Preparing Your Business for the Fraud Liability Shift
In the previous post, we discussed what EMV and the fraud liability shift are as well as how it...
The customer standing in front of you seems like a safe bet; they have an ID document with a photo that to match their face, leaving you to believe you have sufficiently identified your customer.
However, without checking the validity of the ID document, you are leaving your business at risk. Despite what one might think, cases of Identity Theft and fraudulent transactions in general continue to rise. While in person transactions contribute to this, they are just one way a business is vulnerable to fraud.
Online or mobile transactions fraud rates are increasing even faster. According to the 2020 LexisNexis “True Cost of Fraud” study, identity fraud incidents grew to a significant number during the pandemic and are likely going to continue rising.
Luxury retailers such as jewelers, high-end watch sellers and branded boutique apparel and accessory stores are highly targeted for fraud. Identity fraud criminals know that a single transaction at these types of establishment can potentially net them a large payoff with fewer risky transactions than if they target lower end goods. Also, high-end retailers are more likely process in-store credit applications and will see a far higher percentage of credit-card transactions which are fraught with risk.
Certain types of transactions your business does can leave you more susceptible to fraud and identity theft occurrences than others, making it increasingly crucial for you to know where your vulnerabilities lie, and the best way to negate the risk.
If your business accepts credit applications, you are exposed to potential credit fraud losses. You may receive a completed credit application that appears legitimate and that ultimately is approved by your underwriter. Only later do you discover that the information on the credit application was falsified by using stolen identity data. At this point, the likelihood of the credit account being paid is slim. The loss to the company can be quite significant depending on the amount of credit given to the individual. It is highly unlikely that the underwriting bank will be the party responsible for the financial loss.
Credit Card Payments
If you accept credit card payments, you are exposed to potential credit card fraud losses. According to The Nilson Report, the cost of credit card fraud reached $28.65 billion worldwide in 2020 with the United States accounting for nearly half of the credit card fraud losses. There are several ways in which criminals can obtain credit card information, but all of them have the same result – a financial hit for your company. The more valuable the transaction, the harder the hit to your bank account.
Large Cash Transactions
If you conduct large cash transactions, you have federal regulations triggered by anti-money laundering laws. The Bank Secrecy Act made it the responsibility of businesses to keep detailed records of cash purchases and file reports of any transactions exceeding $10,000. It is also the duty of the business to report any suspicious activity. Therefore, it is even more crucial for business to make sure they know their customer. There are multiple ways in which a fraudster may do damage to your business, but this doesn’t leave you helpless. One of the most important steps you can take to booster your fraud fighting efforts, is verify your customers identity.
How PALIDIN can help you "Know-Your-Customer"
All these vulnerabilities and liabilities listed above can be alleviated by authenticating customer identities. Our PALIDIN software is designed to protect you and your customers by providing the power to authenticate ID documents live – in real time – during a transaction. Depending on your organization, your approach to verifying your customers identity may be different.
For Brick-N ’Mortar operations, the client will be physically in the store conducting the transaction.
In this scenario, one of PALIDIN’s desktop solutions would be ideal. Using one of our ID scanner devices which can either be attached to a computer or tablet, or simply connected to an ethernet or WiFi connection, you can scan the identity document and it will be evaluated by using a global ID Document Authentication Library. These systems can authenticate passports, national ID cards, and many other types of official credential documents – in just seconds. The results are be displayed in an easy-to-understand red/green format, making it simple and quick to see whether the ID presented is authentic.
PALIDIN also offers the option to integrate the data read from the ID documents into applications and client databases used by your company. This can help not only save time, but also reduce data entry errors for your organization. For transactions over $10,000, your company can choose to have PALIDIN store encrypted logs of each transaction’s authentication. These logs can be stored locally or remotely depending on your business’ needs.
Authenticating Identity for Mobile and Online Transactions
PALIDIN includes an optional mobile component that will allow for authentication even when the customer is not present in the store. PALIDIN WebID uses the same authenticating database as the desktop software application. It requires the customer to take a picture of their ID as well as capturing a “selfie.” With PALIDIN WebID, you can enable both “facial match” and “facial liveness” tests. These tests will check if the person performing the authentication matches the photo on the identity document and check that the “selfie” being taken is done in real time by a real person. No matter whether your customers are interacting with you in person or online, PALIDIN offers a method to achieve authentication of the identity and peace of mind for your company.
Allie Roberts is a content writer at Fraud Fighter with a focus on new fraud trends, identity authentication solutions, and counterfeit detection. Her articles aim to help businesses realize and reduce their susceptibility to fraud.
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