What is Multi-Factor Authentication?
Answer: With the increasing electronification of business, it is easier than ever to obtain another person's identifying information, and perpetrate identity fraud. To detect fraudulent or stolen identities and stem the increasing tide of losses due to identity fraud, financial institutions need to employ systems that will enable them to stay one step ahead of potential frauds. Implementing a multi-factor authentication process, performed upon the opening of a new account, can help to accomplish this. Multi-factor authentication consists of verifying and validating the authenticity of an identity using more than one validation mechanism.
Generally, this is accomplished by verifying:
- Something you are, in the form of identifying information, or biometric identification, such as an iris scan or a fingerprint.
- Something you have, for example a driver's license, or a security token.
- Something you know, such as a password or pin number.
This is not a new concept-it has been a cornerstone of cryptography for centuries. Today, multi-factor authentication is used in numerous applications, from ATM cards that are secured by Personal Identification Numbers (PINs) to websites that are protected by digital certificates and passwords. However, this concept has yet to be widely applied when it comes to opening new accounts.
Many institutions use an automated system to validate and verify applicants' identifying information. This is a highly effective means of mitigating fraud risk, but as fraudsters become more sophisticated, the means of detecting and preventing identity fraud need to keep pace. An example of multi-factor authentication at the new accounts desk would include performing the following:
- Credential validation - The ability to read and validate information encoded within the magnetic stripe and barcodes of government issued identification.
- Identity screening - A system to perform positive and logical verification of furnished customer data.
- Fraud detection - Comparing customer information to negative files, both internal and external from across industries, which represent known and/or attempted frauds
By employing multi-factor authentication, financial institutions can lessen vulnerabilities in the account opening process, making it more difficult for those with fraudulent intent to access our nation's financial system.
