Businesses seek to balance fraud fighting, customer friction

Striking a balance between fraud reduction and customer friction is the biggest challenge facing businesses today. Sixty-six percent of businesses recently surveyed by IDology said balancing these two concerns is their greatest challenge in fraud prevention, up from 40 percent a year ago

"Consumers want protection, but they also want convenience. While fighting fraud it's important to remember that the vast majority of transactions that occur each day aren't attempted fraud; they're legitimate customers," the IDology 2018 Fraud Report states. Headquartered in Atlanta, IDology specializes in identity verification, authentication and fraud prevention for card-not-present environments. This is the sixth such report it has produced in as many years.

Identity verification increasingly has become a revenue driver and a tool for reducing risks. Evidencing this, a majority of firms IDology surveyed (85 percent) said it can be a strategic differentiator, despite being more complicated. And consumer opinion seems to validate this view. The report noted that separate research conducted by IDology, The Consumer Digital Identity Study, indicates 56 percent of Americans would be more likely to choose a financial institution if it used highly advanced identity verification methods to render the account origination process more secure.

"The prevailing mindset that in order to keep fraud out, the customer verification process has to be made more difficult is quickly becoming outdated," said John Dancu, IDology's CEO. "In our modern connected world it's no surprise that fraud is on the rise and becoming more sophisticated. Winning businesses will be the ones that take a strategic approach to identity verification with the realization that they can offer frictionless customer convenience and effective fraud deterrence to ultimately cultivate customer trust."

Mobile fraud challenges many; new verification tools help

According to the report, nearly 60 percent of businesses saw increases in fraud attempts over the past year. Increases were most prevalent among banks (71 percent experienced more fraud this year than in 2017), followed by fintech (60 percent), healthcare (57 percent) and insurance (56 percent) firms.

Here are some additional highlights from the report:

• Credit card fraud and account takeovers remain the most widespread forms of fraud;
• The share of businesses reporting mobile device attacks increased more than two-fold, from 18 percent in 2017 to 39 percent this year;
• The number of businesses believing their industries are least prepared to detect and prevent mobile device attacks increased 167 percent between 2017 and 2018;
• 71 percent of businesses say identity verification has become more complicated over the last three years;
• The technologies that are expected to contribute the most to identity verification over the next three to five years are mobile device attributes for verification (cited by 44 percent of surveyed businesses), artificial intelligence (42 percent), machine learning (41 percent) and submitting ID documents via mobile devices (40 percent).

"We are at a crossroads where the movement to mobile meets high consumer expectations and sophisticated fraud schemes," said Julie Conroy, research director of the retail banking and payments practice at Aite Group LLC. "Identity verification is now something that businesses must consider as a key strategic factor for market differentiation and growth. A seamless and multi-layered approach with an anti-fraud consortium network of companies across industries is now table stakes."

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