Axing The Faxing: How One CU Improved the ID Process
OCEANSIDE, Calif.-Members at Pacific Marine CU here were sometimes locked out of their accounts for weeks if they forgot their account information.
"Members would call asking for sensitive information, and if we weren't confident we were speaking with the actual member, we'd have the member fax a written request with a copy of identification," said Kate Baker, member solution center manager at the $617-million credit union.
But faxes often spelled doom for the relationship, she said. "Members may not have access to a fax or a scanner or someone acting as power of attorney. It could take them weeks to fax us. When you put up a roadblock such as a fax, the member is going to go somewhere else for their financial needs."
Alternatively, members could show identification at a branch, Baker said. But with Pacific Marine's combination of 70% military and 30% civilian membership spread across the world, a branch visit was inconvenient to impossible.
In 2008, Pacific Marine axed the fax as the primary means of making sure who's on the other end of a call. The CU began verifying member identity by asking out-of-wallet questions, reserving the burdensome fax process for extreme cases.
The questions, including "What pet insurance do you have?" or "With whom did you live in 2004?," as well as some red-herring questions, are automatically generated by a risk-based member authentication tool, Knowledge IQ, part of the Precise ID risk management solution from Experian.
With about 1,000 calls per month requiring identity verification, the member solution center has saved about 500 hours per month in fax labor after switching to the challenge question approach, Baker said.
When a person calls a CU representative asking about sensitive information, Precise ID factors in the particular member's credit and non-credit data, scores and analytics as well as Pacific Marine fraud policies. The platform then calculates a fraud risk score and produces out-of-wallet questions.
"The questions are based on best practices in fraud separation," explained Matt Ehrlich, senior product manager, fraud and identity solutions group, decision analytics, Experian. "We go through categories of questions - and questions within those categories - that let the good guys through but are toughest to answer for a fraudster."
At Pacific Marine, Knowledge IQ presents call center representatives with three multiple-choice challenge questions, which they use to verify caller identity, said Baker. "If the caller gets any wrong, Knowledge IQ gives us two additional challenge questions. The caller has to answer three out of five correctly." Questions can be weighted according to difficulty, she said.
Precise ID then delivers an authentication decision. Precise ID authentication normally is a "slam dunk," Baker added. Even when the Precise ID decision is a "pass," the CU reserves the right to request fax verification if there's any question about identity. Fax or in-person verification is still required for about 5% of calls, she said.
Pacific Marine also uses Precise ID for online account openings and adding joint account holders online - and for any wire transfer over $3,500 and Western Union over $1,500, Baker said.
"If we'd had the luxury of running fraudsters through Knowledge IQ years ago, we might have been able to stop part of a pretty big Western Union fraud case," she said.
Experian works to bolster the effectiveness of Knowledge IQ by adding data to the question source pool, said Ehrlich. "We work in conjunction with Pacific Marine to evolve. Currently, we're working with clients to see if they might provide transaction-based information or last-time-and-date accounts-accessed information as the source for out-of-wallet questions."