Cyberattacks on financial institutions such as banks are not just growing in volume but also in terms of complexity and speed. This ever-evolving threat is costing billions. The severity of the situation can be better understood by this comparison:
In 2018, the Home Office revealed that the UK’s financial sector faces economic crime losses worth £14.4bn every year, while cybercrime victims alone lost £34.6 million between just April and September. In 2020, cybercrimes accounted for more than USD 600 million in reported victim losses. By using identity verification technology along with a risk-based approach, banks can shield themselves against such disastrous threats.
An Ongoing Threat
Ongoing data breaches lead to exposed Personally Identifiable Information (PII). Thanks to this, it has become increasingly convenient for criminals, imposters, and identity thieves to use the stolen data to open new accounts and avail numerous benefits. This makes identity theft easier to commit than ever before.
Given the scale, frequency, and impact of cyberattacks on consumers and businesses, it is important to be aware of the current fraud landscape. And more importantly, this bog will also shed light on online identity verification technology that banks can use (if not already) to prevent identity fraud.
Fraud Rates are Going Up
Fraud such as money laundering, bribery, corruption, account takeovers, etc. costs businesses billions of dollars each year. The Financial Conduct Authority (FCA) estimated that approximately £650 million is spent by the UK government every year to combat financial crimes. Considering that this estimate does not include IT investment costs, the actual number is in all probability much higher. What makes it more alarming is that fraud management solutions will hit an all-time high by 2023, reaching a value of £7.6 billion according to Forrester. Evidently, the threat is here to stay.
For banks, fraud prevention technologies continue to lower down fraud costs that otherwise would have accounted for much more. However, this does not mean that the threat has been controlled and managed for good. Criminals are using sophisticated techniques and advanced technology to commit financial crimes. They now have top-of-the-line weapons for attacking customer information, digital platforms, and company databases. By using social engineering tactics such as the use of deep fake videos, taking advantage of weak security systems has become a breeze.
Traditional fraud control methods such as manual customer identity verification are no longer deemed sufficient. With fraud rates outpacing the investment being made on fraud prevention tools, a new strategy must be devised.
Identity Theft Is The Fastest Growing Crime
Unfortunately, the probability of you having your identity stolen is much higher than you may think. In 2020, losses for identity theft victims reached USD 219.48 million. With data breaches and phishing attempts being the primary facilitator behind this crime, the consequences are considerably devastating.
After Ticketmaster’s massive data breach in 2018, customers were warned by the company to change account details as they were exposed to identity theft, while the Marriott hotel offered identity theft mooting services free of charge to all its customers after 5.3 million passport numbers were exposed. This proves how clear the threat is.
Online Platforms Are Vulnerable
With the world going remote and preferring to avail services online for maximum convenience, financial institutions had to shift towards digital platforms. However, with more customer data being stored online, the probability of data breaches more than tripled. As evident in the notorious Equifax data breach incident, fraudsters steal a customer’s social security number (SSN), date of birth, and financial information to gain illegal benefits. This also makes it easier for criminals to avoid being spotted during identification and verification checks during customer onboarding.
Data breaches are showing no signs of stopping down. In fact, the crime is becoming more complex with every passing day. The consequences, particularly that of identity fraud, have forced banks to abandon traditional methods of identity verification. The good news is, developments in the field of AI have introduced modern identity verification techniques to overcome this threat.
- Risk-based Approach
It has become increasingly difficult to detect the fraud taking place on digital channels. As a result, the rule-based approach for fraud prevention and detection is no longer sufficient. To stay ahead, banks need to utilize machine learning and AI-powered solutions across all online platforms. This would help allocate an automated risk-rating according to the level of risk associated with every customer, minimize manual effort, create a robust mechanism for fraud detection, weed out fraudsters during the initial stage of account opening, and assist in the detection of suspicious patterns.
- Digital Identity Verification
With a fusion of traditional identity verification techniques and risk-based analytics, banks can attain context-aware identity verification. This would allow firms to make decisions regarding customers based on their identity details, background check, and the associated risk.
Digital identity verification brings convenience to customers in the form of remote verification. It requires customers to open the bank’s website and have their ID documents verified through an automated digital identity verification software. By combining this with biometric verification, fraudulent documents and identity thieves are easily identified. Ultimately, digital identity verification enables banks to better manage risk, avoid financial crimes, and stay compliant to global fraud prevention regulations as well.