The Future of Identity Validation in the Mobile Channel

Account takeover fraud increased by 72% during 2019, with losses reaching $17B, according to a recent survey by Javelin. COVID-19 is changing online buying habits permanently with Americans relying more on mobile devices out of convenience and necessity, according to the Identity Validation in the Mobile Channel panel held this week. 57% of Americans are now using mobile channels for 50% or more of purchases, and 16% are relying on mobile channels for 100% of all purchases during COVID-19 based on a recent survey by DaVinci Payments. M-Commerce is projected to reach $2.91T this year, a 25.4% increase over 2019’s $2.32T level. Covid-19 is the crucible mobile channels needed to test their reliability, resiliency, and security, and they’ve proven more scalable and trustworthy as a result. More consumers are trusting mobile channels than ever before. Shopping for necessities and all types of personal items, from clothing and fitness equipment to furniture, is driving record mobile e-commerce growth. Mobile Channels’ Digital Acceleration Is a Fraud Magnet The mobile channel’s soaring online revenues are one of the most attractive targets for cybercriminals, hackers, and organized crime. Banks, financial services, insurance, merchants, retailers, and nearly every online business isn’t completely prepared from an identity validation standpoint to deal with how sophisticated many fraud attempts are today over mobile channels. A recent panel held during the virtual Mobile Payments Conference, Identity Validation in the Mobile Channel, provides valuable insights and practical advice to every online business that is relying on mobile channels today. The Panel was held virtually on Tuesday, August 25th, hosted by John Buzzard, Lead Fraud & Security Analyst at Javelin Strategy & Research, and featured several industry experts including Rich Stuppy, Chief Customer Experience Officer of Kount. The panel covered emerging mobile fraud trends, what to look for in an identity verification solution, the value of customer journey maps in finding potential areas of fraud vulnerability, securing mobile devices, and the impact of machine learning on identity validation. 3 Key Identity Validation Takeaways Takeaway 1 – The massive acceleration of digitization across all mobile channels is attracting online criminals and organized crime groups targeting consumers’ payment methods, accounts, and identities at an unprecedented rate. All panelists agreed this is the most significant threat and trend in protecting mobile channels today: “What we're seeing is companies that had previously had somewhat of a focus on digital have really doubled down on that,” Stuppy said, and continued to say that he knows mobile and digital channels can be prone to fraud, especially if consumers are new to them. He added that the level of fraud is increasing as digital acceleration increases. “McKinsey just published a report that said they saw 10 years of digital acceleration in just a few months.” Kevin Gosschalk, Founder and CEO at Arkose Labs, says that they’ve seen a 30% increase in fraud across their network this year. The recent research John Buzzard completed on P2P payments further quantifies the effects of COVID on digital acceleration and the fraud it attracts. Peer-to-Peer (P2P) payment fraud has soared between 2016 and 2019, increasing 733% with mobile channels being one of the growth areas criminals rely on according to recent report Buzzard completed at Javelin. Takeaway 2 – Identity and authentication products need to be adaptive enough to capitalize on the insights gained from customer journey maps and the potential fraud risks so preventative action can be taken quickly. One of the most valuable insights from the panel was the use of customer journey roadmaps in the context of anticipating where online criminals and fraud perpetrators will attempt to attack potential victims online: Panelists agreed that payment processing and the nascent, fast-growing areas of P2P payments is a fertile area fraudsters are attempting to capitalize on and defraud victims. Buzzard observed that fraudsters often attempt Account Takeovers (ATO) when mobile channel accounts are first created. Stuppy said “The first place that you start is having a really solid understanding of your customers’ complete digital customer journey, and understanding where the points are that you want to measure for fraud and risk and safety. The concept of continuous fraud prevention and continuous sorts of authentication measurement is really important,” he continued. Gosschalk added that “consumers are also right in demanding a great customer journey and a great customer experience. People will abandon the service that constantly falls through too many security hurdles. So I think there is a huge balancing act to be done in security.” Takeaway 3 – Mobile channels’ traditional cybersecurity techniques need to be strengthened with machine learning to deliver excellent customer experiences while protecting all consumers online. Panelists discussed the implications of how machine learning is thwarting online fraud, man-in-the-middle, stolen credit cards, stolen identities, and stolen credentials to commit fraud: The paradox every organization is dealing with centers on the need to balance—providing an intuitive user experience that is free of false positives yet adaptive enough to catch and reject fraud attempts. Risk engines integrated into identity and authentication products are needed to thwart fraud attempts across all mobile channels and secure every mobile device or endpoint. Bence Jendruszak of SEON succinctly captured the perspective of the Panel when he said that “a trusted device is a really good point of authentication,” further supporting the point that every mobile device needs to assess risk in real-time and reject fraud attempts at any point in a customers’ digital journey. Conclusion Mobile channel’s digital acceleration this year is providing the impetus needed to gain millions of customers’ trust. With that trust comes the risk of fraud and the many forms of cybercrime that consumers new to mobile channels aren’t familiar with or know how to defend themselves against. The recent panel at the Mobile Payments Conference provides three key insights into how online businesses can better protect their mobile channels, which have become the primary source of revenue for many businesses in the last several months. Thwarting fraud attempts while providing an excellent customer experience by balancing risk signals is key. Machine learning techniques are proving effective at taking on this challenge, and the panelists together provide insights into how every online business can protect themselves and their customers.