Online fraud is on the increase, but the good news is emerging technology can protect digital identities.
Every minute, fraudsters steal more than $35,000 by pretending to be someone else. That amount hasn’t changed much in recent years. But something else has—more theft is happening in the digital, rather than physical, domain.
The likely cause? Improved security in card-present transactions. That sounds counter-intuitive, but consider the effects of EMV, the underlying standard for payment cards with built-in chips that authenticate transactions. The U.K., where EMV cards have been in use since 2005, witnessed a dramatic drop-off in card-present fraud losses. Yet we're seeing more fraudulent web and mobile payments. There is also an increase in fake accounts. As the digital and physical worlds converge, fraudsters are shifting their efforts to the digital realm.
Three technologies—biometrics, social analytics and blockchain—show promise for payment processing. Let’s take a closer look at each.
Biometrics. Because user IDs and passwords are fairly easily compromised, firms are moving towards biometrics, the technologies that authenticate people through fingerprint, retina, voice or face recognition. The most secure approach to biometrics is to authenticate users directly on the device. This removes the motivation for thieves to hack into central servers in search of personally identifiable information. The FIDO Alliance, a nonprofit professional association, is developing standards that enable compatibility across authentication devices.
Social Analytics. When we interact with people and organizations online, we leave a digital trail of clicks, likes, comments, geotags and so forth. In that trail, there’s a pattern that tells a story of who we are. Cognitive analytics and machine learning analyze these patterns. It turns out that social behaviors often correlate with personally identifiable information. This raises the possibility of authenticating customers by studying their social footprints to verify their identity.
Blockchain. Blockchain records immutable transactions in a distributed digital ledger, shared among many parties. Those parties can authenticate one another via universal identifiers secured within the distributed ledger. Combined with identity verification, blockchain offers greater control over personal information. Every online transaction could potentially bear the watermark of each party’s digital ID. This way, it becomes possible to validate identity in real time, reducing the need for intermediaries and making it harder to commit fraud.
Biometrics, social analytics and blockchain are the future of secure payments. They can protect customer identities by creating digital versions with built-in security. These digital identities, in turn, are an elegant way to protect all parties involved in a transaction. Digital identity verification hold promise to help the payments industry outwit fraudsters.
Nachiketa Mitra is vice president of payments for Cognizant.