Identity fraud has become an ongoing threat for businesses worldwide and traditional identity verification (IDV) techniques are failing to keep up. The Association of Certified Fraud Examiners surveyed global organizations and found that 79% experienced an increase in the level of fraud since the onset of the pandemic. This includes fraud such as stolen credit cards, online phishing attempts, as well as synthetic identity fraud. In this blog, we will be looking at some common crimes faced by established businesses to enable startup owners to understand how to effectively combat them.
- Synthetic Identity Fraud
The fastest-growing crime in the world right now is known as synthetic identity fraud. This kind of fraud is not only gaining prominence but is also equally difficult to spot and prevent, particularly through conventional identity verification methods.
In synthetic identity fraud, criminals combine legitimate information of customers such as their insurance number, social security number, full name, date of birth, etc. with fake information to create a completely false identity. If left undetected, the fraudsters are able to open new bank accounts, file for tax returns, avail medical benefits, apply for unemployment insurance, and much more.
Identity authentication services are required to combat expert-level frauds such as synthetic identity theft. As this crime costs banks and organizations billions every year, advanced tech such as automated identity verification can substantially minimize the risk, if not completely eliminate it.
Reports revealed that cyberattacks occur once every 39 seconds. For fintech startup owners, this poses a major challenge. Examples of a few cybercrimes include false chargebacks, account takeovers, and data breaches. With more customer data available online, it serves as a sweet spot for criminals.
Identity verification online leverages biometric technology and allows firms to prevent the onboarding of fraudulent players during the initial registration process. By analyzing the facial features and expressions of customers through a selfie or video, imposters and identity thieves can be easily distinguished from legitimate customers.
Conventional methods of identity authentication are still utilized by businesses. While they have been employed for manually checking the documents provided by customers, how can fake ID cards, credit cards, or bank statements be filtered out? Using technologically advanced tools, fraudsters use techniques of manipulation that can be left undetected by the naked eye.
For the detection of forged, modified, and fake documents, automated identity verification technologies must be employed. This is because an AI-powered identity verification software utilizes OCR (Optical Character Recognition) technology that automatically extracts required data from the identity documents. This method is not only swift but also less prone to error, compared with the traditional methods.
Spoofing is a type of cybercrime in which online hackers impersonate someone else, such as a legitimate business, to trick customers into providing sensitive data. This can be done through emails, websites, or applications all of which have fraudulent URLs and are linked with fake sources. This can lead to the theft of confidential data as well as data breaches.
However, AI algorithms have the ability to detect unusual activity and patterns. As a result, identity verification solutions are able to detect and prevent any spoofing or phishing attempts.
Based on the findings of the PwC’s Global Economic Crime and Fraud Survey of 2020, nearly 47% of firms underwent a fraud incident during the previous 24 months. Every one of those firms reported six fraud cases on average, with customer-related fraud being at the top of the list (35% of all crimes). Given the high frequency at which fraud occurs, startups must invest in robust identity verification software to weed out fraudsters, mitigate risk, minimize the external threats, safeguard internal systems, and increase profits while keeping fraud at bay.