Multi-Factor Verification

Using the Power of the Community to Fight Digital Fraud

A new world brings with it both new opportunities and new challenges. Organisations now have the ability to meet their payment obligations with a degree of efficiency that was unimaginable a few years ago thanks to the development of Electronic Funds Transfer (EFT) technologies. However, with the transition from analogue to digital payments, a new challenge has emerged:

How can an organisation verify the legitimacy of a counterparty to a transaction in a fully digital environment?

Trust is a crucial ingredient when two parties conduct any transaction. But in a virtual world, rife with identity theft and manipulation, a state of information asymmetry exists between the two parties. This can fatally undermine trust, increases the risk of fraud and limits an organisation’s ability to fully embrace the benefits of digitalisation.

In fact, fraud ranks as the most common type of cybercrime according to the Australian Cyber Security Centre (ACSC). It represents 39.86% of all reported cybercrimes, closely followed by identity-related crimes, which comprise 32.4%.1 In FY 19-20, reports of Business Email Compromise (BEC) scams to the ACSC cost Australian organisations in excess of $142 million.2

The growing risk that organisations are unknowingly transacting with nefarious actors is further exacerbated by the fact that our banking systems were designed for a pre-digital age. Among other limitations, they are not capable of matching Account Names with BSB and Account Numbers.

A new approach is needed to establish counterparty legitimacy in digital transactions. Addressing this challenge requires all organisations to come together and share crucial information for the common good. By harnessing the power of decentralised information, and aligning it with centralised information sources, we maintain that it is possible to establish the veracity of a counterparty with a strong degree of certainty. This is what we have set out to achieve.

We call our approach: Multi-Factor Verification

Multi-Factor Verification is a methodology that sources centralised information from both the counterparty (Enterprise) and government agencies (Authority). This is subsequently cross-checked against a decentralised database of information sourced from a broad network of nearly 2 million Australian organisations (Community). Sourcing information from the Community in this way to fight fraud is unique. It is an approach that is premised on the belief that many independent organisations possess snippets of information which, when aggregated, can benefit everyone.

Bringing together information from the Enterprise, Authorities and the Community, allows organisations to verify and legitimate their counterparties. It ensures trust can be established between parties transacting in a digital environment. It also enables organisations to fully embrace the many benefits of digital transactions, whilst mitigating the growing risk of digital fraud.

This guide outlines the challenge we all face when it comes to establishing legitimacy in the digital world. It also explores our Multi-Factor Verification methodology.

We hope our approach will act as a catalyst for others seeking to address other digital legitimacy challenges.