Identity Verification: The US Experience with Payment Checks

The US Department of the Treasury prevented the disbursement of approximately $99 million intended for more than 4,900 deceased recipients through a government-wide verification system. These disbursements were uncovered by checking over 885 million transactions totaling about $2.77 trillion. The return of these payments to the sending agencies underscores the crucial need to verify recipients before making disbursements.

Importance of Verification

Financial institutions and fintech companies are actively exploring verification mechanisms as it helps to prevent losses. According to a report by PYMNTS and Trulioo, companies lose about $34 billion due to failures in identity verification. Moreover, 76.1% of companies reported that KYC and KYB processes hinder their growth. There is a direct link between verification and revenue.

Strengthened Control Measures

By executive order, the Treasury is required to enhance oversight over federal payments and mandate agencies to provide necessary verification information before making disbursements. Recent actions include expanded access to the full deceased list provided by the Social Security Administration for comparison with potential disbursements.

Trials and Challenges

Banks and fintech companies need to pay attention to the entire customer lifecycle. Issues related to data theft and the creation of synthetic identities mean that verification is crucial at all stages of the bank's interaction with the customer, not only during account opening.

Significance of Better Data Integration

Enhanced integrated infrastructures can provide better signals without requiring constant authentication for all customers. The US Treasury has demonstrated the effectiveness of this approach at the level of $2.77 trillion.

Companies can learn from these examples by minimizing the risks of making incorrect payments through advanced verification.