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Case study

The challenge

A leading American bank holding company allows customers to make payments on certain products, such as loans and credit cards, using external demand deposit accounts (DDAs). A DDA lets customers withdraw deposited funds at any time, without advance notice, via external accounts from other banks. However, anyone who knows the bank account information of others can make transactions using these accounts, which can lead to fraud. The bank amassed fraud losses of around $3.3 million per year because the company’s external accounts were not being validated as customers made payments. To reduce fraud losses and control the transactions made with external accounts, the bank decided to build a real-time validation capability for external DDAs. It turned to Cognizant to implement a solution to address its challenges and goals.

Our approach

The two-phased project began with the primary validation of accounts using an early warning system (EWS) and secondary validation using microdeposits. Real-time validation and EWS services allow the bank to exchange information between organizations to prevent and combat fraud. With the EWS validation process, the bank can ensure, with the utmost security, whether the external account can be added to a customer’s profile. It also checks the status of the account each time, prior to any payment being made.

In the second phase, we implemented the validation using microdeposits. If a customer is not satisfied with their initial EWS validation’s rejection, the system prompts the customer to opt for additional validation using microdeposits, which allows them to continue adding the account. In addition to real-time validation, our banking technology solution includes features such as velocity control, pluggable UI, reusable API and stimulus check validation.

Reducing fraud losses and increasing transaction control

Real-time validation helps our client identify potentially fraudulent accounts and significantly reduce fraud losses. The single external validation API can be used by other lines of business as a foundation for different use cases, helping the bank reduce development costs and time to market. We also tailored the API to address our client’s unplanned and immediate COVID-19-related requirement to cash stimulus checks for customers and noncustomers. Using the external account validation API and the EWS, Cognizant helped the bank tackle its fraud losses and add more transaction control for customers.

100% success rate

in validating ~10 million payments via the velocity control function

~7.5 million payments

validated via the EWS

Detected 53%

of ~1 million external accounts as needing further validation using the EWS