Marcel Wendt, CTO and Founder, Digidentity.
Digital transformation is reshaping the finance industry at pace, with more online transactions taking place now than ever before. The number of people shopping online has reached 2.71 billion in 2024, over 70 million more than 2023 figures.
Risk grows alongside innovation, with the impact of fraud particularly detrimental within this sector. To truly bring forward a new generation of banking, institutions must be equipped to meet escalating security demands and tackle unprecedented threats head-on.
The good news is, through rigorous digital identity solutions, there are safeguarding measures that can reduce the risks; however, this responsibility requires collaboration between enterprises with governments, to create meaningful legislative guardrails to support secure identities for all.
Rising Threats
Before the advent of digital services, people would fake their identities by changing the names on their identity documents and donning disguises to con banks out of money in person. This is still the case, but con artists have evolved to cyber criminals, faking their identity online instead.
One growing concern is the advent of deepfakes. This technology is growing in sophistication, with a finance worker recently paying out over $25 million to fraudsters, tricked by his deepfaked chief financial officer.
Deepfakes run the risk of eroding consumer trust within their digital products and services as cybercriminal tactics evolve. Financial institutions must remain vigilant and across their entire digital supply chain to remain secure.
Yes, ultimately, users are at the endpoint and there is a responsibility for them to be aware, vigilant and educated to detect, but the finance industry needs to be armed with the right tools to protect identities in the first place.
In addition, fraud now accounts for over 40% of all criminal offences in England and Wales. This figure shows the sheer scale that fraud has in the UK. The reasons for this are varied, but one key solace is that it becomes easier to protect your identity online if you have the right technological know-how.
It’s therefore more important than ever before to have the right identity verification processes in place, to ensure people are who they say they are.
Building a Safer Financial Future
In the UK, there have been provisions to ban cold calls on all financial products and introduce a legislative commitment for the tech sector to protect their customers. This is a step in the right direction, as phishing scams are the most common type of scam in the UK.
To support this directive, businesses within the financial industry should also consider implementing digital identity protections.
Digital identity solutions are central to shielding against illegal activities, helping to ensure that individuals’ identities are genuine and verified to a high standard, reducing the risk of fraud or other illegal activities. This goes beyond just financial fraud, encompassing a broader spectrum of activities that could exploit identity-related vulnerabilities.
Security Solutions
These incorporate features like biometric verification and multi-factor authentication, alongside capabilities to digitally sign contracts, letters, and agreements with electronic signatures. This ensures that transactions like wire transfers, online payments and purchases are authorised by the customers through identity verification.
These advanced verification and authentication methods add layers of security, making it more challenging for malicious actors to impersonate legitimate users and conduct fraudulent transactions.
Yes, the rise of AI brings higher risks of fraud in bad hands, however the use of AI to verify identity remains part of the solution.
Within the UK, companies can reach Strong Customer Authentication (SCA), by introducing Multi-Factor Authentication (MFA) and biometrics through a provider such as Digidentity.
While Two-Factor Authentication mandates two factors, MFA can involve more than two, typically incorporating a combination of factors from various categories to enhance security by providing an additional layer of protection.
Although the technology is available, the onus cannot just fall on governments to implement robust safeguards to protect consumers. They must continue partnering with businesses to ensure these innovations are supported and keep pace with the ever-evolving world of risk.
