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Getting to ‘Know Your Customer’ in New Ways Promotes Trust and Prevents Fraud

businesswoman with question mark on paper hiding her face
Glenn Harrison Photo
Contributing Writer
Lisa Hochgraf Photo
Senior Editor
CUES

3 minutes

IDology’s flexible quiz product taps deeper insights for online ID verification.

By now, most folks who do any banking online have seen warning after warning—often from their financial institution—not to divulge personally identifiable information online (looking at you, Facebook “Answer these 10 questions” quizzes). So, shouldn’t people applying for accounts or products via your web branch hesitate if the application system prompts them to confirm data about previous loans, credit cards, former addresses and the like?

These mini-quizzes serve a critical function: exposing thieves who’ve stolen your identity but don’t have access to key information that generally isn’t publicly available. But they can have a couple of significant side effects:

  • Each additional step in an online application process makes it more likely that applicants will drop off.
  • Questions related to your credit history may look to consumers like an attempt at identity theft rather than identity verification.

Heidi Hunter, VP/product innovation for IDology, an ID verification solutions provider based in Atlanta, spoke with us about a tool and a tactic that can help credit unions sidestep these side effects and guide legitimate online applicants to the finish line.

Secure But Easy to Use

IDology added the Flex API tool to its ExpectID verification solution in August 2021. The tool asks the member a series of questions about their identity—but not the usual questions, says Hunter.

“It's different than a standard quiz you might get from a credit bureau, such as, ‘What's the amount of your mortgage?’ ‘How many people under the age of 18 do you have in your home?’ ‘Who's your auto loan with?’” she says. “We’re not basing these questions on your credit history. We’re not going to ask you about your credit card account, auto loan, etc. We’re going to ask other questions that are relevant to your history as a consumer in the United States.” For example, you may see a list of names and be asked to choose which of those people you know.

IDology algorithms pull from a wide range of databases beyond credit reports, and the sources are continually adjusted and updated to stay ahead of fraudsters’ data mining techniques, according to Hunter.

“There’s deep information there that can be tapped to give deep insights into the person’s background,” she says. “The premise of our questions is that you can’t answer just by stealing someone’s wallet or because you stole their identity.”

Don’t Frontload Friction

In addition to using a broader source for quiz questions, your verification tool can be more effective if the quizzes are deployed only when the transaction poses a high enough risk, Hunter points out.

Presenting every user with a quiz—and/or doing so too early in the process—often increases your online application dropoff rate, she adds. For example, you may want your system to administer a quiz only when something else about the applicant triggers a red flag.

According to IDology's 4th Annual Consumer Digital Identity Report, published in October 2021, 82% of consumers feel it’s “extremely” or “very” important for them to be able to trust a company to effectively and smoothly verify their identity during new account opening experiences.

Hunter says that too often credit unions add too much friction at the start of the application process. Instead, “it needs to be applied as the member moves along and as risk indicators are found,” she says.

On the other hand, you may decide that because certain products or accounts require higher levels of security, or because of compliance requirements, you need every applicant to complete the quiz.

“If it's a higher-risk channel, the credit union stands to lose more, so they set up high-risk orchestration,” Hunter says. “That puts a little bit more friction on the process to make sure only legitimate applicants get through.”

Glenn Harrison writes for Credit Union Management from Stoughton, Wisconsin. Lisa Hochgraf is senior editor for CUES.

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