As more of our lives move online, we expect identity fraud attempts to continue apace. Fortunately, technology is still one step ahead.
While some trends may seem bleak, there are straightforward and convenient ways to thwart identity thieves.
NFT marketplaces will need to verify their users’ identities to reduce fraud
Non-Fungible Token (NFT) marketplaces sprung up rapidly this year to meet market demand for the relatively new concept of buying and selling the rights to digital goods (frequently art).
But, lately, the success of these platforms has been overshadowed by a lot of negative press. There have been a host of issues: buyers – and members of the general public – possibly not understanding what they are buying, and some sellers possibly overpromising.
Ultimately, for NFTs to take off as a real asset class, there needs to be some level of protection for buyers, which may need to be facilitated by these trading platforms.
One first step is verifying the identity of buyers and sellers on the platform. In addition to verifying that the seller has the rights to sell the digital asset, verifying the identities of both parties in the transaction can help put people at ease. They will both know they are engaging with a real human (even if that identity is kept secret by the platform), and the trading platform can confirm ownership rights.
This is somewhat like the early days of social media when it was not particularly clear if someone posting as a celebrity or politician was, in fact, that person.
New fintech startups will continue to proliferate, and so will fraud
As both consumer and investor demand for fintech startups continues to heat up, we expect to see even more neobanks and cryptocurrency investment platforms launching in the coming year. Unfortunately, bad actors are ready and they often target these nascent platforms, with the expectation that fraud prevention may be an afterthought at launch.
But we expect that, as these startups go to market, these companies will shift their initial focus from purely optimizing for new user sign-ups to preventing fraud on their platforms, shifting from the required risk and compliance checks to more comprehensive anti-fraud solutions. Fortunately, there are ID verification solutions that can help with both, preventing fraud while still optimizing for sign-up conversions.
Likewise, the tight hiring market for software developers will lead these new fintech firms to look for no-code or low-code ID verification and compliance solutions, rather than attempting to build them in-house.
More companies (beyond those required by law) will adopt stronger identity verification methods to combat continued data leaks
Massive data leaks continue apace. While the types of information collected in each hack / data breach varies, it’s becoming clear that data source verification – with just a Social Security Number, date of birth, address, or knowledge-based authentication – isn’t sufficient security for most account sign-ups. Bad actors can buy this data quite easily on the dark web.
In 2022, we will likely see other industries beyond financial services start to require additional methods of verification for new customers when they sign up for an account. The technology is here: it’s now incredibly easy for a customer to verify that they physically possess the required ID documents, and that they are a real live person signing up for a service.
Importantly, advances in AI and machine learning mean this verification process can be entirely automated and completed in seconds, so there’s no additional burden on customers for this added layer of security.
Covid revealed the fragility of “human in the loop” verification methods, where an actual human must review each selfie or document. One verification company, for example, uses humans around the world to verify passport documents for airline check-in kiosks. We expect that companies will move to more automated solutions, which also benefit end-users with far faster verifications.
Synthetic identities will pose an even greater risk to identity security in 2022
An unintended consequence of the Social Security Administration randomizing SSNs has been the rise of synthetic identity fraud. As a result, many of today’s fraud detection systems can’t quickly verify the authenticity of an SSN.
Synthetic identities are often either valid SSNs combined with valid personally identifiable information (PII) from another person, or entirely fabricated SSNs and PII, like a shipping address.
The insidiousness of synthetic identity fraud is that it is often “victimless,” in that there is no specific person they are looking to defraud. Instead, it’s usually the platform itself. With no personal victims, these fraud attempts are far harder to detect, because there is no one to alert the platform.
Once again, requiring multiple forms of ID verification can solve this problem – specifically, requiring a liveness and documentary verification can help ensure that the person signing up for the account has a real document, that the data on that identity document matches what they entered, and that the person is a living human (whose photo also matches what was on the identity document). In 2022, we expect to see more organizations adopt this multi-factor ID verification to thwart synthetic identity fraud on their platforms.
Conclusion
It may seem like the threat of fraud and bad actors is greater than ever before, especially as the pandemic has pushed much of our financial lives online. The good news is that the technology exists today to help thwart these bad actors, without introducing any real burdens to legitimate customers. With widespread adoption, we believe that 2022 will be the beginning of the end of online identity fraud.
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