Out of Wallet or Out of Touch?
These days, having your wallet stolen is far from the worst that could happen. Having your data stolen, on the other hand, could cause irreversible damage. That’s why the age-old, familiar process of using out of wallet questions to authenticate a consumer’s identity has rapidly become irrelevant. It’s built on the assumption that all of a person’s most valuable information is stored in their physical wallet, which is simply no longer true.
Problems with Out of Wallet Questions
Historically, banks and lenders have used a set of challenge questions, or “out of wallet” questions, to validate whether a person is who they say they are. The idea is that the answers to these questions, such as “Which street did you live on in 2002?” or “Out of these four addresses, which one does not belong to a family member of yours?”, are answers that only the real person would know. They’re not answers that a fraudster could glean from a stolen wallet.
The problem with this form of knowledge-based authentication is that fraudsters have long since evolved past stealing a person’s wallet. Identity thieves can quickly and easily gain access to a victim’s social media history and public records to find out the answers for themselves. Or, failing that, they can use an email or SMS phishing scam to get the victim to reveal the answers.
On the other end of the spectrum, out of wallet questions also create excess decline traffic when consumers fail to remember the correct answers. Often, the questions are either generated from outdated credit bureau data or merely too obscure for consumers to know off the top of their heads. In this case, a consumer is then falsely denied the loan they need.
A Better Solution than Knowledge-Based Authentication
It’s time for lenders to get smarter. Luckily, it’s not only identity thieves who are evolving; solutions are, too. Utility bill data, for instance, has become an unlikely hero in identity verification. Automated access to utility data through the Urjanet platform is third party verified. It involves minimal effort on behalf of the consumer – all they have to do is provide their credentials.
Utility data as an ID verification source eliminates the issues that arise from knowledge-based authentication. And it not only prevents fraud from identity thieves, but fraud from potential borrowers as well. With data pulled directly from the utility provider, consumers have no opportunity to alter or fabricate their account details and payment history.
The race for a fast and secure solution to prevent fraud is accelerating, and those who hesitate to innovate will quickly be left behind. Check out our solutions sheet to learn more about how the Urjanet Utility Data Platform works to empower identity verification in a digital age.
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About Amy Hou
Amy Hou is a Marketing Manager at Urjanet, overseeing content and communications. She enjoys writing about the latest industry updates in sustainability, energy efficiency, and data innovation.