Is the end in sight for paper-based verification?
While the cost of identity fraud reached almost £2bn last year, CIFAS estimates that account takeover fraud - fraud when someone uses another individual's identity to commit fraud - is up around 150% over the past 12 months due in part to the credit crunch. Fraudulent applications for credit are costing lenders huge sums and cracking down on these applications is vital to minimising risk. But for many lenders, the price of verification can seem prohibitive.
And indeed paper-based verification is a significant expense, costing on average around £25 per application and taking up to two weeks to process. It's for this reason that new electronic verification has been so eagerly adopted by lenders - the cost drops to a few pounds and the checking process time is dramatically reduced, lessening the risk of 'losing' customers in the two-week window.
The process of carrying out ID checks can be split in to two parts 1) the Identity check is a method of proving an identity exists and 2) the verification check is a method of proving the person owns the identity. Until very recently, electronic ID solutions have mainly been used to complete the first stage of this process which confirms the Identity exists. The second stage of the process which is needed to verify the person owns the identity is still predominately done using traditional paper-based methods, for example a letter sent to the applicant at their home address. However, developments in technology now mean that robust identity and verification checks can both be done in a single electronic search. This method uses robust data sources to confirm the identity exists and then matches bank account or credit card details to the applicant's name and address to verify the person owns the identity. The whole process can be done instantly real time, saving significant time and cost. And the future looks promising. The ultimate goal, which is certainly achievable, is to employ an end to end electronic verification process and do away with the need for paper checks altogether.
This is a dramatic step in speeding up the approvals process and will mean significant cost savings for lenders and retailers.
Comment: John Cannon, verification expert, Callcredit
• Callcredit (www.callcredit.co.uk) is the UK's most innovative, state-of-the art credit reference agency, with an extensive range of information and value added services for businesses and individuals.
• Callcredit Check provides consumers with online access to the details of their credit file at www.callcreditcheck.com
• Callcredit has harnessed state-of-the-art information technology with an unrivalled knowledge of the industry's needs to develop a range of innovative information solutions. Solutions that are enabling major lenders and a host of other blue chip companies to address regulatory requirements, make better credit decisions, target new customers more effectively and manage existing customers more profitably.
• Callcredit is one of six core businesses that form the
Callcredit Information Group. The other five are:
• Database management company EuroDirect
• Market analysis firm GMAP Consulting
• Online payment service provider, Legatio
• Scorecard development and affordability assessment specialist DecisionMetrics
• Marketing services and database specialist, Broadsystem
• Following the publication of Sir James Crosby's report, Callcredit has joined forces with the other two UK credit reference agencies to offer expert advice for victims of ID fraud. This joined up approach will mean that victims can contact Callcredit who will then alert the other two agencies to the fraud on their behalf. Our ID fraud team will also work with victims to contact all lenders and ensure that fraudulent information is removed and the consumers' credit history is fully restored.