Identity Verification and Identity Theft Protection
through Multi-Factor Authentication

Anyone who has been victimized by identity theft knows how devastating it is to have your privacy violated, and to have to rebuild your financial life.

Improvements in identity verification are promising to make it harder for would-be thieves to make purchases or perform other financial transactions using your accounts. One tool that is widely used is multi-factor authentication, or MFA.

How multi-factor authentication helps protect consumers

Multi-factor authentication uses two or more sources to verify that a person trying to make a transaction is really the account holder. The main categories of these sources are:

• Something possessed, as in a physical card, USB token or mobile device
• Something known, such as a secret password or question
• Something inherent, such as a fingerprint, voice print or retina pattern

Most people use a form of MFA daily without even realizing it, such as when they withdraw money from an ATM. This requires "something possessed" in the form of a debit card, as well as "something known" in the form of a 4-digit PIN. Without both, it's impossible to access the funds. Another example is major theme park entry, which often requires a fingerprint match (something inherent) in addition to a physical ticket.

Out-of-band authentication

While the above works well for brick-and-mortar transactions, online transactions are a little trickier to use MFA due to the lack of card readers or fingerprint scanners in most homes. One solution increasingly utilized by companies is out-of-band authentication. Out-of-band authentication requires an additional channel, such as a mobile phone, to authenticate a transaction originated on a computer before it's permitted to post to your account.

As an example, if you purchase a large-ticket item from on online retailer using your credit card, either the retailer or the bank might send a text message to the mobile phone on record with a PIN that must be entered in the checkout screen in order to complete the transaction. This protects you from fraudulent transactions, as a thief would not only have to know your login credentials and credit card information, but would have to physically possess your phone in order to see the PIN text message.

Combined with a robust identity protection solution, improvements in identity verification, such as MFA and out-of-band authentication, could go a long way in preventing thieves from exploiting your identity and credit profile for financial gain.