Dec
14
2012

Knowledge based authentication for sales enablement

Let’s face it. Today’s world is fast-paced. Consumers today want to transact on demand and instantly. On the flip side, businesses want to make safe, instant decisions and distribute their goods and services right away to recognize the revenue. Add to that the fact that the “point of sale” is now everywhere the consumer is. For example, shop for a car online, get directions to the dealership on your smartphone, finance it, then drive it home tonight. Same goes for retailers. Order a new flat-screen television from your tablet and have it shipped overnight, and you’re ready to go for the big game. You get the point. Is instant decisioning and immediate purchase approval really that important? Absolutely.

To illustrate the point, let’s consider a hypothetical example of a credit card company that issues bankcards online via Web applications. They’ve done a good job of setting up credit score criteria to auto-decision around, but they didn’t bother including knowledge based authentication (KBA), as they thought that the costs were high and that missed customer opportunities wouldn’t really add up over the long term. Were they right? Let’s run some numbers and see.

Over the course of any given week, our card issuer runs an average of 1,000 credit card applications, or 4,000 applications per month on average. The average credit limit they approve is $2,000. So for any given week, they approve $700,000 in new lines or $2.8 million per month.

A summary of their monthly processing stats prior to running applications through KBA service looks like the following:

  • Automatic system approvals — 35 percent ($2.8 million  in new credit limits)
  • Automatic system declines — 25 percent ($2.0 million in new credit limits)
  • Manual review applications — 40 percent $3.2 million in new credit limits)

Now let’s say this same company decided to add in KBA to their online account opening process in an effort to reduce the manual reviews. More approvals mean more new bookings today, new revenues recognized more quickly and a reduction in manual labor costs. What’s the benefit? Try the fact that the average credit limits approved for any given month goes from $2,800,000 to $4,400,000 million, which represents a 57 percent lift in new credit limits. The icing on the cake is the card issuer saves $12,000 ($144k/year) in labor costs by having consumers self-authenticate through KBA questions.A summary of their monthly processing stats after switching to run applications through KBA looks like the following:

  • Automatic system approvals — 55 percent ($4,400,000 in new credit limits, a 57 percent lift in dollars approved)
  • Automatic system declines — 25 percent (same as previous, since credit risk policies did not change)
  • Manual review applications — 20 percent ($12,000 per month ($144k/year) in labor cost savings (800 applications/month times 1 hour of labor at $15 an hour)

Booking more customers today can really add up!


One of the most frequently asked questions is: How do I “try-out” KBA? Or similarly, how do I run a head-to-head test against my current vendor?

We’ve had more clients recently express interest in the ability to “try-out” KBA. After all, why risk moving your business in a direction that you’re not comfortable with up front? Makes sense, right? We at Experian agree. You deserve full disclosure up front, and you deserve the ability to run a test to understand the benefit. We heard you, and as a result, we now have additional options and testing processes in place to help you do just that. Additionally, we’ve created a consulting process to help you evaluate the current KBA vendor you’re doing business with, in an effort to truly understand if you’re getting the most out of the service or if Experian’s Fraud tools would do a better job.

New to KBA?

The testing process is simple and straightforward. If you’re new to KBA, then you’ll simply provide information to us about the consumers with whom you’re doing business, and we’ll take it from there. We’ll come back to you with an overall analysis of what KBA questions could have been presented to your customers, along with suggestions around how to best interact with those consumers to retain their business, while at the same time balancing the necessary fraud checks to keep your company secure.

Want to compare Experian to your current KBA provider?

Again, the testing process is simple and straightforward. You would simply provide information to us about the consumers with whom you’re doing business, along with your current business operating processes and procedures where KBA is in use, and we’ll take it from there. We’ll come back to you with an overall analysis of what KBA questions could have been presented to your customers, along with opportunities to improve your business processes using Experian. If you’d like, we can even take it a step further by evaluating the effectiveness of the current KBA service you have in place.

What to look for if you decide to run a test on your own without Experian:

i.  For the KBA vendor, what data source categories are used to generate questions? Tip:  You want a provider that has a data diversification strategy comprised of multiple data sources, both credit and noncredit, from which to draw questions.

ii.  Does the KBA vendor offer its own consulting services that include performance monitoring of the KBA service, so you know how and if the product is working correctly? Tip: This is critical to knowing whether the KBA service is working. Think of it simply as your very own KIQ optimization strategy.

iii.  Does the KBA vendor provide product configuration options that include a scoring matrix?

  1. Combination of fraud score and question performance
  2. Customizable score breaks and thresholds
  3. Increase the pass rate of good consumers while eliminating fraud with custom velocity checks like use limits and concurrency checks

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