As privacy and security professionals, we understand that fraud is becoming more personalized. We know that a new generation of fraudsters is out there with endless credentials, birthdates, even security questions and answers at their disposal through the dark web. Since cybercriminals can simply log in with this information and pose as the user, traditional authentication methods like security questions or passwords don’t always provide real proof of identity. Enterprises must keep these threats in mind when configuring a secure fraud prevention strategy.
A new generation of fraudsters
As fraudsters become increasingly calculated with their tactics, we can anticipate threats to continue escalating in sophistication. People increasingly prefer to operate primarily online rather than in person because of the pandemic, and many are using digital payment options like PayPal, Venmo, or even Facebook to conduct transactions. Plus, digital banking is the norm today, even for baby boomers, which presents even more opportunities for fraudsters to conduct phishing attacks, steal credentials and launch account takeover (ATO) attacks. Below are examples of threat vectors that have become more preventable in recent years that security professionals should keep a close eye on.
Internet of Things (IoT) vulnerabilities
Connected devices like Alexa and Google Home are remixing the conventional financial infrastructure. Digital accounts make it easier for consumers to purchase things on the go and in the moment. The type of data that IoT devices collect is widespread — including physical location, payment information, passwords, lifestyle habits, health details and more. All these would give fraudsters plenty of material to devise a sophisticated social engineering attack.
Social media scams
U.S. consumers lost $770 million to social media scams in 2021 alone (18x what it was in 2017), and this figure only accounts for about 25% of all fraud losses that year. The Federal Trade Commission (FTC) reported that more than one in four people who reported losing money to fraud in 2021 said it started on social media with an ad, a post or a message. In fact, the same FTC data suggests that social media was the most profitable and easy method for scammers to reach people last year.
These malicious threats call on both consumers and businesses of all sizes to act responsibly with their data and have a baseline understanding of online safety such as password and identity management. However, even that is not enough to prevent fraud.
So, how can businesses stay ahead of these highly personal and sophisticated threats? As mentioned previously, it is not enough to educate consumers — businesses need to rethink how they are verifying the identities of their users.
Problems with conventional identity verification models
Many organizations today are still layering on a slew of multi-vendor risk signals in hopes of deterring fraudsters and protecting their ecosystems. However, this legacy approach is extremely inefficient because it creates silos among the multiple identity verification solutions in place and can actually increase the risk of fraudsters getting through the system.
You may think that compliance checklist models would be a solid way to confirm what security measures are in place, but unfortunately, they are not efficient at determining if the overall security strategy will effectively counter the contemporary threats we live with today. Using multiple solutions for verification increases an organization’s risk of non-compliance, which can be costly. Regulations related to Know Your Customer (KYC), anti-money laundering (AML), data privacy and the Markets in Financial Instruments Directive (MiFID) are all meant to require enterprises to identify and report unlawful activity such as terrorist financing or money laundering to regulatory agencies. However, with a scattered privacy and security strategy, many companies cannot keep up, allowing information to slip through the cracks.
Consolidating identity verification layers is key
In light of these issues, one consolidated and centralized identity verification system can be a gamechanger. A consolidated, holistic approach to identity verification equips enterprises with the necessary controls and assurances to accurately identify end-users and helps to achieve high catch rates and low false positives. On top of that, enterprise teams can collaborate to maintain a strong security posture the same way that we collaborate on developing a new product or feature. It’s a win-win.
A holistic approach means that the organization has one single application programming interface (API) layer that checks all risk and fraud detection capabilities to address identity proofing, compliance verifications and AML use cases. This approach consolidates all the identity verification processes into one comprehensive platform to confirm user identity and maintain compliance standards more efficiently. Additionally, it delivers a more seamless user experience that verifies consumer or employee data, while providing enhanced authentication using a document such as a government-issued ID. In other words, the convenience factor isn’t lost in the verification process.
The risks of not prioritizing identity verification are significant — damaged brand reputation and consumer trust, compliance-related fines and significant financial repercussions. A comprehensive identity verification approach increases the security posture of your business and your customer data while still providing the convenience your users have come to expect. Taking an integrated approach to identity management and compliance can enable enterprise security professionals to outsmart a new generation of fraudsters in this digital-first world.