Gaining Customer Trust

In a new era of digital identities, data breaches are growing and here to stay

• By Christina Luttrell
• Aug 01, 2019

Recent years have confirmed that data breaches are here to stay. Breaches are growing both in intensity and frequency. According to the Identity Theft Resource Center, more than 5.9 million records have been breached in 2019 and we aren’t even halfway through the year.

The effects of these breaches are still unfolding as consumers and businesses cope with an environment of cyber insecurity where personal information from chronic breaches filtrates the dark web, phishing attacks are common and fraud is a constant. From both a business and consumer perspective, concerns about identity as well as trust are heightened.

IDology’s Sixth Annual Fraud Report revealed that nine of 10 businesses believe recent large-scale data breaches have directly impacted fraud in their industries over the last twelve months, resulting in more synthetic identity fraud and customer friction, as well as an increase in compliance and regulation requirements.

Consumers, as expected, are also worried about security, with 84 percent expressing they are highly to moderately concerned about their personal information being at risk due to data breaches, according to IDology’s Second Annual Consumer Digital Identity Study. Some of the key trends we’re observing across industries, as well as consumer segments, are:

Unprepared for the Increase in Mobile Fraud

Mobile devices have become the preferred way for many consumers to manage their lives and conduct business. With this shift to mobile first, fraudsters are increasingly turning their focus to exploit the channel’s vulnerabilities, evidenced by a 117 percent increase in mobile fraud in 2018 compared to the previous year.1

In the last 12 months, consumers opened more new accounts on mobile devices than on computers, according to IDology’s Second Annual Consumer Digital Identity Study. As mobile preference as well as fraud increase, it’s unsurprising that many companies feel unprepared. In fact, 32 percent of companies stated they don’t feel prepared to detect and prevent mobile fraud.

Companies that are embracing mobile to capture more business will positively provide consumers the type of experiences they require, but need to also respond to the ever-changing fraud trends by securing those channels to deter fraud without hindering the consumer experience.

Security is Crucial

Another key finding from the Second Annual Consumer Digital Identity Study is that consumer’s value security over speed during account sign-up. Eighty-eight percent of online consumers said they highly valued a secure account opening process compared to 57 percent who valued a quick process. However, when asked how they felt about additional verification and security checks that slowed down an account sign-up or high-risk transaction, 75 percent stated they were “strongly” or “very” opposed to the interruption.

As a result, businesses struggle to consolidate two prevailing but conflicting mindsets: keeping fraud out by making verification harder and bringing in more customers by making transactions seamless.

Who is Responsible?

IDology’s Second Annual Consumer Digital Identity Study also found that the perception of who is responsible for protecting consumer data is also changing, and perhaps for the better. Seventy-eight percent of consumers strongly believe it is a company’s responsibility to protect their personal information, increasing from 67 percent last year, while 68 percent of consumers strongly believed it is their responsibility, increasing from 59 percent last year. This translates to both consumers and businesses having a deeper sense of responsibility related to taking actions to protect their own and their customers’ information. For example, Two-Factor Authentication (2FA) is becoming more the standard for high-risk transactions and account openings: In the last 12 months, more than half (53 percent) of consumers have been required to provide further proof of their identity when opening a new account or using an existing online account.

A recent poll conducted by IBM/Harris reported that 75 percent of U.S. consumers won’t do business with companies they don’t trust to protect their data. The IDology Consumer study echoes this trend, with more than two-thirds of consumers surveyed (71 percent) reporting that knowing more advanced identity verification methods were being used would positively affect their decision to do business with a financial institution. This is a dramatic 27 percent increase over last year, when only 56 percent of Americans felt the same way, and shows that companies need to prioritize protection efforts related to customer data—not only for increased loyalty, engagement and trust, but also to decrease the risk and costs related to fraud.

A New Approach to Identity Verification

Thinking about identity verification in a different way, not just as a compliance check but as a strategic differentiator, is key to preventing fraud and friction. Businesses also should consider:

Increasing trust and addressing consumer concerns help drive new business. The importance of trust has top-line implications, particularly in financial services, as identity verification becomes much more of a competitive differentiator and moves from the back office to the front lines.

To build trust, more secure data exchange is needed. By verifying identities using a multi-layered identity verification platform that accesses and correlates different sources of data—mobile, email and location attributes, to name a few—companies can shift to a more secure process, ensuring agile verification and a frictionless experience while also deterring fraud. Using dynamic, rather than static, data and correlating layers of identity attributes to create a holistic and accurate picture of a person’s identity deliver a more reliable predictor of risk and higher locate rates when verifying an identity.

Friction and prevention don’t have to be mutually exclusive. Instead of a balancing act, think about verification on a per-customer basis: What is the right amount of friction for this specific person and when is the right time to introduce it? A multilayered identity verification solution that examines an assortment of attributes and can dynamically make decisions based on a variety of parameters is the most effective way to maintain strong security while also ensuring customers only experience friction when necessary. It also prepares organizations for tomorrow’s consumer, economy and fraud trends.

Take advantage of collaboration to decrease fraud and risk. By accessing a collaborative consortium fraud network across multiple industries, supported by machine learning and a team of fraud analysts, businesses can gain timely alerts and actionable insights to detect and deter fraud.

Keep a step ahead. Staying on top of trends, advances in technology and the dynamic ways that systems are being compromised by fraudsters will again help to ensure trust.

These considerations along with a shift in thinking about identity verification as a strategic differentiator can help businesses bolster consumer trust in a new era of digital identities and prevent fraud and friction and drive revenue.

This article originally appeared in the July/August 2019 issue of Security Today.