Cybersecurity – Maximising KYC to eliminate the vulnerability of online fraud and build customer engagement.

As payments and online engagement continue to expand, as do our global fraudsters.

We are massively in a realm where digital experiences and transactions are now just a part of our DNA. Some would state that we are in a predicament where digital identities have equal to if not more, bearing on statue than physical selves. In the recent Global Digital 2019 Report reveals that internet users are growing by an average of more than one million new users every day since January 2018 and an expected annual digital growth of 9.1%

From these internet users, 2,818 Billion people worldwide engage with eCommerce. In 2018, one in every ten dollars spent globally was spent online, with an expected spend growth of 14% year-on-year to hit US$4.5 Trillion in 2021. By 2022 online sales will make up 17% of all global consumer sales.

With all this growth and more and more customers engaging online storing card and personal details, inevitably brings more risk. Fraudsters are relentless in their maneuvers to attack customers intangible selves and businesses worldwide from their hard-earned established customer trust, brand loyalty and revenues. Fraudsters highly victimize the elderly as customers who are an easy target for fraudulent schemes.

 

Global online payment fraud – it’s a major concern.

Payment fraud is already a billion-dollar entity, and it’s rapidly growing as our financial technology continues to advance online as do our fraudsters, presenting a top concern for 44% of financial professionals. Juniper research stated that online sellers will lose $130 billion to online payment fraud between 2018 and 2023 with an average online payment fraud costing global businesses 1.8% of revenue and for every $1 of fraud from chargebacks, companies lose an extra $2.94.

With most people engaging online for 50-80% of their waking hours, how do they bring security and confidence to their digital identities and online purchasing transactions? How do businesses globally circumvent the ever-changing vulnerability to the continued development of sophisticated fraudsters, bots, and large-scale data-breaches?

In the last year alone, we have seen a substantial increase in cyber-attacks, where security breaches increased 11% in 2019 from 2018, and within the first half-year of 2019, 4.1 billion records were breached – utilising this captured data to assist in one of the fastest-growing identity theft methods of account takeovers. Where in 2018 it tripled from the previous year, reaching a four-year high and experiences losses of US$5.1 Billion.

Fintechs; payment companies, banks, eCommerce sellers, digital currency platforms, investment platforms, are proving to be committed to not only the innovation of financial technology, seamless and advanced customer experience but in fraud detection and prevention technologies. Gartner has stated that globally cybersecurity will reach US$133.7 billion by 2022. Global regulations surrounding payment services are also combatting the threat of online security and fraud; constantly adapting regulations per localised jurisdictions and globally to ensure appropriate regulations instilled to serve consumers digital identity and businesses operations.

For payment providers in Europe, the revised PSD2 regulation will instill Strong Customer Authentication (SCA) where the consumer can further identify their intangible self with their tangible biometric components; bringing security to their identity and transaction.

 

Businesses need to truly identify digital identities for all customer touch points.

Business leaders worldwide are rethinking their online strategy, syncing with leading technology developments and adapting their business mantras with dynamic decision-making intelligence for the best layers of defence and continued growth of consumer trust and loyalty with their brand.

One of the critical mantras these businesses are implementing is a wide range of Know Your Customer (KYC) tactics throughout their entire customer journey. Implementing KYC above and beyond regulatory requirements and will include a combination of the following:

  • Knowledge-based: Using specific security questions to verify identities
  • Documentary-based: Using technology like machine learning and AI to assess the authenticity of various government – issued IDs
  • Biometrics-based: Uses a person’s biometrics such as fingerprints, voice, and facial characteristics to verify a user’s identity
  • Database reference-based: References multiple databases like credit bureaus and even less formal sources such as social media for verification purposes.

For many businesses, onboarding customers in a verified manner may bring the risk of friction and loss of engagement if the required verifications at an entry-level are too vigorous. 75% of businesses want advanced authentication and security measures that have little or no impact on the digital customer experience. In our ever-evolving Fintech innovations, companies can harness methods and intelligence to circumvent KYC friction.

One method to maintaining low KYC friction at the point of entry it to implement pre-screening KYC verifications in the onboarding journey. Which allow the costs associated with KYC performance to remain low, and identities are quickly verifying through risk analysis against basic KYC checks.

These pre-screening KYC verifications may include:

  • Email Verify: Address & Domain Intelligence, Age, Reputation & Validation
  • Device ID Intelligence: Java-Based, Hardware Fingerprint, Granular Device Details & Reputational Data
  • Phone ID: Geo Location, Phone Type, Phone Carrier

 

Following businesses can quickly expand more rigorous KYC checks, including document identity verification or biometrics at various touchpoints of the customer engagement where it is deemed more applicable or required through compliance. While designing their KYC experience with intelligence like cascading verification logic to maximise data performance, and minimise overall costs and continued frictionless experience on the customer’s verification process.

 

Maximising revenue retention and customer lifetime value through ID verification.

Building trust through technology without disruption is increasingly the goal, but also the responsibility of businesses with online channels. While there are substantial barriers to achieving that goal, it is more critical than ever for companies to overcome. Businesses need to look beyond just implementing KYC for compliance and utilise KYC data to enhance customers digital profile, experience and trust.

Lack of visible security is the number one reason customers abandon an account creation or transaction. Nearly two-thirds (66%) of customers appreciate security protocols when transacting online because it makes them feel protected.

If KYC verifications are presented to customers in a manner when they are relevant in their journey as well within a layered cascading approach, the business is acquiring the best data and fraud prevention techniques. The more a business knows about their customers, the more they not only build further trust within their brand but can tailor customers experiences to expand loyalty, improve overall customer lifetime value and obtain revenue retention.

It has been proven that businesses that utilise a combination of KYC verifications in conjunction with real-time fraud prevention technologies can diminish chargebacks by 66 percent in the first two-months and increase authorisation rates by 85%.

 

Implementing an array of KYC without the pain of multiple integrations.

The only way businesses can verify a customer’s identity in real-time is through accessing world-class data and pairing it with automated KYC checks and real-time fraud prevention technology. However, for many businesses implementing a single KYC data service can take months with high costs and drains on internal development resources, which can result in slow to market launches or missed market opportunities altogether.

Many businesses globally are in a constant state of flux as they try and keep up with KYC demands for regulation. Often it is too cumbersome of a process to manage, and the costs and resources required outweighs the benefits of implementing additional KYC regardless of what it could bring to their business performance and revenues.

Data aggregation and global KYC orchestration hub technologies support the high demands our online eco-system is presenting. Hubs like 4Stop based out of Germany and supporting many global Payment Service Providers (PSPs) with access to implement thousands of premium global KYB, KYC data services, data intelligence and anti-fraud technology all from a single API. Utilising orchestration hubs is the most cost-efficient manner to implement and perform KYC worldwide. Allowing businesses to harness the true potential KYC and ID verification brings to their business without any touch on their operations.

Most KYC orchestration hubs stay relevant as our online eco-system continues to evolve, and more and more KYC verification technologies are developed. They are continually updating their data hubs and KYC data services with these advancements. Providing their clients complete peace-of-mind that their anti-fraud technology, compliance management and KYC services are designed and implemented in a future-proofed, fail-safe manner -locally, globally, today and in the future.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.