The global pandemic ignited a digital transformation wave. Businesses and consumers alike increased their online activity and digital channels became the primary vessel for communication and connection. As we increased our time online via remote work, shopping, or streaming, cybercriminals used that time to study our growing digital footprints – seeking out ways to exploit new potential loopholes for their fraudulent activities.
Despite the heavy investment in anti-fraud tools and technology solutions, the fintech sector saw a 50% increase in fraudulent activity in 2021 compared to 2020. The uptick in fraudulent activity can be evidenced by velocity abuse – once a fraudster infiltrates a system, they will utilise that loophole to get approved as many times as possible, normally verifying different real users without telling them what they’re being verified for.
'Regarding the metaverse, establishing stronger digital trust at the very beginning of the user journey will be paramount to its overall success.'
Veriff’s research also showed that identity fraud represented 56% of attacks within the fintech sector. The use of ID cards (33.91%) was the most common strategy used by attackers for illicit verifications, followed closely by the use of passports (29.19%).
The rise in fraudulent activity has validated the message that Veriff has proclaimed since its founding - the world needs to adopt a gold standard in online identity verification to establish widespread digital trust and mitigate attacks. As these threats and risks have become increasingly real for those in the fintech and crypto industries (especially with the rise of digital currencies), the need to heavily invest and expand access to identity verification technology has intensified.
The metaverse and the gaming & virtual sports betting sectors are new territories for digital user exploration, making them ripe for fraudsters to aim at. Regarding the metaverse, establishing stronger digital trust at the very beginning of the user journey will be paramount to its overall success. Investment in additional measures, such as identity verification including age verification, as well as parent and guardian verification, can help make the space more transparent and secure for all users.
Online gaming and sports betting industries saw a major consumer boost during the pandemic, mainly due to the highly accessible and popular on-demand entertainment experience they offer. As fraud threats continue to rise, these businesses will learn first-hand the importance of incorporating IDV (identity verification) as a critical component of the fabric of their operations. It is an effective means to foster a safe experience for all consumers, especially when personal finances are at stake.
Crypto fraud reached new heights in 2021, and close to two-thirds of that fraudulent activity was the result of attackers using illegally obtained ID cards or passports. At the same time, the overall success of the crypto sector hinges on the availability of verifiable credentials and the ability of anti-money laundering (AML) and identity theft protection providers to plug these major fraud gaps. 'Knowing your customer' (KYC) ensures that identity theft and money laundering are minimised, giving more control over how client accounts are managed.
In 2022, the key to avoiding increased fraud and penalties will be to invest in third-party identity verification solutions like Veriff. These solutions will bridge the gaps in the problematic network of global legislation that this industry battles daily and ensure preparedness for future enforcements that will inevitably tighten customer and user identity requirements. Providers need a clear picture of who their customers are - age, location, other identifying characteristics - and early investment in these solutions will ensure businesses are meeting current and future KYC and AML legislation requirements as the sector hits exponential growth.
However, just ticking the boxes to meet the required KYC and AML legislation needs is not enough to prevent fraud. For businesses to tackle fraud issues, they need sophisticated fraud detection capabilities - this is where Veriff’s IDV solution which includes background video recording, device, and networking fingerprinting, behavioural analysis, and other checks shines at its best.
The digital world is quickly moving toward this new virtual reality of the metaverse, a market that may reach USD 783.3 billion by 2024, and a market cap that may reach 2.7 times that of just gaming software, services, and advertising revenues. The opportunity is ripe; the establishment of digital trust and data privacy is critical for business leaders and everyday users. By implementing a solution like Veriff’s (the first of its kind for the metaverse), metaverse companies will be able to discard bots and block sold accounts so users can be certain that they are interacting with real individuals within the digital environment.
From a safety standpoint, Veriff’s technology verifies the identities of metaverse users while protecting underage users from inappropriate or age-restricted content and individuals falsifying their online identities.
To meet the growing demand for a seamless digital user experience, businesses need to identify a fast and scalable identity provider that can ensure trust among their customers and keep their operations in motion. This will enable them to ultimately provide users with a frictionless and trustworthy online experience.
This editorial was first published in our Financial Crime and Fraud Report 2022, which showcases the innovation and development of the best practices and instruments used by financial institutions in their fraud prevention activities, to improve the digital onboarding process of their customers while fighting against financial crime.
About Janer Gorohhov
About Veriff
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