How Identity Verification Lowers Business Risk Management?

Today, when you hear of anything – a company, a brand, a product, - one of the first things we’re likely to do is look it up online. If it isn’t online, is it even there? The digital revolution is rightly known as the third industrial revolution. There’s a distinct difference in the way businesses operated before and after the emergence of the internet as a platform for business activities.

Businesses Today

Businesses today have the opportunity for unlimited growth but with this comes added risks. Retailers have almost no idea who they are dealing with and, in turn, they stand at risk of falling prey to fraud. In light of this, having access to a reliable third-party identity verification service has become invaluable for business risk management.

The Rise Of Online Transactions And Fraud

Global retail e-commerce sales in 2018 were approximated to be worth US$2.843 billion. By 2020, this was estimated to reach US$4.135 billion. A large percentage of these sales is attributed to sales in customer-not-present environments. Unfortunately, this has been matched by a growth in online fraud. Payment card fraud in the United States grew from US$8.6 billion in 2017 to US$9.1 billion in 2019. Card not present transactions accounted for 65% of these losses!

There’s also a case to be made for the accessibility of information. By hacking passcodes and other such non-unique-attribute-requiring identification systems, fraudsters can access vast amounts of personal information. This damages the customer’s credit rating as well as the business’s reputation.

Global Response To Identity Verification Solutions

The internet has made it challenging for businesses to identify customers, but, it isn’t impossible. The use of individual identification markers dates back to over 3000 years. The Chinese were probably the first to use a person’s unique palm prints as a tool for identification. In 1858, Sir William James Herschel, a British civil servant designed the first system to capture hand images to identify an individual. The evolution of this idea led to the use of fingerprints for identification and further to the study of how faces, gestures, voices, irises and gaits could be used for identification.

For a business, risk management involves maintaining a fine balance between complying with regulatory policies with minimal operational costs and allowing customers to have a smooth experience. The advantage of modern identity verification solutions is that it can be tailored to every business, budget and mode of risk management. You can choose to verify an identity by comparing account details to a reliable third party database or by using a combination of this and biometrics.

Mobile Biometrics To Verify Transactions

By 2023, transactions worth about US$2 trillion may be authenticated by the use of mobile biometrics such as facial or voice recognition, fingerprints or an iris scan. Biometric hardware is becoming a common feature in smartphones with the most common being fingerprint scanners. The Mobile Pay Security: Biometric Authentication & Tokenisation report suggests that within the next 5 years, 1 billion devices with have features for facial recognition and iris scans.

Within a few years analysts assume that instead of having to enter credit card details, customers will be able to complete an online purchase simply by using their fingerprints or other such unique biometrics. Since every individual’s fingerprint is unique and cannot be copied, this assures the retailer that the purchase is being made in person.

The European Union’s eIDAS regulation

When companies take their business online, it becomes much easier to sell their products to an international audience instead of being limited to the domestic market. However, verifying the identity of a foreigner can be much more difficult than verifying the identity of a person from the same country. The EU recognized this and introduced the EU electronic identification, authentication and trust services (eIDAS) regulation in 2018.

The pilot project involved the Netherlands, Germany and Austria. The three countries were able to make their electronic identification and authentication infrastructure accessible to each other. Thus, a business owner in Germany could access public services in Austria and verify an individual’s identity if needed.

Digital IDs

Many countries are looking into the digitization of identification documents to provide a secure identification tool that leverages the smartphone’s ubiquity. 4 states in the USA are developing digital driver’s licenses while China is digitizing social security cards. India too has digitized various forms of documentation. In Canada, a smartphone app is being developed that will use existing digital identities created by financial institutions to create a unique, verified customer ID.

Closing Thoughts

Using a secure identity verification tool can go a long way in minimizing and managing risks. With the digital solutions available today, businesses can verify an individual’s identity in real-time without compromising on the customer’s experience. It’s a win-win situation for everyone.

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