ID Analytics Research Finds Conventional Wisdom About Change of Address and Fraud Risk is Incorrect

December 18, 2009

Traditional Metrics No Longer Provide Comprehensive Risk Coverage: Study Finds Identity Scoring Offers a More Effective Approach

SAN DIEGO, CA– ID Analytics, Inc., the leader in on-demand identity intelligence, today announced the publication of its’ latest research study, “Address Discrepancy Data Study: Change of Address and Address Mismatch.” ID Analytics’ study examines the relationship between changes in address and fraud risk to determine whether certain variables related to an address change indicate a greater risk of fraud. The study finds that traditional variables no longer provide comprehensive risk coverage and the variables need to be modernized.

According to the U.S. Census Bureau, 40 million Americans representing 13 percent of the population move to a new address each year. Companies must distinguish legitimate address changes from those reported by fraudsters to develop reliable and predictable ways to effectively combat fraud, comply with federal regulations and resolve customer identity management challenges.

Address discrepancies can be caused by errors in historical credit file data or by very recent address changes that have not yet been updated in a consumer’s credit file. Fraud tactics such as account take-over – where a criminal falsely reports an address change to gain access to consumer’s account – make it difficult to distinguish attempted frauds from credit file errors or valid address changes.

Key findings from the Address Discrepancy Data Study include:

  • Traditional Variables are Not as Predictive as Once Thought. Traditional variables used to gauge the risk of a reported address change such as comparative area income levels, distance of a reported move, and geographic move patterns, no longer provide comprehensive, predictive risk coverage.
  • No Other Single Variable Proved Better at Predicting Address Risk. ID Analytics examined other variables including specific address change combinations and determined no single traditional variable or multiple variables, in combination proved more predictive of address risk.
  • Identity Scoring is More Effective at Predicting Risk of an Address Discrepancy. ID Analytics’ study concludes that network-based identity risk scoring is highly predictive at identifying the risk of a reported address change, with more than 30 percent of fraud found in the top one percent of identity scores.

 

Additional findings include:

  • Conventional change of address wisdom may not be as accurate as once thought. Counter intuitively, high- to low-income moves are not the most risky income level move combinations.
  • Address changes of over 100 miles are more predictive of identity risk than income comparisons, but over 95 percent of consumer address changes occur between addresses less than 50 miles apart.
  • The riskiest Sectional Center Facility (SCF) to SCF moves are highly predictive of fraud risk, but the vast majority of reported moves are not risky.

 

“The study’s findings provide insight into address discrepancies in the current economic environment, and how organizations can better understand current address discrepancy trends to improve their fraud detection systems and compliance efforts,” stated Mike Cook, Chief Strategy Officer, ID Analytics, Inc. “We discovered that network-based identity risk scoring is a powerful tool for performing analysis to determine to what degree, if any, an address discrepancy contributes to identity risk both at account opening and during ongoing account management and even eCommerce transactions where the bill to and ship to address differ,” said Cook.

The study used as its data source the information in the proprietary ID Network®. Built with the specific purpose of preventing identity fraud, the ID Network is the nation’s only real time, cross-industry compilation of identity information. It houses 700 billion total aggregated data elements, 2.6 million reported identity frauds, and 1.4 billion consumer transactions. With a constant stream of input from Fortune 100 companies, the ID Network receives an average daily flow of 45 million identity elements.

ID Analytics’ approach provides visibility into real time address changes contributed to the ID Network by ID Network Members, making the ID Network one of the earliest available sources of updates to an individual’s identity information caused by life changes. Identity risk scoring also helps organizations comply with the two new FACTA regulations related to address discrepancies, resolving address discrepancies with a credit bureau and credit or debit card address changes.

For a copy of the whitepaper, please complete our Request Information form.

About ID Analytics, Inc.

ID Analytics, the leader in on-demand identity intelligence, protects both organizations and consumers by providing unprecedented real time visibility into the risk of individuals. ID Analytics pioneered identity-scoring technology. ID Analytics combines three unique capabilities to assess risk and improve the customer experience across all consumer touchpoints: the ID Network®–the nation’s only real time, cross-industry compilation of identity information; Personal Topology™– an individual’s particular identity characteristics and their connectedness to each other; and ID Analytics’ proprietary Advanced AnalyticsSM. Leading communications, financial services, retailing, and healthcare companies, as well as multiple government agencies, trust ID Analytics to provide solutions that drive new revenue opportunities, reduce financial losses, and facilitate compliance with federal regulations. ID Analytics is based in San Diego, CA.

ID Analytics is a registered trademark of ID Analytics, Inc. All other trademarks and registered trademarks are the property of their respective holders.