The Importance of Identity Data


By Aaron Press, Director, Payments at LexisNexis Risk Solutions

According to the LexisNexis® True Cost of FraudTM study, identity and address verification is the most frequently cited challenge in fraud management.  That probably does not come as a surprise to most fraud managers.  Also not surprising is that when merchants are concerned about identity and address verification they are more likely to conduct higher levels of manual reviews.  That shift in behavior has some unintended consequences.

First, manual reviews drive personnel costs.  Worse, the study also found that as many as 35% of transactions rejected by manual reviewers are actually legitimate.  That drives up the cost – more time spent on reviews, money left on the table, and lost customer relationships.

Solving this problem starts with integrating good identity data into the fraud management workflow.  Identity data is a critical form of “external” data – information about people the merchant has never seen before.  Using robust data, identities and addresses can be evaluated not only for accuracy, but also for risk.  For example, it may be helpful to know how often a person changes addresses, how many people live at an address, or if the address is a residence or a commercial building.  This is especially important when billing and shipping identities are different, allowing the system to look for links that indicate strong connections, such as family, or weak connections, which may indicate fraud.

In an ideal scenario, identity validation and risk assessment should be automated and fully integrated into the fraud management workflow.   When manual reviews are necessary, however, it is critical to use the best tools with the most complete and accurate information available.  “Free” address or telephone look-up web sites are usually unverified, and often inaccurate, meaning they end up costing time and money.  Investing in high quality, fully integrated data will pay off with better, faster decisions that ultimately cost less.