Using Vendor Verification to Fight Payments Fraud

Jul  08 
Matt Jasper  Director of Product Management, Aggregation & Information Services, Fiserv 

What government organizations should watch for and what they can do about it

The incidence of fraud is on the rise in the payments arena. The rapid digitization of numerous payment-related processes, accelerated by the COVID-19 pandemic, has increased the prevalence and risk of fraudsters using identity-theft and account-takeover methods to defraud government organizations.

According to the FBI Internet Crime Complaint Center, SIM swapping, an identity theft attack that leaves fraudsters in control of an individual’s mobile phone number, grew more than 1500% from 2020 to 2021. Payments Journal reports that account-takeover fraud losses have grown from approximately $4 billion in 2018 to over $12 billion in 2021.

A proactive response is needed to counteract this illegal activity.

The Anti-Fraud Two-Step

Whether the intent is to pay a vendor or an individual, organizations can minimize fraud risk by implementing systems, processes and controls that validate payee identities and bank account ownership as a standard operating procedure prior to processing payment transactions.

There should be a two-step procedure. Verification of the identity of the recipient is a strong first-step; but it should be complemented by authenticating ownership of the recipient’s target bank account to provide end-to-end fraud risk mitigation in the payment process.

Comprehensive Identity and Account Ownership Verification

The Fiserv approach to this process is to use industry data sources to help ensure the identity of users interacting with your systems. Requiring successful identity validation, prior to payment processing, increases your organization’s operational efficiency while mitigating risk. In the event a user’s identity cannot be validated automatically, top U.S. financial institutions trust Fiserv to manage appeal and escalation processes to help ensure payments are successfully completed.

But establishing a valid identity isn’t the end of the story; confirming ownership of a valid bank account, which is linked to that identity and owned by that same person, is critical to minimizing fraud. VerifyNow™ from Fiserv, our verification solution, confirms ownership of the payee’s bank account seamlessly. In up to 95% of cases, account verification can be completed automatically with no intervention from your staff, using the following methods:

Instant Verification. Through internal data sets and partnerships with industry-leading third parties, Fiserv uses data provided directly by financial institutions to authenticate account ownership and verify status, working in the background with no user interaction. Instant verification can significantly increase authentication success while reducing the opportunity for fraud by protecting against common attacks, such as the use of stolen or closed accounts.

Real-Time Verification. Fiserv is a service provider to the largest financial institutions in the U.S. Because of this relationship, VerifyNow is able to perform real‑time account verification by comparing account data entered by an applicant with data collected from the financial institution that services the account. This industry-standard technique, which leverages consumer consent and their own access to their bank’s website, offers a safe and secure way to verify account ownership for over 90% of U.S. bank accounts.

Trial Deposits. The small subset of accounts that cannot be verified through real-time and instant verifications can be managed through trial-deposit verification, which validates the applicant’s access to the account. When an accountholder initiates trial-deposit verification, Fiserv makes two small, trial deposits to the external account. The accountholder is instructed to confirm the amount of the two deposits.

Efficient Payments, With Peace of Mind

Fraudsters have become shrewder and more resourceful than ever, and their payment-related attacks are on the rise. The use of verification solutions, such as VerifyNow, results in streamlined verification of identity and account ownership prior to payment processing, minimizing the risk of fraud and improving your payee experience.