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Both online retail and fraud are growing quickly. While e-commerce sales worldwide are set to increase from $4.9 trillion in 2021 to $6.5 trillion by 2023, it’s estimated that retailers operating online could lose almost $130 billion in revenue to fraud worldwide by 2023.
Those in financial services have a vital role to play in preventing this growth in fraud. To do so they need to be aware of the types of fraudulent activity taking place.
Common methods include:
Effective ID verification starts with the right data
Financial institutions need to do what they can to prevent all types of fraud. To start with they need to ensure they have a best practice approach to KYC and AML to confirm their customers are who they say they are.
This begins at the customer onboarding stage. When onboarding a new customer anywhere in the world financial organisations need access to a global dataset of billions of records. For real-time ID verification, fraud prevention and data accuracy purposes, it must allow them to perform sufficient cross checks of the contact information provided by the prospective customers – their name, telephone number, email address, or home address. To do this effectively the dataset must leverage government agency, credit agency and utility records, as well as access politically exposed person (PEP) watch lists.
Take verification to the next level with biometrics
To ensure those looking to access their accounts are who they say they are financial institutions should take biometrics seriously. Once a customer has passed the ID checks at the onboarding stage, biometrics – which can operate across all devices – can confirm the customer's identity with facial comparison technology. However, organisations should use a biometric algorithm that checks for eye movement as part of their ID verification process. This ensures they engage with a real live person, not a static image or avatar, to prevent fraud. Also, with no passwords or time-consuming security questions it helps to deliver a positive customer experience.
Artificial intelligence (AI) helps stop fraud
AI can work well as part of the ID verification process. One form of AI, semantic technology, associates words with meanings and recognises the relationship between them. The machine reasoning and automated pattern recognition provided by semantic technology helps to identify possible fraudulent applications in real time.
Those in financial services need to be constantly identifying new types of fraud so they can evolve their procedures and also work closely with retailers to spot any fraudulent activity amongst their customer base. Those not yet doing so need to embrace best practice processes to deliver effective ID verification and prevent fraud, and encourage retailers to do the same, particularly as they are very cost effective and easy to integrate into existing systems.
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