Rapid growth in online fraud necessitates automation of ID verification
By Barley Laing, the UK Managing Director at Melissa
Online sales have taken off, in large part due to the closure on the high street during the pandemic, along with shoppers increasingly recognising the convenience of buying online. According to IMRG’s Capgemini Online Retail Index online sales grew 74 per cent year-on-year in January 2021. This is backed up by figures from the ONS that reveal ecommerce sales increased 46 per cent in 2020, compared with 2019. The fastest growth since 2008.
With this jump in online sales there’s set to be a corresponding increase in fraudulent activity. Figures from Juniper Research highlight that the value of losses due to ecommerce fraud will rise from $17.5 billion in 2020 to over an estimated $20 billion by 2021; a growth of 18 per cent over a single year.
Time to automate ID verification
By far the fastest, most accurate and cost-effective way to deliver ID verification online, and help reduce fraudulent activity, is to automate it. This means embracing electronic ID verification (eIDV). Such a tool will help to prevent fraud in real time at the point of customer access online, by ensuring retailers are dealing with the person they think they are. eIDV does this by making cross-checks in real time against the data provided by the shopper – such as their name, address, phone number, email address and date of birth.
When sourcing an eIDV tool retailers must procure one that has access to a dataset of billions of consumer records from around the world, from reputable data streams; including government agency, credit agency and utility records, so it can undertake effective cross-checks of data.
Also, by ensuring the real time automation of cross-checks it’s possible to deliver a seamless customer journey at the payment stage using eIDV, and therefore help provide a standout customer experience. This is vital for retailers with so much similarity in the quality and price of products on offer online.
eIDV is not something for those only operating at the high value end of ecommerce to embrace, but all merchants – particularly with fraud on the up and the cost of integrating ID verification solutions into systems coming down. The automated service also has the added benefit of ensuring good governance by aiding compliance with know your customer (KYC) regulations.
Along with eIDV it’s important retailers use an automated address verification system (AVS). It’s a service provided by major credit card processors and banks to enable merchants to authenticate ownership of a credit or debit card used by a customer. The credit card company or issuing bank automatically checks the billing address provided by the customer to the retailer against the billing address in its records, and reports back to the vendor. Using this information, in real time, the merchant can block purchases made by unauthorised users.
Manual checks are slow and costly
The only other alternative to automation is manual checks of customer ID. In an online world this is not a course of action to take, because physical checks taking place behind the scenes are time consuming and significantly more costly than an automated approach. Bear in mind with a manual approach you would need to employ staff with knowledge of thousands of ID document types and then there’s the possibly of human error, making manual reviews less stringent than they should be.
Automate data quality processes to support ID verification
It’s not only automated tools like eIDV that retailers should consider to prevent fraud, but simple data quality practices, which at their core stem from plain and simple contact data verification.
A great place to start is with an automated address autocomplete or lookup service. These are tools which make sure only deliverable and verified addresses enter your system. They work by automatically revealing a suggested correct version of the address as the customer completes an online contact form, enabling them to select one that’s not only accurate but easily recognised, and correctly formatted for their country location. Another key benefit of a lookup tool is that as well as preventing mistakes caused by fat finger syndrome, it reduces the number of keystrokes required when typing an address by up to 70 per cent. This speeds up checkout and reduces shopping cart abandonment, aiding the delivery of a standout customer experience.
Another vital part of the data quality process that supports ID verification is making sure all email and phone numbers are live, callable and part of a genuine host. This includes determining the common language in use for the given area code. There have been too many occasions where fraudsters have used fake phone numbers and emails to bypass verification procedures when signing up and purchasing online.
With fraud online set to grow retailers need to look at the advantages offered by automation when it comes to ID verification. The speed, accuracy and cost benefits of tools like eIDV, along with wider data quality practices, are set to become increasingly vital. Also, automation has the added benefit of delivering a positive customer experience, with no negative impact on the customer journey, therefore aiding all important standout for retailers in an increasingly competitive market.