Social media as ID verification

As our world becomes more connected through technology, financial institutions and retailers are seeking new ways to expand their user base across borders. To do this, ID verification and risk management become a key part of identifying the right consumers.

But what do you do if a potential customer lacks traditional ID verification items such as a driver’s license or credit rating? Social media profiles might be the answer.

Veridu, a London, U.K.-based ID verification company with offices in Brazil and Denmark, provides companies with an API-based service that enables financial institutions and retailers to base risk-assessment decisions on a potential user’s social media profiles.

Rasmus Groth, the founder and CEO of Veridu, told Mobile Payments Today that financial institutions and retailers can use the company’s ID verification system in the customer on-boarding process or as a risk-management tool to flag potential fraudulent transactions. Groth argues social media profiles can be a better verification method than asking people to scan documents or ID cards, which he believes can be easily faked.

“In our book, a lot of the identity verification methods going on right now are basically a circus and just pretending to make it safer,” Groth said. “We think this is a really elegant way to enable users to identify themselves and get access to more merchants and to reduce the merchants’ risk of dealing with more customers.”

Risk assesment

Once a financial institution or retailer integrates Veridu’s API into their online or mobile channel, they can ask potential users to sign into a combination of social media networks such as Facebook, Twitter, and LinkedIn

Veridu rates the profiles collectively using a number system between 0 and 100. Theoretically, a higher score means that the potential user is who they claim.

“The way we gear the service is that 57 percent is what we consider a normal, trustworthy person,” Groth said. “Anything below 50, we think something might be off. There’s always a balance.

“It depends on what kind of service you have. If you’re primary concern is making enrollment or on-boarding really easy, you set thresholds quite low in the beginning, but later you can have the person reverify their identity.”

Mobile environment

Payfriendz, a U.K.-based person-to-person payments mobile app similar to Venmo, currently is testing Veridu’s system as a risk-management tool for funds transfers. The company’s app is different from Venmo in that it allows a user to store acquired funds in a wallet within the app without the need to transfer money back and forth between a linked bank account.

Payfriendz eventually wants to use this feature to enable users to pay merchants with funds from the wallet, according to co-founder and CEO Volker Breuer.

Breuer laid out a scenario in which Veridu’s system would be a handy tool to have in a company’s risk-management arsenal:

“For example, you top up the Payfriendz account with 100 credits, then, in the next minute, you want to withdraw it. That transaction would get flagged by our risk management engine. You [as a company] can either cancel it, [have an] agent [manually] look at it, or use Veridu in that situation to make sure that is the person who they claim to be and wants to do that transaction.”

Once live, Veridu would sit side-by-side with other risk management tools Payfriendz uses to prevent fraudulent activity.

“It’s another layer of risk management and comes in handy since we’re targeting a younger audience,” Breuer told Mobile Payments Today. “Our main target group is U.K. students. For them, sharing social media profile information is normal, so it works nicely in this context for us.”

While Payfriendz’ use of Veridu for risk management would be limited to the U.K. once it’s live, Groth’s vision for his service is that it can be a tool financial institutions and retailers use to reach new, legit customers in countries such as Africa, China, and Russia.

“The most important thing about it is, not so much the fraud, but treating the 99.9 percent of good users better,” he said. “It’s annoying for everyone to be treated like a potential fraudster.”

Photo courtesy of Marco Paköeningrat.

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