The innovation of the decade?
By Matthew Peake, Global Director of Public Policy, Onfido
Before the digital economy transformed the way consumers interacted with products and services, the way companies managed and verified their customers’ identities remained relatively stagnant. For many organizations, the default process was to require a user to show a physical document like a paper ID, or enter a one-time passcode. This was particularly the case in banking, travel and even voting.
Over time, companies have looked for alternatives to verify the identity of customers online for the convenience of users. One method was to use knowledge-based authentication (KBA) to verify identities in a virtual space. Powered by the credit bureaus, it forces consumers to answer “secret questions” about themselves and their financial history that only the legitimate person would be expected to know. However, this is often a long and frustrating process for users. Additionally, as fraudsters’ tactics have evolved and data breaches have become more prolific, these systems have become direct targets for bad actors due to the sheer volume of information and data they hold.
But as the past two years have seen a decisive shift towards online services, what began as a mission of convenience is now a necessity that aligns with a long-term behavioral pattern. In reality, one in two now feel more comfortable with online services than before the pandemic. So, as companies pivot to meet their users online, it’s a financial, reputational and, in some cases, regulatory obligation that they can verify their customers accurately and securely. This is where digital identity innovation can serve as a bridge between the physical and virtual worlds, provide protection against identity fraud, and onboard customers quickly and seamlessly.
What drives digital identities?
The value of digital identities has been clearer than ever over the past two years, helping businesses to effectively onboard new customers as the digital economy has grown. But it is not the only reason.
Today’s fraud landscape is changing rapidly. As consumers moved online, malicious actors followed closely. So much so that identity theft has increased by 44% since 2019, while the level of organized crime has also surged with improved tactics such as 2D/3D masks, deepfakes and replay attacks all being deployed. As a result, users are increasingly aware of their online presence and the value of their personal data. Indeed, recent studies show that 57% of consumers now fear their identity is available for purchase online. As a result, many are taking a pragmatic approach to fraud, especially in banking and finance. More than 40% of banking customers, for example, said they would immediately close their account or switch providers if it were compromised by fraud.
This shows that the stakes are higher than ever for online businesses: failing to verify the identity of customers and they could be hacked, expose their users to fraudsters, lose revenue and ultimately dismantle the trust they have built. . Over the next decade, digital identities will be crucial for businesses to stay ahead of increasingly sophisticated fraudsters.
Setting a new standard for virtual identities
But how do they do this? Today, digital identities rely on emerging and innovative technologies designed to mitigate fraudulent attacks.
Machine learning and biometrics play a vital role in the digital identity verification process. They allow users to verify their identity simply by taking a picture of their ID and posting a selfie. This confirms that he is the rightful owner of the ID and is physically present. Unlike traditional KBA processes, this protects against identity theft and impersonation, and greatly reduces the potential for identity fraud.
Beyond that, digital identities are now combined with advanced innovations such as AI and low-code solutions to fuel best practices in fraud prevention. For example, AI automates the entire identity verification process, allowing companies to select “pass” requirements based on risk and complete verifications in less than 10 seconds. This means businesses can tighten the security behind their onboarding controls for high-value or riskier services, such as mortgage applications and loans, without impacting the overall customer experience.
While no-code and no-code solutions make it easier than ever to implement digital identities for businesses. With improved accessibility, all businesses can access powerful analytics and make smart, real-time decisions about the onboarding process, staying ahead of fraudsters and protecting users.
The coming decade
Early adopters are already seeing the benefits of this new and improved identity verification standard. Today’s sophisticated fraudsters have closely followed consumers online and it is no longer enough to combat this threat by requiring users to enter a one-time passcode or show a physical ID document to prove their identify. Those who do so risk damaging their reputation, losing revenue, and breaking trust with their users.
Fraud prevention best practices now rely on advanced AI and biometric technology to deter fraudsters and allow businesses to tailor their protection based on risk. It’s what will keep companies and their users safe in virtual spaces, replicating the level of security and convenience found in the physical world, and why it should earn the title of Innovation of the Decade.