Joe Bloemendaal, Head of Strategy at Mitek, explores why now, is the perfect time for banks and financial services firms to be finding ways that can tackle fraud with a few clicks
Fraudsters have been taking advantage of the pandemic crisis ever since it started, using various means to scam the public. From fake government texts, phishing links in emails, to advertisements of supplements that falsely claim to cure or prevent COVID-19 – the list goes on. Since the start of the COVID-19 pandemic, fraud cases have been on the rise, with more than 2,500 scams being reported to investigators in the UK by the start of April alone.
As we spend more time online, communicating with friends and family, shopping for groceries and signing up to virtual workout classes, the threat of fraud also continues to mount up. During lockdown, Action Fraud reported that over £16 million were lost to online shopping fraud, highlighting just how significant the problem is.
While not every case of fraud is directly relating to banks and bank accounts, it’s vital the financial services industry is listening and finding ways to help tackle this growing issue. Banks and financial services firms need to protect their customers against the tidal wave of fraud. So how is this possible while keeping their own businesses afloat during this economic turbulence? Let’s find out.
KYC with a selfie
It wasn’t so long ago that every bank still required new customers to onboard in a branch, face-to-face. Since the start of the COVID-19 pandemic, it’s not just this that has changed. Our whole world is now online.
That’s why the FCA’s recent call encouraging banks and financial institutions to use selfies to verify new customers was a welcome relief. It was finally the step forward that many in the industry had been calling for, for years. For banks still operating on archaic in-person checks, almost impossible during lockdown, it was a call to arms.
In-person checks stem from the need to verify the identity of every customer, to comply with Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations. Banks need to know that we are who we claim to be. If they don’t do their due diligence here, they face enormous fines from the regulator, and massively increase the risk of fraud for themselves and their customers.
According to Experian, 95% of businesses believe they can identify their customers accurately. But 55% of consumers disagree. This may be because for too long, these checks have been taking place in person, or in long-winded online forms. Both require documents that are hard to find and hurdles that are laborious to jump through.
To fight off increasingly sophisticated fraud threats, banks need equally sophisticated technologies. But it’s no use relying on technology alone. Even more important is combining technology with the human eyes from a team of global security experts, well trained to identify fraudulent documents and faces. This is where digital identity verification – and the humble selfie – comes in.
The move towards selfies by the FCA proves that the regulator believes now is the time for every bank, not just the most digitally advanced, to move towards digital identity verification. Having a new customer take a selfie, and a photo of their ID document, and then compare the two is quick and effective. It also puts up a very strong fight against fraud, if the right technology and service providers are used.
Achieving customer satisfaction
During the pandemic, consumers are more conscious than ever of the experience they have when interacting with brands and institutions. We’re buying more online and becoming much more reliant on digital channels to do everyday things. As such, consumers are now forced to become more digitally-savvy.
This also means that customer satisfaction is more important than ever, a fact that has not escaped the banks – particularly with the Competition and Markets Authority’s customer experience ranking weighing on executives’ minds. A quick and simple onboarding experience, without sacrificing security, tops the list for both banks and their customers. No one wants to be left out in the cold right now.
Accounting for all generations
With that in mind, many believe the ‘selfie-first’ approach could potentially leave out some of society’s most vulnerable. Take the over 70s. Ensuring that older generations can access the same speed and simplicity of service is vital – especially at a time when millions are shielding or self-quarantining in their homes, at greater risk from the virus than their younger counterparts.
A couple of years ago, this may have been an insurmountable hurdle. Older people prefer in-person interactions – it was a universal truth. But now, 95% of UK households have access to a mobile phone, compared to just 80% in 2010. Since we know that older people, especially those living alone, are much more susceptible to fraud, this shift towards digital is absolutely critical.
But a mobile phone is not all it takes for digital identity verification to be a success. Being able to use a mobile phone is one thing, but signing up to new digital services and setting up online banking accounts may seem like a Herculean task to this audience.
Banks and fintechs must ensure that these processes mimic the in-person interaction that older people are so used to. Onboarding should be personal, simple, speedy – but not compromise security. Getting this right will be key to helping navigate this ‘new’ fully digital world, both as the threat rises during COVID-19, but also long-term. We should be doing all we can to give the ‘golden generation’ access to the digital economy that has so far shut them out.
But it’s not just older generations. There are also increasing threats to children’s’ online identities, which worryingly also need protecting from fraudsters. A record number of data breaches in 2019 exposed over 15 billion records – a new worst year on record. On the black market, children’s clean, unused identities are worth top dollar.
For parents, it’s critical to start protecting your child’s identity sooner, rather than later. This means putting as many barriers in place as possible. Opening a bank account in their name, which will need to verify their identity, is one of the simplest ways to do this quickly and effectively.
We’ve got a long way to go until fraud can be wiped out once and for all. For now, a selfie and the combination of AI and human expertise, appears to be a promising bet to ward off the fraudsters. Banks and financial firms will need to prove their security is up to scratch and for consumers, they’ll need to put their best face forward – quite literally – to make their most important financial decisions.
The potential that digital identity verification holds is huge, and it’s unlikely to stop with sign-ups and onboarding. Now is the time for organisations need to get on board fast – before the fraudsters catch up.