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Six Predictions for Identity Verification and Fraud Protection |

During the pandemic, the world has witnessed a dramatic confusion of tech-driven trends. Digital adoption across industries, online business operations, and technology-enabled communications have shifted into high gear. People and businesses have adapted. Fast. We shop, meet, work, play and learn now on the digital screen. In such a landscape, threats have also multiplied. Andrew Sever, co-founder and CEO of Sumsub, shares six key predictions to consider for improving identity verification and fraud protection in our dynamic, digital and vulnerable world.

As 2023 approaches, it becomes increasingly clear that this is the new normal. Despite traditional mindsets or rumors of hardcore returns to the office, forward-looking generational behaviors are here to stay.

But alongside all the tremendous benefits of our new next-level digital interconnect, there is a serious escalation in fraud. Crimes involving digital transactions and identity have become more frequent and sophisticated. McKinsey recently pointed out that data from the FBI and FTC shows that fraud losses in 2021 in the United States jumped to $5.9 billion and Internet crime losses jumped to $6.9 billion, “of increases of approximately 436 and 392%, respectively, over 2017”.

Companies face a critical need for powerful and customizable verification and monitoring tools in their KYC (Know Your Customer), KYB (Know Your Business), transaction monitoring and AML (Anti-money laundering) efforts. Indeed, a Sumsub Identity Fraud Report 2022 analyzing over 500,000 fraud cases and millions of verifications across 21 industries, fraudsters are estimated to have stolen 3.6% of all e-commerce revenue in 2022, 40% of payment merchants now prioritize payment prevention of illegal chargebacks and 46% of payment fraud growth occurred from 2021 to 2022, significantly increasing the share of this type of fraud globally.

Against this backdrop of unprecedented challenges created by accelerating digital adoption, at least six trends in improving verification and combating fraud will impact businesses around the world in 2023. Let’s take a look. a look.

Learn more: DevSecOps accelerates incident detection and response efforts

1. A shift towards full automation

The use of advanced technology in business processes – from delivering products and services to paying bills and managing workers – with minimal human intervention will continue to increase. For example, when onboarding a user for a fintech app or even for onboarding an employee to a new role, a workflow system can trigger a set of predefined steps to send an email from welcome, set up security credentials, and set up financial details in payment or compensation systems. . Workflow automation can improve the efficiency and accuracy of each step, but these gains must be balanced with different types of verification. Validating email addresses and phone numbers, reviewing user risk profiles, running additional checks based on candidate actions, and setting triggers in the check logic for rare manual reviews cases should all be part of the automated process and increasingly will be.

2. Documentless onboarding will become the new normal

Documentless onboarding is increasingly being implemented in the fintech, trading, crypto, marketplace and transportation industries and for online businesses worldwide – enabling verification of a user with a liveness check and cross-checking his facial biometrics with his ID and picture from an official state database. This type of verification comes in handy for users in both mature and emerging markets. They don’t need to scan their documents, and the verification is exceptionally secure because it taps directly into government databases. Users often know their ID numbers by heart in emerging markets like India, Indonesia, Brazil and Nigeria.

For travelers, documentless onboarding can involve presenting a QR code on their mobile device to share their ID and look into a camera at a TSA checkpoint. The TSA’s computer system will associate the traveler’s encrypted image with the airline’s mobile ID, a process that typically takes less than five seconds.

3. The tension between hyper-personalization and privacy issues will increase

Hyper-personalization of products and services is one of the most beneficial ways for businesses to connect with customers, making them feel known and understood. This leads to better customer satisfaction, loyalty rates and business results. As a data-driven approach, to be successful it requires a shift to personalized identity and transaction verification processes as well as the accumulation and use of customer behavioral data.

But, while many customers like to feel connected to brands, they also want to know that their privacy is protected. When hyper-personalization is done poorly, it risks violating customer trust. With cases like this class action As Apple’s mobile app tracking will be sorted in 2023, the tension between personalized experiences and privacy will be in the spotlight.

4. Anonymity will be increasingly difficult to achieve

Unsurprisingly, as hyper-personalization and privacy issues collide, questions about convenience and the possibility of anonymity will continue. A fundamental study by Pew Research found “59% of American internet users think it’s impossible to completely hide your identity online.” As the digital presence has only expanded, this skepticism is more prevalent than ever. More than at any other time in modern history, advertisers are tracking digital habits across the internet and across devices (phones, tablets and laptops) to find out where we go, shop and what websites we usually visit. Governments track additional data.

There is no doubt that controlling the collection and pull of data by all the apps and devices we own and use is complicated. Even with limited use, our personally identifiable imprint is still in the ether.

5. Strict crypto regulations and anti-money laundering protections will increase

One of the reasons blockchain technology and the use of cryptocurrency have been so appealing is that anonymity was initially a core concept built into the technologies. Eliminating the control of big banks, combating the collection of unapproved data, and transacting democratized and anonymously in a decentralized global ledger system backed by thousands of computer peers is ideologically appealing to many.

But it’s well documented that criminals have flocked to crypto and its often difficult-to-trace origins to launder money earned from nefarious activities. Research documents an approximately two-fold increase in crypto fraud, from 0.7% of all cases to 1.5%. Until 2023, crypto exchanges and providers are being pressured to prohibit operations from Russian users, as well as other state and individual actors. We can expect to see more crypto regulations across the globe. Switzerland has already introduced a new ruler for identity verification for any crypto transaction over $1,005. In our new digital reality, banks’ anti-money laundering responsibilities will eventually extend to all kinds of fintech institutions.

6. The fight against AI-generated deepfakes will become essential

Fraudsters continue to develop increasingly sophisticated, AI-powered deepfake technology and the proliferation of fake profile creation leveraging this on social platforms likely means that these platforms will turn to KYC technologies in a near future to protect users from social engineering. According to the input data, some deepfakes are so difficult to distinguish from reality that only sophisticated anti-fraud algorithms can reliably detect them. By using verification platforms designed to combat deep-seated advances, individual identity and businesses are better protected.

As a result of the changes we have observed over the past few years, Gartner recommends that “risk leaders recognize organizational resilience as a strategic imperative and develop an organization-wide resilience strategy that also engages staff, stakeholders, customers and suppliers.” Verification in KYC, KYB, transaction monitoring, and AML efforts must play a key role in these strategies in 2023 and beyond.

How do you strengthen your anti-fraud stance and improve identity verification? Share with us on Facebook, Twitterand LinkedIn.

Image source: Shutterstock


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