How advanced verification technology stops sophisticated student discount fraud

SheerID, a Portland-based company founded in 2011, has built its business around solving a persistent problem for retailers and service providers: verifying that consumers actually belong to groups eligible for special discounts, such as students, military personnel, or healthcare workers.

“We verify that customer audience data, and then we enrich that brand CRM with this permissioned data, so that they can fully engage their most loyal audiences,” explained Rebecca Grimes, Chief Revenue Officer at SheerID, in an exclusive interview with VentureBeat. “Our platform is built so that we can deliver this seamless, secure and fast experience for their consumers.”

The verification process begins with basic information like name, date of birth, and university. SheerID immediately checks this against authoritative data sources, which Grimes said the company has built relationships with over 14 years in business. If instant verification fails, the system moves to document review using both AI-powered analysis and manual verification.

“If we are unable to process that through our authoritative data sources, then there is an incremental step where you add a document upload,” Grimes said. “Once that goes into our system that is another layer of supplemental review that is both automated through our AI document review process as well as, in some cases, manual doc review.”

The company can complete this secondary verification process in an average of under 3 minutes globally, Grimes said.

Why identity-based marketing offers deliver 337% ROI for major brands

The partnership reflects the growing sophistication of fraud in student discount programs. Jesse Dwyer, head of communications at Perplexity, said the company’s focus on accuracy makes it particularly valuable for academic users who need trustworthy information.

“For most AI model makers, a certain amount of hallucination is a feature, and for Perplexity, it’s a bug,” Dwyer said in an exclusive interview with VentureBeat. “That’s something that we found academics value, students value it, finance professionals value it enormously.”

Unlike competitors that train AI models on user data, Dwyer said Perplexity doesn’t use customer information for training purposes. “We don’t train on your data,” he said. “The model doesn’t actually get trained on your data.”

SheerID operates on a software-as-a-service model, charging for platform access, verification processing volume, and support services. The company, which has about 160 employees with offices in the U.S. and Europe, works with major brands including Amazon, Spotify, and T-Mobile.

According to a study commissioned by SheerID from Forrester Consulting, customers using the company’s verification platform achieved a 337% return on investment through increased revenue, fraud prevention, and operational savings.

How Perplexity aims to beat ChatGPT and Google in the battle for student users

AI companies increasingly target the education market. Perplexity differentiates itself from larger competitors like OpenAI’s ChatGPT and Google’s search tools by emphasizing accuracy and source attribution.

“What we do with third party models is we do two forms of adaptations,” Dwyer explained. “We build our own in-house models that look at the query that you’re asking… We’re reformulating queries. So you ask a question one way, what AI is good at is it can ask that same question thousands of different ways.” Dwyer noted that query reformulation is just one example of the many techniques Perplexity employs to constantly test for and achieve higher accuracy.

This focus on accuracy addresses concerns among educators about AI tools that can generate plausible-sounding but incorrect information. Dwyer said Perplexity’s approach aligns with academic values around building knowledge through verified sources.

“The peer review system was developed to create a sense of accuracy… so that future generations can build on that established knowledge,” he said.

The real cost of giving away millions in free AI services to students

The student access program is a major investment for Perplexity, though company executives declined to specify the cost. Dwyer noted that unlike traditional software, AI tools have direct computational costs for each query.

“Every query has a direct cost in terms of compute,” Dwyer said. “That’s something that we’re mindful of, and we build our partnerships around.”

However, the company sees strategic value in building relationships with academic users. Unlike many tech companies that monetize through advertising, Dwyer said ads represent “less than a half of a percent of our revenue” and the company doesn’t sell user data.

The partnership provides SheerID with exposure to the rapidly growing AI market. Grimes compared the current moment to the early days of music streaming, when SheerID began working with Spotify and other services.

“I think that we’re going to see similar global programs in the AI industry, beyond just engaging with students that will be needed, needing services like SheerID to support their success,” she said.

How student data stays protected in an era of AI privacy concerns

Both companies emphasized their approach to data privacy, particularly important given recent concerns about AI companies’ use of personal information. SheerID operates as a data processor rather than controller, meaning customer data belongs to the brand partner rather than SheerID.

“We’re processors, so we’re not a controller, so we are just processing that data on behalf of that brand,” Grimes explained. “We don’t take control of the ownership of that consumer data.”

The verification system looks at additional signals beyond documents to prevent fraud, including IP address location and proximity to claimed universities. This “triangulation of all of these processes and data” allows SheerID to “confidently confirm eligibility or ineligibility against an offer,” Grimes said.

What this partnership signals for the future of AI in education

The partnership reflects broader trends in both the AI and identity verification industries. SheerID has expanded rapidly in recent years, launching new products for in-store verification and income-based eligibility checking. The company appointed former Ruby CEO Stephanie Copeland Weber as CEO in June 2024, as founder Jake Weatherly transitioned to a board role.

For Perplexity, founded in 2022, the education market represents a natural fit for its research-focused AI tools. The company processes more than 150 million questions weekly globally and has positioned itself as an “answer engine” that provides sourced information rather than generating creative content.

The partnership comes amid broader scrutiny of AI’s role in education, with institutions grappling with questions of academic integrity and the appropriate use of AI tools. By requiring verification and emphasizing accuracy, both companies aim to address these concerns while expanding access to AI capabilities.

“We would encourage educators and universities or researchers of any kind to reach out and try perplexity,” Dwyer said. “We’re one of the few leading tech companies that’s founded not just by a PhD student, which is fairly common, we’re founded by one who actually finished his PhD.”