Visa is amping up digital account security with an artificial intelligence tool that helps banks detect fraud from new accounts, the world’s largest payment card network said Monday.
The Advanced Identity Score product is "brand agnostic," which means it can incorporate into almost any bank's system. It generates a two-digit Fair Credit Reporting Act-compliant identity fraud score that helps prevent fraud loss at the point of credit or loan application.
Visa said it is the only fraud solution that can harness nearly all U.S. bank card application data, including that from denied and approved applications, and account-level fraud data to detect and prevent potential fraud, which it says is estimated at $10 billion a year.
“Visa’s mission to connect the world and enable individuals, businesses and economies to thrive is more important than ever with COVID-19 affecting communities and all parts of the economy,” said Melissa McSherry, global head of data, security and identity products and solutions at Visa.
“As consumers, financial institutions and merchants focus on controlling expenses during uncertain times, the cost of new account fraud in terms of money and time lost can be significant. Advanced Identity Score offers financial institutions a powerful tool to use on top of existing systems and processes to prevent identity related fraud."
The risk score is generated using artificial intelligence, predictive machine learning and application and identity-related data. It analyzes areas like the frequency of applications within a period of time, fraud and suspicious activity and bankruptcy data across consumer identity elements.
Data is also gathered from government agencies, third-party data providers, law enforcement agencies and self-reported data from consumers.
Visa designed the product "to help reduce fraud, prevent negative impact to brand loyalty and trust and eliminate operational costs due to remediation," and said it "can decrease the number of new accounts opened with stolen identities, protect consumers against synthetic ID or account takeover fraud, save time and help eliminate a poor customer experience."
With the rise in popularity of digital banking, new account fraud has become a significant and common problem. Credit reporting firm TransUnion said this type of fraud occurs when "a hacker uses another person’s personal information and good credit rating to open an account and borrow money using fake credentials."
"The hacker then borrows as much as they can. After they have reached their credit limit, they move on to open another account with different credentials. In the end, banks end up losing lots of money to defaulters."
U.S. data breaches increased by 44.7% in 2017, according to TransUnion. In 2016, 15.4 million new accounts were noted to have fraudulent activity, which rose to 16.7 million the following year. New account fraud is now the biggest concern in retail banking.
TransUnion said that online channels are a major risk for retail bankers because most cybercriminals can manipulate systems by using stolen credentials to open an account and transact. And Visa said that U.S. cardholders are currently spending an average of 15 hours to resolve new account fraud.
Existing fraud prevention strategies typically use layering and multiple tools to combat identity-related fraud, but are rules-based with gaps and limitations that may create customer friction or false positives, according to Visa.
Effective methods of prevention that banks should adopt moving forward include frequently assessing new account activity patterns across all branches, using predictive models to reveal fraud-related variations, using front-end screening systems and using end-to-end encryption to protect online transactions, TransUnion said.
“With more than 14.7 billion data records breached since 2013, many of which include sensitive data such as name, tax ID number and address, new account fraud has been a consistently growing challenge for financial institutions,” said Julie Conroy, research director of the financial analyst firm Aite Group.
“Financial institutions are looking for solutions that can help effectively detect synthetic and stolen identities at the time of application. The consortium data and sophisticated analytics that power Visa’s Advanced Identity Score promise to make it a valuable addition to financial institutions’ control framework.”