If you were recently denied a bank account, you were probably notified by the financial institution that your denied application was based on data from Early Warning Services (EWS). Most consumers have never heard of EWS and this article focuses on informing you about what EWS does, how EWS affects you, and how you can stop EWS from harming your banking future.
About Early Warning Services
Early Warning Services, LLC was formed in the 1990s by several big banks including Bank of America, JPMorgan Chase, Capital One, U.S. Bank, and Wells Fargo. The banks formed EWS to help evaluate and eliminate fraud from current and new customers. The banks contribute financial data about their customers to EWS and the company scrubs, normalizes, and aggregates the data in order to sell it back to the banks in the form of a huge database of combined consumer data.
Early Warning Services also owns and operates the Zelle Network. Zelle is a financial services network that allows people to send and receive money from each other via connected bank accounts.
Early Warning Services is based in Scottsdale, Arizona.
We’ve written more extensively about Early Warning Services and its impact on consumers.
What Does Early Warning Services Do?
EWS claims to identify individuals who have committed fraud in the financial services marketplace. The financial service industries that might benefit as Early Warning Services clientele would include financial institutions (retail banks/savings and loans/thrifts), brokerages, mutual fund companies, credit card issuers, check acceptance companies, and others. Early Warning Systems has specific solutions that are tailored for each industry, but in general attempts of fraud will fall into one of three categories; deposit, payment, and identity fraud.
While this sounds like a great idea for banks and other financial services firms, it can be damaging if a consumer is erroneously identified as being involved in fraudulent activity. For instance, EWS might flag you if you try to cash a check written fraudulently by another party.
Employees might be described as playing the role of “risk detectives,” seeking to keep their clients (banks, brokerages, credit unions) from losing money in ID theft scams or bad checks. According to their website, employees use the collective knowledge and best practices in fraud management from leading financial services organizations to fight identity, deposit, and payment fraud. This intelligence is delivered through a suite of Early Warning fraud solutions and may result in billions of dollars in annual loss avoidance.
Banks want to be more open with each other about the internal and external frauds they face. By joining forces, openness in information sharing is facilitated, and efforts to thwart fraud are more quickly recognized. As fraud continues to reach new levels of sophistication, the speed at which current and accurate information are integrated with the processes that detect, prevent, and deter fraud becomes critical.
Early Warning Services promises to provide solutions to prevent each of these three fraud methods using a database provided by “various organizations” which share their most current information on accounts, transactions, and identities. The following are the four major “Solutions” or programs that they offer clients:
- DEPOSIT CHEK: Â For physical and online items presented for deposit or payment at financial institutions. Performs validation and status verification of the payer’s checking account. Responses help detect fraud, prevent losses and expedite funds availability decisions.
- IDENTITY CHEK: Â Distinguishes high-risk individuals from profitable customers with the end goal of opening more “good” accounts and reducing costly write-offs. This service identifies applicants with a prior history of fraud and/or account abuse while also performing identity verification and compliance list screening.
- PAYMENT CHEK: Â Identifies high-risk credit card remittance payments made from checking accounts. For both physical and online items, this service validates an account’s existence, reports its status, and whether the payer’s name, address, and other elements match the account.
- INTERNAL FRAUD PREVENTION SERVICE:Â Available to financial services organizations, it provides notification of job applicants and employees that have been released by another institution because they knowingly caused or attempted to cause financial loss.
What Does This Mean to Consumers?
Well, provided the data in their system for an individual consumer is accurate, this seems positive (for responsible individuals without negatives in their past financial account history). If it helps them save money, perhaps it will be passed on to us as consumers somewhere down the road. Ownership and control of this company by the banks themselves will no doubt encourage sharing of information for fraud control, bridge some of the competition gaps and perhaps ultimately reduce costs for all consumers.
