Prioritise contact data quality for effective fraud prevention

Financial crime remains a big issue with $3.1 trillion of illicit funds flowing through the global financial system in 2023, according to Nasdaq’s 2024 Global Financial Crime Report.

It’s no wonder that most in financial services are investing heavily in advanced ID verification technology to protect themselves from fraud and meet increasingly strict Know Your Customer (KYC) and Anti-Money Laundering (AML) regulatory standards.

However, more needs to be done to bolster their ID verification efforts. The best way is by improving customer contact data quality from the outset.

Why contact data quality is important

In our experience the quality of contact data is critical to the effectiveness of ID processes, influencing everything from end-to-end fraud prevention to delivering simple ID checks; meaning more advanced and costly techniques, like biometrics and liveness authentication, may not be needed.

Having accurate customer contact information, such as name, address, email and phone number, makes the verification process more reliable. With this data ID verification technology can confidently cross-reference the provided information against official databases, or other authoritative sources, without discrepancies that could lead to false positives or negatives.

A growing issue is fraudsters exploiting inaccuracies in contact data to create false identities and manipulate existing ones. By maintaining clean and accurate contact data ID verification systems can more effectively identify suspicious activity and prevent fraud. For example, inconsistencies in a user’s phone or email, or an address linked to multiple identities, could be a red flag for extra scrutiny.

Address verification - the foundation of contact data quality

Address verification – having a consistently accurate, standardised address - is typically recognised as the cornerstone of contact data quality. It’s because having access to up-to-date customer addresses makes it much easier to match and verify identities across multiple sources.

As a result, verifying the accuracy and legitimacy of an individual’s address should be the first step in any identity related process, with any discrepancies between a claimed address and official records highlighting a potential fraudster.

By identifying these inconsistencies early ID verification technology can help to mitigate risks, making sure only legitimate users are granted access to services, thereby protecting both their business and customers from fraud. 

Additionally, address verification plays an important role in regulatory compliance, by ensuring that the address information provided meets KYC and AML regulatory standards.

Email and phone verification

As I’ve briefly mentioned, it’s not all about having an accurate address when it comes to effective customer verification. The role of phone and email verification is also vital as part of a comprehensive ID verification process, and therefore in preventing fraud. Particularly early on in the process when it comes to helping organisations to identify and mitigate possible fraudulent activity. The ability to verify all three contact channels contributes to enhanced security by filtering out fake or high-risk contact information, improving the accuracy of the ID verification process.

Email verification involves analysing various elements such as the age and history of the email address, the domain and syntax, and whether the email is temporary. This is important because new and poorly formatted email addresses are often tell-tale signs of fraudsters. Furthermore, the association of a single email with numerous accounts could highlight criminal activity. It’s only by checking if an email address exists and works, then examining those factors that I’ve already mentioned, that organisations can identify possible high-risk indicators.

Equally important for fraud detection is phone verification. By verifying the type and carrier of the phone number, organisations can identify high risk numbers, like those associated with VoIP services, which are frequently used by fraudsters.

Examining the validity, activity and geolocation of a phone number also ensures it’s not only functional, but consistent with the user’s claimed location. And like with email, a single phone number linked to multiple accounts can indicate fraudulent behaviour. 

Use autocomplete / lookup tools for contact data accuracy 

Using autocomplete or lookup services are the best way to obtain accurate customer contact data.

With an address autocomplete tool it’s possible to deliver accurate address data in real-time by providing a properly formatted, correct address at the onboarding stage, when the user starts to input theirs. Services such as these are vital because around 20 per cent of addresses entered online contain errors; these include spelling mistakes, wrong house numbers, and incorrect postcodes, as well as inaccurate email addresses and phone numbers, typically as a result of errors when typing contact information. An additional benefit of these tools is the number of keystrokes required when entering an address is cut by up to 81 per cent. This speeds up the onboarding process and improves the whole experience.

Similar technology can be accessed to deliver first point of contact verification across email and phone, so these valuable contact datasets can also be verified in real-time.

In summary

The accuracy and quality of customer contact data is pivotal to the success of ID verification technology, and therefore fraud prevention. Access to such high quality customer contact data not only enhances fraud detection, but improves the user experience and operational efficiency. Those in financial services must make sure that data verification tools are used across address, email and phone, alongside their ID verification technology.