Experts predict that by 2021, damage caused by internet fraud will reach $6 trillion, making cyber fraud one of the world’s fastest growing and most dangerous economic crimes. And according to a recent report by IBM, in 2019 the financial services sector was the most targeted industry for cyber criminals.
Technological advancements in identity verification, such as artificial intelligence and machine learning, have presented financial institutions around the globe with a weapon with which to fight back. However, with intelligent technology comes intelligent fraud, and criminals continue to find ways to defy these security barriers, resulting in financial losses and reputational damage as well as loss of customer confidence. And that was before COVID-19 added even more pressure on stretched security protocols as criminals capitalise on the distraction of the ongoing pandemic.
In the context of COVID-19, an accelerated move to online has seen banks offering customers more convenient options for opening accounts, resulting in a rise in new account fraud. Which could explain why recent figures from Action Fraud has put online shopping fraud at £16.6 million in losses since 23 March.
While typically the UK’s financial services sector has not legally required the highest regulatory levels, increasingly, banks are exploring more stringent options to truly mitigate risk and protect themselves and their customers.
Artificial Intelligence (AI) is able to recognise and classify documents, affording financial institutions and their customers an efficient route to onboarding. However, fraudsters have become more and more adept at forging and faking, even including realistic holograms to bypass AI and machine learning technology.
Now is the time for a hybrid approach to verification security
We know how vital technology has become to the UK’s financial services sector, not least in the fintech sphere and increasingly traversing the traditional bank sector. And while AI and machine learning can quickly and accurately recognise identity documents, extract the relevant data and use biometrics to compare facial features, a hybrid approach can take this one step further. When technological checks are combined with the knowledge of a human identification specialist, not only do financial services providers and customers have double the safety net and half the risk, the conversion rate for an onboarding customer is also heightened.
In reality, that means proprietary technology will use artificial intelligence to scan and recognise security features on identity documents with maximum precision including asking the user to tilt their ID document in various directions in front of the camera so that the security features, such as holograms, become visible. Meanwhile, a specially trained Ident Specialist will check the security features during a video conversation.
Perhaps the most critical distinction to make when taking a combined machine and human approach to identity verification is the ability for humans to use their intuition to spot discrepancies in a person’s response. For example, a simple glance away from the camera can suggest to an identification specialist that the customer is being coerced, something technology would be unable to identify alone. A human can also ask social engineering questions to determine whether the customer is genuine. Using automation alone would mean some potential customers would fail the onboarding process at this stage, but by linking them up with a specialist, who is able to take identity verification one step further, conversion rates become much higher.
Put simply, by combining man and machine, the highest levels of security can be achieved. For IDnow, that has meant an average False Acceptance Rate (FAR) of 0.05% compared to the FAR of 0.1% required by the Bundesamt fur Sicherheit in der Informationstechnik (the federal agency for security and information technology) for the use of biometric systems in the sovereign area.
There are many options for the UK’s finance sector when it comes to identity verification. Automated approaches alone continue to be sufficient for many however, in order to safeguard against increasingly sophisticated threats while increasing customer conversions, it is time to move beyond the minimum. We must explore what we can learn from and how we can replicate the world-leading BaFin regulatory landscape Germany is renowned for to ensure the UK’s finance sector remains robust and able to challenge the growing global threat of by cyber-crime and fraud.