Identity Verification: An Optimal Solution for Payment Fraud
2018-11-19 11:01 Monday
Achieving a balance between transaction security and convenience is perhaps the biggest challenge for the mobile payment industry. Contactless card and mobile transactions have become increasingly common in the UK, which has eased the transition process for both customers and retailers. However, a lack of security barriers has also meant that payment fraud has soared.
Contactless payment usage in the UK increased by nearly 30% between June 2017 and June 2018, and has been credited with maximizing convenience by reducing queuing and waiting times. Due to this, future growth seems all but assured.
However, the downside of this explosive growth has been a higher vulnerability to payment fraud. Official figures from UK Finance reveal that contactless card and mobile fraud increased by 117% from 2017 to 2018, reaching $5.6 million. Criminals take advantage of cracks in the payment security system to take possession of cards or devices and make small, but nearly instant, purchases. Moreover, the nature of contactless transaction makes the fraud difficult to spot through traditional anti-fraud measures.
A recent report notes that 85% of businesses consider identity verification as the most effective safeguard for payments, due to increases in fraud, competition, and consumer expectations. As a result of prevailing fraud, identity verification has also become more complicated over the last three years. New trends in identity verification include artificial intelligence, machine learning, and mobile document capture. Biometrics are considered more secure by most consumers and are preferred over other methods such as digital identification. For many users, identity verification methods are an important factor in choosing a payment platform.
"The prevailing mindset that in order to keep fraud out, the customer verification process has to be made more difficult is quickly becoming outdated. In our modern connected world, it's no surprise that fraud is on the rise and becoming more sophisticated. Winning businesses will be the ones that take a strategic approach to identity verification with the realization that they can offer frictionless customer convenience and effective fraud deterrence to ultimately cultivate customer trust," said John Dancu, CEO of IDology.
"We are at a crossroads where the movement to mobile meets high consumer expectations and sophisticated fraud schemes. Identity verification is now something that businesses must consider as a key strategic factor for market differentiation and growth. A seamless, comprehensive and multi-layered approach with an anti-fraud consortium network of companies across industries is now table stakes," said Julie Conroy, Research Director for Aite Group.