Fraud – specifically, identity fraud – is one of the biggest threats plaguing the UK banking industry. When you consider that fraud costs the UK banking industry an estimated £1.2 billion, and that a new incident of financial fraud was reported every 15 seconds in 2018, the sheer scale of the problem becomes clear.
Increasingly regular data breaches are making fraud easier to perpetrate than ever before. The explosion in online and mobile banking has opened new channels for criminals to infiltrate and for banks to safeguard. Worryingly, banks and financial institutions are still relying on outdated approaches to identity verification which are simply not up to scratch in today’s threat landscape.
So, what’s the solution, and how can we finally gain the upper hand when it comes to identity fraud?
Identity fraud: the perfect storm
Identity fraud is largely being driven by the accelerated adoption of digital banking and payments. The faster the payments, the faster the fraud. The mobile channel has become a particularly prime target for hackers, with incidences of mobile banking fraud increasing 20 percent from 2017 to 2018.
Data breaches expose colossal amounts of PII across the web, and are a major contributor to identity fraud. With this type of data in hand, it’s relatively straightforward for criminals to cross-reference breached data to commit account takeover fraud and new account fraud.
As the threat landscape makes things easier for criminals, banks are being overrun by identity fraud, as they have long relied on legacy, manual identity verification methods and static credit agency data to determine the identity of a customer. The danger? If stolen, then it’s all too easy for bad actors to infiltrate accounts or apply with fraudulent applications, and once data is out in the wild, there’s no controlling its spread.
What’s more, as banks further shift to digital channels to better serve their customers, this creates even more challenges in verifying identities effectively.
These factors create a perfect storm for identity fraud to take place as criminals have a wealth of PII data at their fingertips to attack flimsy identity verification processes. While third-party breaches may be outside of their control, banks can no longer rely on static knowledge-based authentication for identity verification.
A modern wave of identity verification
The consequences of identity theft exposure should make banks to take a critical look at their legacy identity verification processes. Where do they start, and what are they supposed to do?
By combining traditional identity verification methods with advanced risk analytics, powered by AI and machine learning, banks can achieve context-aware identity verification. This involves a variety of checks, including real-time account checking, ID document capture, biometric verification – such as taking a ‘selfie’ to match with ID – and device geolocation.
This approach enables organizations to review and analyze multiple pieces of information from different sources and across multiple digital channels, whether online, mobile or both, to make security decisions in real-time, based on the total risk associated with a new customer. Which, in turn, lowers a banks risk of fraud in the new account opening process.
Less fraud, faster growth
The benefits of a modern identity verification go beyond mitigating identity fraud. It also plays a major part in giving banks the ability to fully digitize their services to better serve customers and drive top line revenue growth.
Customers are demanding more from their banks. They expect a fully digital and seamless customer experience that are available online and on mobile devices. New account opening that requires an applicant to physically visit a remote bank branch to verify their identity in person is not only inconvenient, but adds additional time and manual steps to the onboarding process that can quickly frustrate customers to the point where they will abandon the process altogether and go to another bank.
If banks offer multiple digital identity checks that effectively verify a customer’s identity remotely, without compromising security, then this will help increase pass rates, boost the customer experience and reduce application abandonment rates. By doing this, banks offer a simple, modern account opening experience that helps to quickly acquire new customers, retain loyal customers and drive services growth, all while mitigating the exposure to fraud.
The explosive growth in digital banking, alongside the relentless threat of cyber-attacks, is creating new challenges for banks to effectively verify identities. It’s clear that if banks do not review their legacy processes and solutions fast, the threat of application fraud will exist for years to come.
Modern identity verification will not only stand them in good stead to finally gain the upper hand in the fight against identity fraud, but also goes hand in hand with banks digitizing their new account opening processes, to remain competitive in an increasingly challenging market landscape.