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PROVIDENCE, R.I. – As credit unions expand their online services, the one constant is the need to balance convenience and cost-effectiveness with security and fraud prevention. This is particularly true now that credit unions are starting to allow prospective members to open their accounts online. It’s one thing to authenticate a returning member, quite another to authenticate a complete stranger opening a new account. “Think how easy it is,” said George Tubin, a senior analyst with financial researcher TowerGroup Inc., in Needham, Mass. “A lot of times you get these guys coming in to try to sign up for new accounts. They write that they’re coming from Duluth, but who’s to know? A lot of this type of fraud is emanating from countries that aren’t necessarily friendly to the U.S. There is no downside for these criminals. If they get caught, nothing happens. The U.S. goes to their government and their government says `Who cares? We don’t like you anyway’.” Now Digital Resolve and Andera have entered a partnership that will give credit unions that use Andera’s New Accounts Online service the added benefit of Digital Resolve’s Fraud Analyst real-time identity verification solution. “Till now, our fraud-prevention framework has been based upon information about the applicants – things like name, Social Security number, address,” said Charles Kroll, president of Andera, a Providence R.I. company that develops online customer-acquisition technology for retail financial institutions, most of which are credit unions. “Digital Resolve provides a new dimension to that picture – information about where the applicant physically is at the time he’s applying. There are a lot of cases where you can combine those two dimensions of information and get much richer information than you could from any individually.” Fraud Analyst is a rules-based fraud-detection and prevention solution built on what Digital Resolve calls IP Intelligence. When a consumer is trying to open a new account online, Fraud Analyst gives the credit union a behind-the-scenes way to compare what information it is expecting from that person with what it can discern about that person from the connection. It is also available as a stand-alone system. Digital Resolve’s partnership with Andera marks its debut in the credit union space. “If a user claims that he is in Atlanta, but if the IP Intelligence says that the transaction is coming through Seoul, South Korea, there could be a legitimate reason for that, but absent an explanation it would be a pretty good indicator of fraud,” said William Calpin, president and CEO of Digital Envoy, Digital Resolve’s parent company in Norcross, Ga. “Likewise we manage a list of anonymous proxies, a database of anonymous proxies. If the user is coming in from behind one of those, that would be a very unusual occurrence for a consumer opening an account. There is a whole series of steps.” The upshot, said Kroll, is that “when you add that layer of what they call IP intelligence on top of our standard fraud-prevention framework it now means that those Russian fraud rings have to literally fly to the county where that person lives in order to impersonate them. And that doesn’t happen.” According to Calpin, the whole verification process adds about three milliseconds to Andera’s processing time. “It’s not even the blink of an eye,” he said. “The information is processed and back, and the user won’t know anything has happened. That’s pretty important. You can probably delay a consumer a second or two, some even think maybe three to five, but impatient people like me don’t want any change at all. So when we can do that at such a high speed, it makes it very attractive to the financial institution and for the online user.” The downside, of course, is that depending on the security level the credit union chooses to implement, the system can turn down legitimate applicants – which is why it funnels questionable accounts to a review queue for examination by a credit union employee. “So the only downside potentially is that most applications will end up in that review queue and won’t be automatically accepted,” Kroll said. “But, you know, in today’s age you can’t be too careful.” The Andera integration of Fraud Analyst is currently in beta and is scheduled to be made available as an option to Andera customers at the start of the second quarter. -

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