The wireless operators have sold this service. Citi can verify that your name is associated with a specific wireless phone account. The text PIN shows that the person calling about the application has access to that wireless phone account. Citi can also see that the wireless phone account is associated with a cluster of other accounts in the same name. The larger the cluster, the higher the confidence that it is the same person.
This is not "proof" of identity, in the sense of 100% certainty, and it does not "eliminate" the risk of fraud, but it reduces the risk because it is It is evidence that the applicant is real.
Probably like others on this forum, I've had my card blocked by fraud control at inconvenient times. Last summer we had a three week trip Downunder en route to Cairns and Kakadu, DW and I both with new cards, we had duly filled out the travel notices. But sure enough the 1st time after using the card in BNE, it was blocked. I called fraud control and they do the verification by leaving a code on your answering machine of your home phone number. Well I explained that I had no way to get the code; but he was able to verify my identity surprisingly by calling Chase to confirm using one of my chase credit card numbers. So my card was unblocked and it worked fine the rest of the trip. However, for my DW they only offered calling the home phone and would not budge, we gave up on using her card for the trip.
Another time, I tried using it for Medicare quarterly payment. You can pay using a credit card if you send it by mail, so I did using my Platinum Select. A week later, I got a letter that it was rejected. I called both the bank and Medicare and there was no way to redo except for mailing it in again, well I forgot that idea and paid it online using a bank account.
But it always works fine for GCs, btw I read somewhere that you can do a single transaction for up 25% of your credit limit.