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A Forrester Total Economic Impact Study Commissioned By NeustarJune 2020The Total EconomicImpact Of NeustarFraud AndAuthentication SolutionCost Savings And Business BenefitsEnabled By Neustar Fraud AndAuthentication Solution
Table Of ContentsExecutive SummaryKey Findings11TEI Framework And Methodology4The Neustar Fraud And Authentication Solution Customer JourneyInterviewed Organizations55Key Challenges5Key Results6Composite Organization7Analysis Of BenefitsReduce Digital Identity Fraud88Reduce Phone FraudEnable New Digital Products10Improve Customer Service Agent Productivity11Reduce False Positives12Flexibility15Analysis Of CostsNeustar Fraud And Authentication Solutions CostInternal Team To Install And Maintain Neustar Fraud AndAuthentication SolutionFinancial SummaryNeustar Fraud and Authentication Solution: OverviewAppendix A: Total Economic ImpactAppendix B: EndnotesProject Director:Jennifer AdamsAssociate Consultant:Connor Maguire916161718192021ABOUT FORRESTER CONSULTINGForrester Consulting provides independent and objective research-basedconsulting to help leaders succeed in their organizations. Ranging in scope from ashort strategy session to custom projects, Forrester’s Consulting services connectyou directly with research analysts who apply expert insight to your specificbusiness challenges. For more information, visit forrester.com/consulting. 2020, Forrester Research, Inc. All rights reserved. Unauthorized reproductionis strictly prohibited. Information is based on best available resources.Opinions reflect judgment at the time and are subject to change. Forrester ,Technographics , Forrester Wave, RoleView, TechRadar, and Total EconomicImpact are trademarks of Forrester Research, Inc. All other trademarks are theproperty of their respective companies. For additional information, go toforrester.com.
Executive SummaryKey BenefitsReduce digital identity fraudlosses:20%Save time on inbound customercalls:1 minute per callImprove customer service agentproductivity: 3.1 millionIn the age of digital transformation, consumers expect to shop and bankfrom almost anywhere via multiple digital devices. While the shift to digitalenhances customer experience, it also opens up vulnerabilities forfraudsters to exploit. It is difficult for companies to know who exactly isbehind a digital device. Traditional identity verification tools, such asknowledge-based authentication (KBA) questions, have beencompromised by data breaches.1 Companies must find ways to effectivelyseparate legitimate customers from fraudsters, all while maintainingexcellent customer service and a frictionless customer experience.Neustar provides a fraud and authentication solution that helps users tomore easily and more accurately verify their customers’ identities. Neustarcommissioned Forrester Consulting to conduct a Total Economic Impact (TEI) study and examine the potential return on investment (ROI)enterprises may realize by deploying Neustar’s Fraud and AuthenticationSolution, including digital customer identity and inbound callerauthentication. The purpose of this study is to provide readers with aframework to evaluate the potential financial impact of the Neustar Fraudand Authentication Solution on their organizations.To better understand the benefits, costs, and risks associated with thisinvestment, Forrester interviewed several customers with years ofexperience using Neustar’s Fraud and Authentication Solution. With theshift to digital, the interviewed companies did not have an effective way tomatch their customers to their digital devices. Fraudsters could takeadvantage of this to commit fraudulent transactions, and the companieswanted a more effective way to separate legitimate customers fromfraudsters.Prior to using Neustar’s Fraud and Authentication Solution, the interviewedcompanies relied on ineffective homegrown solutions to protect againstdigital and phone fraud. This left them vulnerable, and fraud levels werehigher than optimal. It was difficult to match a device such as a laptop,mobile phone, or tablet to a specific customer. Customer service agentsbegan each incoming call with questions to verify customer identity, whichwas a time-consuming process that customers found frustrating.Fraudsters attempted to use social engineering to coax confidentialinformation out of customer service agents, potentially leading to accounttakeovers or other types of fraud.Key FindingsQuantified benefits. The following risk-adjusted present value (PV)quantified benefits are representative of those experienced by thecompanies interviewed and applied to a composite organization:› Reduced digital identity fraud losses by 20%, 3.0 million benefit.The Neustar Digital Identity Risk tool allowed the companies to separatelegitimate customers from potential fraudsters. Neustar taps into itsproprietary information on phone number reputations, user identities,device identities, device behaviors, and IP addresses to match onlineusers with their devices and assess risk. The companies were able toreduce digital identity fraud losses by 20%, which would save thecomposite organization 3.0 million over three years.1 The Total Economic Impact Of Neustar Fraud and Authentication Solution
ROI144%Benefits PV 9.1 millionNPV 5.4 millionPayback 3 months› Reduced phone fraud, 2.1 million benefit. The Neustar InboundAuthentication product helped verify the identities of incoming callers.those designated as a higher risk went through additional identificationand security procedures. The companies reduced overall phone fraudlosses by identifying higher-risk callers through evaluating phonenumber reputations and voice-over-IP telephony signalingattributes.› Enabled new digital products, 0.6 million benefit. With Neustar, thecompanies could verify the identities of digital customers more easilyand with more confidence. This gave rise to new digital product offeringssuch as instant online credit and loan approval.› Improved customer service agent productivity, 3.1 million benefit.Customer service agents spent less time verifying inbound callers’identities with Neustar Inbound Authentication. The customer servicecenters’ average handle time for inbound calls reduced by 1 minute.› Reduced false positives, 0.3 million benefit. With more accurateinbound caller identification, fewer legitimate customers were flagged asrisky. The customer service agents saved time on unnecessaryauthentication of legitimate customers.Unquantified benefits. The interviewed organizations experienced thefollowing benefits, which are not quantified for this study:› Improved customer experience and raised Net Promoter Score(NPS) by 15%. With Neustar, the companies automatically verified moreinbound callers, which eliminated time spent on identity verification.They served customers more quickly, increasing customer satisfactionand NPS.› Reduced customer friction. With Neustar, the companies could adjustthe level of customer friction to provide the right balance between fraudprotection and customer experience. They gained more confidence intheir abilities to separate legitimate customers from fraudsters, whichallowed them to reduce friction for legitimate customers.Costs. The interviewed organizations experienced the following riskadjusted PV costs:› Neustar fraud and authentication cost, 2.7 million. The companiesspent an average of 1 million annually for the Neustar Fraud andAuthentication Solution.› Internal team to support Neustar, 1.0 million. The installation efforttook eight weeks, and an internal team of two FTEs supports theNeustar platform.Forrester’s interviews with seven existing customers and subsequentfinancial analysis found that an organization based on these interviewedorganizations would experience benefits of 9,082,466 over three yearsversus costs of 3,719,217, adding up to a net present value (NPV) of 5,363,249 and an ROI of 144%.2 The Total Economic Impact Of Neustar Fraud and Authentication Solution
Benefits (Three-Year)Financial Summary 3.1M 3.0M 2.1MPaybackperiod: 3 monthsTotalbenefitsPV, 9.1MTotalcosts PV, 3.7MInitialYear 1Year 2Year 33 The Total Economic Impact Of Neustar Fraud and Authentication Solution 577.9KReducedigitalidentityfraud 266.2KReduce Enable new ImproveReducephone fraud roductivity
TEI Framework And MethodologyFrom the information provided in the interviews, Forrester has constructeda Total Economic Impact (TEI) framework for those organizationsconsidering implementing the Neustar Fraud and Authentication Solution.The objective of the framework is to identify the cost, benefit, flexibility, andrisk factors that affect the investment decision. Forrester took a multistepapproach to evaluate the impact that the Neustar Fraud and AuthenticationSolution can have on an organization:The TEI methodologyhelps companiesdemonstrate, justify,and realize thetangible value of ITinitiatives to bothsenior managementand other keybusinessstakeholders.DUE DILIGENCEInterviewed Neustar stakeholders and Forrester analysts to gather datarelative to Fraud and Authentication Solution.CUSTOMER INTERVIEWSInterviewed seven organizations using Fraud and Authentication Solutionto obtain data with respect to costs, benefits, and risks.COMPOSITE ORGANIZATIONDesigned a composite organization based on characteristics of theinterviewed organizations.FINANCIAL MODEL FRAMEWORKConstructed a financial model representative of the interviews using theTEI methodology and risk-adjusted the financial model based on issuesand concerns of the interviewed organizations.CASE STUDYEmployed four fundamental elements of TEI in modeling Neustar Fraudand Authentication Solution’s impact: benefits, costs, flexibility, and risks.Given the increasing sophistication that enterprises have regarding ROIanalyses related to IT investments, Forrester’s TEI methodology serves toprovide a complete picture of the total economic impact of purchasedecisions. Please see Appendix A for additional information on the TEImethodology.DISCLOSURESReaders should be aware of the following:This study is commissioned by Neustar and delivered by Forrester Consulting.It is not meant to be used as a competitive analysis.Forrester makes no assumptions as to the potential ROI that otherorganizations will receive. Forrester strongly advises that readers use their ownestimates within the framework provided in the report to determine theappropriateness of an investment in Neustar Fraud and Authentication Solution.Neustar reviewed and provided feedback to Forrester, but Forrester maintainseditorial control over the study and its findings and does not accept changes tothe study that contradict Forrester’s findings or obscure the meaning of thestudy.Neustar provided the customer names for the interviews but did not participatein the interviews.4 The Total Economic Impact Of Neustar Fraud and Authentication Solution
The Neustar Fraud And AuthenticationSolution Customer JourneyBEFORE AND AFTER THE NEUSTAR FRAUD AND AUTHENTICATIONSOLUTION INVESTMENTInterviewed OrganizationsFor this study, Forrester conducted seven interviews with Neustar Fraudand Authentication Solution customers. Interviewed customers includethe following:› A global financial services company with 44 billion in annual revenueand 59,000 employees.› A US software company with 4.1 billion in annual revenue and 17,000employees.› A US telecom services company with 1 billion in annual revenue and500 employees.› A US software company with 550 million in annual revenue and 1,800employees› A US financial services company with 350 million in annual revenueand 1,500 employees managing over 7 billion of transaction volume.› A US financial services company with 200 million in annual revenue, 6 billion assets under management, and 800 employ could use the credit.› With Neustar, the organization can confirm digital identities and offernew, fully digital products such as immediate access to an online creditcard or loan.› The new digital product offerings grow from 0.04% of digital revenue inYear 1 to 0.12% of digital revenue in Year 3.The increase in new digital product revenue is offset by increased costs.Forrester assumes a 25% incremental operating margin in line with thehistorical average of digital financial services companies to calculate thenet benefit of the sales uptick.The enable new digital products benefit will vary with:› The focus on digital business growth.› The extent of existing digital offerings.To account for these risks, Forrester adjusted this benefit downward by20%, yielding a three-year risk-adjusted total PV of 577,911.10 The Total Economic Impact Of Neustar Fraud and Authentication Solution“If you’re a prospect, we don’tknow your phone number. Sowe must go to someone likeNeustar to find out what yourphone number is and howrisky it is. And then that lets usgive a customer loans in realtime and show a card numberright after they apply. Itenables these new digitalprojects with instantgratification.”VP risk management, financialservices
Enable New Digital Products: Calculation TableRef.MetricCalculationYear 1Year 2Year 3A3 1,500,000,000 1,500,000,000 1,500,000,0000.04%0.08%0.12% 600,000 1,200,000 1,800,00025%25%25% 150,000 300,000 450,000 120,000 240,000 360,000C1Digitally driven annual revenueC2New digital initiative revenue (% of totalrevenue)C3New digital initiative revenueC4Digital operating marginCtEnable new digital productsC3*C4Risk adjustment 20%CtrC1*C2Enable new digital products (risk-adjusted)Improve Customer Service Agent ProductivityBefore Neustar, the organization’s customer service agents began eachinbound customer call by asking KBA questions to verify the caller’sidentity. These procedures required both the caller and the customerservice agent to spend time on identity verification, rather than on theactual questions and issues.› With Neustar Inbound Authentication, callers’ identities are verifiedautomatically. The customer service agents do not have to spend timeauthenticating callers but can instead begin more calls by immediatelydiving into the customers’ concerns.› Customer experience has improved now that agents spend less timeon authentication and more time providing customer service. Customersatisfaction (as measured by NPS) is now higher.For the composite organization, Forrester assumes that:› Customers make 900,000 inbound calls per month (10.8 million peryear) to the organization’s customer service centers.› The organization’s interactive voice response (IVR) contains 50% ofinbound calls, and these callers never speak to a live agent. Thecustomer service agents handle 50% of inbound calls (450,00 permonth).› Neustar Inbound Authentication automates identity verification for 70%of inbound calls. The remaining 30% require additional verification bycustomer service agents. The organization sets these levels, and it canadjust them to balance frictionless customer service vs. fraudprotection.› Customer service agents no longer ask KBA questions to verifycustomer identities for 70% of the inbound calls. This saves eachcustomer service agent 1 minute per call on average.› The average fully loaded annual salary of a customer service agent is 60,000 (or 30 per hour).› The benefit ramps as the company learns how to leverage NeustarInbound Authentication.The improved customer service agent productivity benefit will vary based11 The Total Economic Impact Of Neustar Fraud and Authentication Solution“Our inbound call centers aresaturated. We needed toreduce the time of the calls,and typically the first 60 to 90seconds of every call was justthe call center agent goingthrough KBA questions. [WithNeustar,] we reduced call timeby at least 60 to 90 secondsby getting rid of that.”CISO, software
on:› The volume of inbound customer calls.› The number of inbound customer service agents and the amount ofcompensation.To account for these risks, Forrester adjusted this benefit downward by10%, yielding a three-year risk-adjusted total PV of 3,105,507.Improve Customer Service Agent Productivity: Calculation TableRef.MetricCalculationYear 1Year 2Year ,000D1Monthly inbound callsD2IVR containmentD3Monthly inbound calls managed by live phoneagentsD4Neustar helps avoid agent time validating identity(% of calls)70%70%70%D5Average customer service agent time savings(minutes per call)1.001.001.00D6Total monthly time savings (hours)5,2505,2505,250D7Customer service agent annual salary, fullyloaded 60,000 60,000 60,000D8Customer service agent annual salary, fullyloaded (per hour, rounded) 30.00 30.00 30.00D9Learning curve ramp50%75%100%DtImprove customer service agent productivity 945,000 1,417,500 1,890,000 850,500 1,275,750 1,701,000D1*D2D3*D4*D5/60 minutesper hourD7/2,080 hours per yearD6*D8*D9*12 monthsRisk adjustmentDtr 10%Improve customer service agent productivity(risk-adjusted)Reduce False PositivesWhen a company flags legitimate customers as potential fraudsters, thatis a false positive. These can result in lost sales, negative customerexperience, and increased employee time spent verifying that thecustomers are legitimate.In a worst-case scenario, when a legitimate customer is flagged asfraudulent, they may not be able to transact, which results in lost sales.More typically, legitimate customers must spend extra time and effort toprove their identities and verify they are legitimate.False positives also mean the company’s in-house teams must use extraeffort to prove the customers are legitimate and can conduct business.For the composite organization, Forrester ass
› Neustar fraud and authentication cost, 2.7 million. The companies spent an average of 1 million annually for the Neustar Fraud and Authentication Solution. › Internal team to support Neustar, 1.0 million. The installation effort took eight weeks, and an internal team of two FTEs supports the Neustar platform.
