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Why aren’t KBA Questions The Best Practice in Online Banking?

kba questions

Knowledge-based authentication or commonly known as KBA has been used since the dawn of financial services. KBA questions have been used as a key data point by almost all organizations during customer identification programs. Basically, knowledge-based authentication questions are used to verify a customer by asking them to answer a series of complicated questions. These questions are based on customers’ personal information and historical data. These are the kinds of questions that an attacker can’t answer just by stealing personal information like your driver’s license and more.

Questions are usually generated from public and private data sources, credit reports, and government databases.

Here’s an example of the questions:

  • What was the make and model of your first car?
  • What street did you live on in 2005?
  • Which state was your social security number issued?

While these questions may sound extremely secure, the efficiency of the KBA questions has been failing over time. The reason for that is the greater public availability of information and KBA’s susceptibility to fraudulent actors. This is why strong implementation of KYC compliance is crucial.

Why Is KBA Failing Slowly?

At its most basic level, KBA can be easily compromised mainly because of the amount of personal information that is available online. This availability of information can come from two locations such as social media platforms and high-profile data breaches. 

According to studies, with enough research cybercriminals can easily get around the KBA questions as almost all the private information is available online. One simple search engine search with the person’s name can provide fraudsters with a plethora of information. 

More sophisticated fraudsters use technologies that make it easier for them to access information that is usually buried deep. Plus data breaches like the Equifax breach in 2017 make things harder for customers. 

Better Banking Solutions to KBA Questions

A better way to mitigate risks of financial crime is to make use of third-party data solutions instead of knowledge-based authentication questions. A criminal can easily guess, research, or spoof KBA questions, it is much more difficult to create synthetic identities to get around third-party data solutions. 

It is much easier to build an idea of someone’s identity by collecting names, DOB, SSN, address, phone number, and email ID. Fraudsters have the means to gather other information such as browser type, IP address, linked bank account information, etc. By collecting and comparing this information available in public and private sectors, hackers can easily fool KBA questions. 

Unless banks have access to real-time identity and document verification during online account opening, it will be almost impossible for banks to verify all the information during online customer onboarding. By reducing reliance on customers to validate identity through data input, institutions are reducing the weak points that fraudsters can use to exploit. Coupling this strategy with extensive, real-time, third-party cross-referencing is the key to improving compliances and reducing online fraud.

What are the Different Types of Authentication Methods During Onboarding

Verifying customer identity is one of the most crucial parts of the customer onboarding process. KYC and AML regulations are changing the way identity verification methods work. Financial Crimes Enforcement Network (FCEN) is one of many regulatory bodies that are responsible for regulating ID verification in the USA. 

  1. Two-Factor Authentication

Two-factor authentication, also known as multi-factor authentication, is a method where the customer has to provide additional information apart from username and password to access their accounts. The additional information is usually a 6 digit numerical code. This code is sent to users once they click on the login button after entering the username and password. Two-factor authentication is a great option for opening accounts and completing impersonation checks whenever a customer tries to access their accounts. 

  1. Credit Bureau-Based Authentication

Another method of customer identity verification is using credit bureau information about a potential customer. This method of verification relies on gathering information about the onboarding customer from any of the major credit bureaus. This information includes data like name, address, and social security number. It also uses a score-based system to create a perfect match without having to put customers’ personal information harm.

  1. Database Methods

Database ID methods collect data from a wide range of sources to verify any identity. These sources of information are made up of online databases such as social media and offline databases such as government data. 

This method of verifying customers is for assessing the level of risk a user poses. Although this method of verification isn’t exactly secure as it doesn’t ensure that the person providing the information isn’t the one making the transactions, thus this method is susceptible to identity theft.

DIRO’s Document Verification Technology For Secure Verification

One of the best ways to verify a customer during the onboarding process and reduce the risk of future financial crime is by verifying all sorts of documents. Using the latest technological features, document verification can be conducted online on all kinds of documents. 

DIRO’s award-winning document verification service is the industry standard for verifying documents and reducing the risk of financial crime for banks, financial institutions, and other industries. It even helps in diminishing the risk of human error. Institutions just have to log in to DIRO’s secure browser and verify if a document is original or not.

DIRO’s innovative technology does instant document verification and offers 100% proof of authentication. The proof of authentication itself can be used as an original document by users. By utilizing all the technology has to offer, banks, financial institutions, and FinTechs can improve their chances of fighting financial fraud.

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How to Avoid Bank Frauds Using Technology?

Want to know how to avoid bank fraud? Well, the first step is to follow the basic old-school step with a blend of technology. Fraud is a worldwide phenomenon that affects all multiple industries and can even have a severe impact on the economy of a country. Banks need to understand how to prevent bank frauds, which they can’t do without employing the right kind of technology. One of the most challenging aspects of the banking sector is to make sure that all online transactions are free from any kind of electronic fraud. Technological advancement and adoption is the only answer to the question of “how to control fraud in banks”.

By utilizing the power of data analytics, banks can detect fraud in their initial step and reduce the negative impacts of significant losses regarding fraud. This is one of the primary methods how to prevent bank fraud.

The present-day studies indicate that false documentation and inadequate training of employees are the reason for 60% of all banking fraud cases. Most of the frauds in banking institutions are detected through customer complaints or some external tip, which is the case with global banking frauds. To mitigate risks, banks need to learn how to prevent online banking fraud. 

Large and small businesses alike are targets of online bank frauds, it is also called ACH fraud or wire fraud. Once cybercriminals can find a weak point in the banking system, they can create a lot of nuisance before being detected finally. 

Banks, financial institutions, and FinTechs need to understand the need for technology so they can reduce the number of frauds they have to suffer through. If you wish to understand how to prevent online banking fraud, then you need to employ technologies such as DIRO’s document verification technology.

Technologies For Online Banking Fraud Prevention

1. Multi-Factor Authentication

The best step is to start with a multi-factor authentication structure to improve the first layer of security. Financial institutions can’t solve all their problems just by using multi-layer authentication, they need to start from somewhere. One of the major mistakes made by financial institutions is to leave everything on a single solution which makes them more open to being compromised.

If financial institutions can set up a solution like combining old-fashioned phone calls for bank authentication with online two-factor authentication, they can reduce the risk of fraud by a lot. In the old days of banking, calendars were put in place for all transactions across multiple accounts. If someone has the same banking and transaction routine, then any sudden changes would be marked as red flags. 

2. Banks Need to Monitor Transactions

In the earlier days of banking, banks used to have daily limits imposed on their users. The banks used to impose the limit on their mainframe processor, along with file limits and batch limits, this limit would help to spot if there was something out of the ordinary. Usually, banks don’t watch out for any activity under $9,000 which makes it easier for criminals to fraud the banks by conducting activities under $9,000. One of the best ways how to prevent bank fraud is to monitor transactions more carefully.

3. Employ Dual & Triple Controls

Dual controls on the corporate side are the minimum they can do to reduce the risk of online fraud. The ideal suggestion is to use triple controls, where one person initiates the transaction, a second person approves the transaction and the third person finishes it.

If organizations don’t have the right kind of resources or people to follow up with the triple controls, then they need to set up ACH transactions. Businesses can confirm using a phone call if the transaction was initiated by a specific person, once that is confirmed, the transaction can be completed. This can be done using a person or by setting up an IVR. Usually, only one person will have the ID and password to call the bank and complete the transaction which adds an extra layer of security.

4. Raise Awareness Towards Fraud

One of the best ways how to control fraud in banks is to keep educating the customers about the ways they can reduce fraud. The rise of online banking has given rise to a lot of online fraud. Banks and other financial institutions can employ all the technology they want but the real solution won’t happen till customers are aware of the threats.

5. DIRO Document Verification Technology

This is one hardcore technological solution to make sure banks, financial institutions, and FinTechs can mitigate the risk of online fraud. Using the technology, organizations can streamline the customer onboarding process and verify documents to reduce online fraud and money laundering. 

DIRO’s document verification technology can verify documents like bank statements, bank account verification, utility bills, address proof, and student records. During the customer onboarding process, banks can verify customer documents to make sure the customers are who they say they are. Money laundering and terrorist funding can be stopped by verifying customers before they can cause any real problems.

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Types of Bank Account Verification Methods & How DIRO Facilitates Account Verification?

types of bank account verification

Verifying a bank account is one of the most crucial parts of minimizing the risks of fraud and scams for banks, financial organization, or FinTechs. With the technology growing at an incredible pace, ACH transactions are at an all-time high. Bank account verification is crucial during online funds transfers, commonly known as ACH transactions, as it ensures where the funds are coming from and if they are associated with any malicious activities. 

Many businesses are offering online payments as an alternative to payment methods such as credit cards and paper checks. Finding an ideal method of bank verification can be suitable for users as it improves the user experience. 

Using the right methods of bank verification will allow you to mitigate the risks of fraud and scams.

Reliable Bank Account Verification Methods

Banks, financial organizations, and other FinTechs need to employ the methods for bank account verification if they intend to keep their brand reputation intact. Here are the best bank account verification methods to keep an eye out for.

1. Use Micro Deposits Verification

Micro-deposits are deposits of less than ten cents transferred from one financial institution to another that can help in verifying if a specific account type is valid or not. If a bank does not offer the feature of online banking or if the users can’t remember their credentials even then they can make micro-deposits for account verification as it is a self-contained process. 

When using micro-deposit verifications, the user will fill in their bank account and routing information. Two small credits are sent to the customer’s account that will be reflected in 1-5 business days. These amounts will confirm that the user can access their own account. 

2. Instant Account Verification Service (IAV)

The fastest method of bank account verification is by using the instant account verification service from the bank itself. Using instant account verification can even improve your overall user experience. With IAV, a user is asked to choose their bank and submit their online banking credentials to verify the account. In just mere seconds, the bank account is verified and the users can start with their banking features.

3. Third-Party Bank Verification Methods

A check verification service or a third-party bank verification service provides businesses, individuals, or other financial institutions with the ability to check the validity of the account. 

Third-party bank account verification can be done using multiple methods such as checking different databases with negative account history, checking to route and account number is valid or not, orax contacting the bank directly to confirm the information.

How does DIRO improve the Account Verification Process?

DIRO’s technology captures original documents from any web source online. Using DIRO’s technology, users can verify bank account documents (any kind of documents) that can assist banks & FinTechs in verifying bank accounts and reduce the risk of fraud and scams.

All types of bank account verification can be done in seconds using DIRO bank account verification technology. Even the best bank account verification methods can often fail to verify cleverly fabricated bank documents. DIRO verifies the documents against the original web source to reduce the risk of financial crime.