What is a thin file? A thin file is basically just that – the “file” or information on a particular individual is thin or rather, lacking sufficient credit history. Typically, this could mean that the individual is young, as they have not had enough time to build a true credit history or they are New-In-Country, without a US-based credit history.
Thin files can also refer to under or unbanked individuals – those customers whose financial needs are not fully served by traditional financial institutions. A 2012 report by the World Bank showed that ¾ of the world’s poor do not have a bank account, “not only because of poverty, but also due to costs, travel distance and paperwork involved.” Under or unbanked individuals can also include minorities, older widows or divorcees whose credit histories link to their husbands’ name only, retirees without a mortgage, extremely wealthy individuals who pay cash for everything and people who deliberately do not use or want credit.
So, how do you verify the identity of these individuals? They are legitimate customers who want your business after all…
1. Utilize an Identity Verification Solution that has more than credit-based data
Many identity verification providers rely primarily on credit based information to confirm a potential customer is who they say they are. However, thin files have little-to-no credit history. Therefore, in many cases, these particular individuals will either be “failed” or escalated to manual review consequently incurring additional costs and potentially missing out on new revenue. Using non-credit based information has been proven to verify more identities while also reducing instances manual review.
2. Implement Dynamic Identity Proofing
Dynamic identity proofing, also known as Knowledge Based Authentication (KBA) or Out-Of-Wallet Questions, can be used as a higher level of verification in situations where businesses want more confidence that the person they are dealing with is real. It is important to find a solution that gives you the control and flexibility to escalate to this higher level of verification – for example, in certain high risk situations or when the customer is under or unbanked. KBA works by utilizing a series of multiple choice questions that are developed in real-time based on personal information found in an individual’s file. When using mainly credit-based information, these questions are not only difficult to serve up when an individual has a thin file, but they also can be overly personal or intrusive which could damage customer satisfaction. Businesses employing non-credit based KBA questions realize the following benefits:
- Faster approval rates to drive more revenue
- Decreased costs through lower manual review
- Improved customer satisfaction and confidence through friendly, non-intrusive questioning
- Improves detection of fraudulent activity
TechValidate, a third party research organization, recently conducted a survey of our trusted and valued customer base. Here is what one customer had to say about their experience with IDology when it came to thin files:
“[IDology offers] higher performance on thin file customers.” ~ Risk Manager, Medium Enterprise Banking Company. View the Validated Response here.
As the under and unbanked market continues to expand, it becomes more important than ever to find new and innovative ways to verify your customers identity while also reducing fraud, increasing revenue, improving customer satisfaction and improving compliance.