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This article was updated on April 23, 2024. Keeping your organization and consumers safe can be challenging as cybercriminals test new attack vectors and data breaches continually expose credentials. Instead of relying solely on usernames and passwords for user identity verification, adding extra security measures like multi-factor authentication can strengthen your defense. What is multi-factor authentication? Multi-factor authentication, or MFA, is a method of authenticating people using more than one type of identifier. Generally, you can put these identifiers into three categories based on the type of information: Something a person knows: Usernames, passwords, and personal information are common examples of identifiers from this category. Something a person has: These could include a phone, computer, card, badge, security key, or another type of physical device that someone possesses. Something a person is: Also called the inherence factor, these are intrinsic behaviors or qualities, such as a person's voice pattern, retina, or fingerprint. The key to MFA is it requires someone to use identifiers from different categories. For example, when you withdraw money from an ATM, you're using something you have (your ATM card or phone), and something you know (your PIN) or are (biometric data) to authenticate yourself. Common types of authenticators Organizations that want to implement multi-factor authentication can use different combinations of identifiers and authenticators. Some authenticator options include: One-time passwords: One-time passwords (OTPs) can be generated and sent to someone's mobile phone via text to confirm the person has the phone or via email. There are also security tokens and apps that can generate OTPs for authentication. (Something you know.) Knowledge-based authentication: Knowledge-based authentication (KBA) identity verification leverages the ability to verify account information or a payment card, “something you have,” by confirming some sequence of numbers from the account. (Something you know.) Security tokens: Devices that users plug into their phone or computer, or hold near the device, to authenticate themselves. (Something you have.) Biometric scans: These can include fingerprint and face scans from a mobile device, computer, or security token. (Something you are.) Why MFA is important It can be challenging to keep your users and employees from using weak passwords. And even if you enforce strict password requirements, you can't be sure they're not using the same password somewhere else or accidentally falling for a phishing attack. In short, if you want to protect users' data and your business from various types of attacks, such as account takeover fraud, synthetic identity fraud, and credential stuffing, you’ll need to require more than a username and password to authenticate users. That’s where MFA comes in. Because it uses a combination of elements to verify a consumer’s identity, if one of the required components in a transaction is missing or supplied incorrectly, the transaction won’t proceed. As a result, you can ensure you’re interacting with legitimate consumers and protect your organization from risk. LEARN MORE: Explore our fraud prevention solutions. How to provide a frictionless MFA experience While crucial to your organization, in-person and online identity verification shouldn’t create so much friction that legitimate consumers are driven away. Experian's 2023 U.S. Identity and Fraud Report found that 96 percent of consumers view OTPs as convenient identity verification solutions when opening a new account. An increasing number of consumers also view physical and behavioral biometrics as some of the most trustworthy recognition methods — 81 and 76 percent, respectively. To create a low friction MFA experience that consumers trust, you could let users choose from different MFA authentication options to secure their accounts. You can also create step-up rules that limit MFA requests to riskier situations — such as when a user logs in from a new device or places an unusually large order. To make the MFA experience even more seamless for consumers, consider adding automated identity verification (AIV) to your processes. Because AIV operates on advanced analytics and artificial intelligence, consumers can verify their identities within seconds without physical documentation, allowing for a quick, hassle-free verification experience. How Experian powers multi-factor authentication Experian offers various identity verification and risk-based authentication solutions that organizations can leverage to streamline and secure their operations, including: Experian’s CrossCore® Doc Capture confidently verifies identities using a fully supported end-to-end document verification service where consumers upload an image of a driver’s license, passport, or similar directly from their smartphone. Experian’s CrossCore Doc Capture adds another layer of security to document capture with a biometric component that enables the individual to upload a “selfie” that’s compared to the document image. Experian's OTP service uses additional verification checks and identity scoring to help prevent fraudsters from using a SIM swapping attack to get past an MFA check. Before sending the OTP, we verify that the number is linked to the consumer's name. We also review additional attributes, such as whether the number was recently ported and the account's tenure. Experian's Knowledge IQSM offers KBA with over 70 credit- and noncredit-based questions to help you engage in additional authentication for consumers when sufficiently robust data can be used to prompt a response that proves the person has something specific in their possession. You can even configure it to ask questions based on your internal data and phrase questions to match your brand's language. Learn more about how our multi-factor authentication solutions can help your organization verify consumer identities and mitigate fraud. Learn about our MFA solutions

  Managing digital identities is a necessity, responsibility and privilege. When done right, digital identity management solutions can help consumers feel recognized and safe. In turn, companies can build strong and personalized relationships with their customers while complying with regulatory requirements and combating hydra-like fraud attacks. What is digital identity? The concept and definition of a digital identity have expanded as everyday interactions increasingly happen in digital realms. Today, a digital identity is more than an online account. Identities can be created and depend on all the digital information associated with a unique entity, which may be a person, business or device. A person's digital identity often includes online and offline attributes that fall into one of three categories: Something a user knows, such as a username, password or PIN. Something a user has, such as a mobile phone or security token. Something that's part of the user, such as a fingerprint, iris, voice pattern, behavior or preferences. People are increasingly open to sharing this type of personal information if it serves a purpose. Our Global Identity and Fraud Report found that 57 percent of consumers are willing to share data if it ensures greater security or prevents fraud, and 63 percent of consumers think sharing data is beneficial (up from 51 percent in 2021).1 People can also use these identifiers to verify their identity at a later point. But digital identity verification tools should rely on more than user-provided verification alone. A person may have hundreds or thousands of digital interactions every day, and these can leave digital footprints that you can use to create or expand digital identities. These types of identifiers — such as search queries, geotags, behaviors and device information — can also help you authenticate a user and offer a more customized and seamless experience. However, when focusing on consumers' digital identities, it's important to remember that their identity is more than the sum of data points. A person's digital identity is unique and personal, and it should be managed accordingly. The business side's challenges A discussion of what makes up an identity can quickly turn philosophical. For instance, you can't authenticate identical twins based on a face scan or DNA test, so what is it that makes them unique? In some ways, the example gets to the heart of businesses' challenges today. To create a safe and enjoyable online identity verification experience, you need to be able to distinguish between a real person and an imitator, even when the two look nearly identical. Access to more information can make this easier, but you then need to ensure that you can keep this information secure. It can be a tricky balance, but if you get it right, your efforts will be rewarded. People want to be recognized as they move across channels and devices, and organizations want to be able to quickly and accurately identify users with a friction-right experience that also helps prevent fraud. However, while 84 percent of businesses say recognizing customers is "very" or "extremely" important, only about 33 percent of consumers are confident that they'll be repeatedly recognized online.1 There's a clear gap — and an opportunity to better meet customers' desires. Organizations across industries know they need a customer recognition strategy and 82% already have one in place.2 Some businesses address this challenge with identity platforms that are standardized and interoperable. Standardization allows the platform to gather and store the growing influx of data that it can use as part of a digital identity strategy. Interoperability allows the platform to match different types of data, including physical data, with a person to verify their digital identity and avoid the creation of duplicate identities. In short, the platforms can make sense of increasingly large amounts of internal and external data and easily incorporate new data sources as they become available. Regulatory compliance and digital identity Navigating the regulatory landscape is a significant challenge for organizations dealing with digital identities. Compliance is not only necessary for legal reasons but also critical to maintaining customer trust and safeguarding institutional reputation. Organizations must stay informed about the regulatory frameworks that affect digital identity, such as the General Data Protection Regulation (GDPR) in the European Union, the California Consumer Privacy Act (CCPA), and other pertinent laws in jurisdictions they operate. These regulations dictate how personal data can be collected, stored, used and shared. Staying ahead of regulatory changes: Regulatory landscapes are dynamic, particularly concerning digital data. Organizations should engage with policymakers and participate in industry forums to  stay ahead of changes. By proactively managing compliance, organizations can avoid costly penalties, operational disruptions and reputational damage. The consumer's perspective Some organizations are adopting a consumer-centric approach to digital identity that puts consumers' needs and desires first. These can broadly be broken into four categories: Security: While people want a seamless and personalized experience, security and privacy are listed as top concerns year after year.1 That might not be surprising given that data breaches continually make headlines and there are growing concerns over identity theft. Privacy: Security is related to privacy, but privacy means more than keeping consumers' information safe from hackers. Our April 2022 Global Insight Report found that 90 percent of consumers want some or complete control over how their personal data is used. 3 Recognition: People want to be continually recognized once they share and verify their identity, even if they move between devices or channels. And nearly 70 percent of consumers say it's important for businesses to recognize them across multiple visits.1 Inclusion: Consumers may have varying levels of access to technology, comfort with technology and access to physical identifiers. Creating digital identity solutions for these potential barriers can also increase financial inclusion. While these are all areas of focus, organizations also need to find the right fit for each person and interaction. For instance, consumers may expect and even appreciate a robust verification process when they're opening a new financial account. But they could quickly be turned off by a similar process if they're making a small purchase or trying to play a new online game. What to look for in a digital identity partner Digital identity solutions and services have grown increasingly sophisticated to meet today's challenges. Identity hubs and data orchestration engines can connect with multiple services to help create, resolve, verify and authenticate identities. By moving away from a siloed approach, businesses can offer customers a better experience while minimizing their risk throughout the customer journey. When comparing potential partners, look for a company that: Has a customer-first approach: If your business is customer-first, then you need a partner who has a similar view. Uses multidimensional data: The partner should be able to offer and use offline and digital data sources to resolve, verify and authenticate digital identities. Its capabilities may become increasingly important as new data sources emerge. Isn't afraid to innovate: Look into how the partner is testing and using the latest advancements, such as artificial intelligence, in its digital identity solutions. Protects your brand: Understand how the partner helps detect and prevent fraud while creating a seamless experience for your customers and protecting their data. The right partner can increase your bottom line, help you build trust and improve your brand's reputation. Learn more about Experian Identity, an integrated approach to digital identity that builds on Experian's decades of experience managing and securing identifying information. Learn more 1“2022 Global Identity and Fraud Report: Building digital consumer trust amidst rising fraud activity and concerns," Experian, June 2022 2“2021 Global Identity and Fraud Report: Protecting and enabling customer engagements in the new digital era," Experian, April 2021. https://www.experian.com/content/dam/marketing/na/global-da/pdfs/GIDFR_2022.pdf https://www.experian.co.th/wp-content/uploads/2021/04/Experian-Global-Identity-Fraud-Report-2021.pdf 3"Global Insights Report: April 2022," Experian, April 2022. https://www.experian.com/blogs/global-insights/wp-content/uploads/2022/04/WaveReportApril2022.pdf *This article includes content created by an AI language model and is intended to provide general information.

This article was updated on November 9, 2023. Fraud – it’s a word that comes up in conversations across every industry. While there’s a general awareness that fraud is on the rise and is constantly evolving, for many the full impact of fraud is misunderstood and underestimated. At the heart of this challenge is the tendency to lump different types of fraud together into one big problem, and then look for a single solution that addresses it. It’s as if we’re trying to figure out how to un-bake a terrible cake instead of thinking about the ingredients and the process needed to put them together in the first place. This is the first of a series of articles in which we’ll look at some of the key ingredients that create different types of fraud, including first party, third party, synthetic identity, and account takeover. We’ll talk about why they’re unique and why we need to approach each one differently. At the end of the series, we’ll get a result that’s easier to digest. I had second thoughts about the cake metaphor, but in truth it really works. Creating a good fraud risk management process is a lot like baking. We need to know the ingredients and some tried-and-true methods to get the best result. With that foundation in place, we can look for ways to improve the outcome every time. Let’s start with a look at the best known type of fraud, third party. What is third-party fraud? Third-party fraud – generally known as identity theft – occurs when a malicious actor uses another person’s identifying information to open new accounts without the knowledge of the individual whose information is being used. When you consider first-party vs third-party fraud, or synthetic identity fraud, third-party stands out because it involves an identifiable victim that’s willing to collaborate in the investigation and resolution, for the simple reason that they don’t want to be responsible for the obligation made under their name. Third-party fraud is often the only type of activity that’s classified as fraud by financial institutions. The presence of an identifiable victim creates a high level of certainty that fraud has indeed occurred. That certainty enables financial institutions to properly categorize the losses. Since there is a victim associated with it, third party fraud tends to have a shorter lifespan than other types. When victims become aware of what’s happening, they generally take steps to protect themselves and intervene where they know their identity has been potentially misused. As a result, the timeline for third-party fraud is shorter, with fraudsters acting quickly to maximize the funds they’re able to amass before busting out. How does third-party fraud impact me? As the digital transformation continues, more and more personally identifiable information (PII) is available on the dark web due to data breaches and phishing scams. Given that consumer spending is expected to increase1, we anticipate that the amount of PII readily available to criminals will only continue to grow. All of this will lead to identity theft and increase the risk of third-party fraud. More than $43 billion in total losses was reported due to identity theft and fraud in the U.S. in 2022.2 Solving the third-party fraud problem We’ve examined one part of the fraud problem, and it is a complex one. With Experian as your partner, solving for it isn’t. Continuing my cake metaphor, by following the right steps and including the right ingredients, businesses can detect and prevent fraud. Third-party fraud detection and prevention involves two distinct steps. Analytics: Driven by extensive data that captures the ways in which people present their identity—plus artificial intelligence and machine learning—good analytics can detect inconsistencies, and patterns of usage that are out of character for the person, or similar to past instances of known fraud. Verification: The advantage of dealing with third-party fraud is the availability of a victim that will confirm when fraud is happening. The verification step refers to the process of making contact with the identity owner to obtain that confirmation and may involve identity resolution. It does require some thought and discipline to make sure that the contact information used leads to the identity owner—and not to the fraudster. In a series of articles, we’ll be exploring first-party fraud, synthetic identity fraud, and account takeover fraud and how a layered fraud management solution can help keep your business and customers safe and manage third-party fraud detection, first-party fraud, synthetic identity fraud, and account takeover fraud prevention. Let us know if you’d like to learn more about how Experian is using our identity expertise, data, and analytics to create robust fraud prevention solutions. Contact us 1 Experian Ascend Sandbox 2 2023 U.S. Identity and Fraud Report, Experian.