By Eduardo Castro, Managing Director, Identity and Fraud at Experian
December is for many of us a time of celebration, gift wrapping and Christmas parties. But the festive period is becoming associated with a darker trend: a spike in identity fraud. Since 2018, identity fraud has been steadily rising during the winter months. Our research shows spikes in identity fraud during November and December by up to 15% year-on-year as fraudsters take advantage of the increase in online transactions during peak shopping season.
The risk posed by fraudulent activity has never been more significant. Indeed, Experian’s identity and fraud technology prevented more than £1.8 billion of fraudulent transactions in 2021, showing the potential financial cost fraud poses to businesses.
There are several steps you can take to make sure your business is safe and minimise the risk of fraud and at the same time protect your customers as well.
Financial loss and reputational damage
Third party fraud occurs when a person’s identity or personal details are used by fraudsters without consent to access credit. It poses an enormous cost to businesses, who have a responsibility to ensure their customers’ details are genuine, investigate the fraudulent occurrence, and potentially in some cases, refund the defrauded customer.
A reputational risk coincides with the cost implication of identity theft. Customers that experience fraud may be discouraged from using that business service in the future. Not to mention the media attention that fraud cases can receive if they have been managed poorly.
Preventative measures are more successful than reacting after the fact. They protect the customer and the business from the cost of fraud and any potential reputational damage.
Verify customer information
When processing customers, it is crucial that all information is legitimate, not stolen. Identity checks and verification systems enable businesses to spot ID fraud by ensuring a customer is who they say they are, stopping fraud in its tracks. Bolstering fraud defences helps to boost customer confidence, while also ensuring that checks don’t inconvenience genuine customers, so they can enjoy as frictionless a journey as possible.
Using comprehensive data sources, verification technology tests the legitimacy of people’s details. As well as combating fraud, it allows businesses to meet compliance and regulatory requirements such as Know Your Customer. Take age-sensitive services such as gambling: businesses that do not correctly verify customers’ identities and ensure they are of the correct age could face significant fines.
In support of the Government’s vision for a digital identity market, which aims to make it easier for people to verify themselves using modern technology, Experian was recently recognised for its identity verification technology. As an accredited Digital Identity Service provider, Experian can supply verification for digital services such as Right to Rent and Right to Work checks.
Measuring your risk
Experian Fraud Score – which deploys a risk probability from 1 to 1,000 – can help business learn the fraud risk of new and existing customer interactions. This simple scoring system at once conveys the riskiness of a transaction, helping businesses to make informed decisions and avoid less trustworthy options.
Users submit basic application information such as name, address, and date of birth, then receive a fraud score, with lower scores signifying a lower business risk. The technology developed by Experian uses the latest Machine Learning capabilities and insights from billions of credit applications and application data points, alongside confirmed fraud application data.
Overall, this time of year is especially important for retailers and businesses who look forward to an increased trading period. But the rise in identity fraud and associated financial consequences could have a devasting impact on your business.
Invest in protecting your business in 2023
Businesses like yours aren’t powerless: there are steps that can be taken to future-proof your business, stop fraud, and protect profits. Investing in identity verification technology will bolster your business’s fraud defences, boost customer confidence and support compliance measures. While taking the time to learn about fraud risk before entering agreements with customers could also save further pain down the line. In 2023 make fraud protection a part of your business plan and achieve peace of mind that you’re protecting your customers and your reputation.
