In recent years identity fraud has skyrocketed during the holiday season. Eduardo Castro, Managing Director, Identity and Fraud at Experian, explores actions businesses can take to safeguard customers.
It’s that time of year again. For many of us December means decorating, buying gifts 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 November and December by up to 15% year-on-year as fraudsters take advantage of the increase in online transactions during peak shopping season.
Compounding the problem further this year are challenging economic conditions which tend to also increase fraudulent activity. 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.
So, what steps can you take to minimise the risk of falling victim to fraud while also protecting your customers?
Avoid reputational and financial hits
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. Nearly 70% of all identity fraud in the UK is classified as third-party fraud according to Experian data.
Not only does identity theft have a cost implication, but a reputational risk too. Identity theft is the top security concern of UK consumers and 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 businesses from the cost of fraud and any potential reputational damage.
Verify customer information
It is vital for businesses to confirm customers’ information is legitimate and not a stolen identity. Identity checks and verification systems enable businesses to spot ID fraud by ensuring a customer is whom they say they are, stopping fraud in its tracks. Bolstering fraud defences helps to boost customer confidence, while also ensuring that passive and invisible checks don’t inconvenience genuine customers.
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.
Understand your fraud risk
Businesses can learn about the fraud risk of each new and existing customer interactions using Experian Fraud Score which deploys a risk probability from 1 to 1,000. 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.
Act now
Make sure your festive season isn’t ruined by fraud. 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.