to 1.6 billion transactions in just a few years, said Clark, and those users expect convenience and speed.

The third data point, as offered by Webster: 92 percent. This is the total number of temporary restrictions that were lifted that otherwise would have gotten in the way had Mitek’s solution not been used in the place of manual intervention when, as Webster noted, “there is a lack of certainty on the other end” in the money movement process.

The 92 percent, said Clark, refers to a result seen working with a payment processor needing verification, who switched to Mitek to verify documents in real time. The process that had been previously in place resulted in a decline of six out of 10 users. Simply put, that payments processor’s systems had not covered demographics well.

“Oftentimes,” explained Clark, these mobile-savvy users “are younger users, such as millennials” or underbanked. An optimal solution must be inclusive, and most users do indeed have identity documents. Now, that same processor is able to say “yes” to more than nine of 10 users in seconds or minutes.

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New PYMNTS Report: Preventing Financial Crimes Playbook – July 2020 

Call it the great tug-of-war. Fraudsters are teaming up to form elaborate rings that work in sync to launch account takeovers. Chris Tremont, EVP at Radius Bank, tells PYMNTS that financial institutions (FIs) can beat such highly organized fraudsters at their own game. In the July 2020 Preventing Financial Crimes Playbook, Tremont lays out how.

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