This year, 2023, digital identity verification will take on greater urgency. This is largely due to the fact that fraudsters stole more than $11.4 billion through account takeovers (ATOs) last year, while account origination fraud is predicted to cost $5 billion by 2024.
The world of technology and everything linked with it moves at a breakneck pace. Identity verification is no exception. Read the blog for our predictions regarding data security and privacy, fraud prevention, and legislation that are expected to impact how businesses authenticate the identity of their customers in 2023 and beyond; Customer Onboarding in 2023: Digital Identity Predictions
Enhanced Digital Identity Management
In 2023, digital identity is expected to continue its unstoppable development. Following the Covid-19 epidemic, employing digital methods to prove that a person is who they claim they are will remain the dominant method of accessing government, banking, health, employment, and education services. The global market for this is estimated to be valued at roughly $33 billion by 2025, representing a more than 100 percent growth from its value in 2020.
In 2023, the usage of digital identity wallets is expected to rise. There are now so many instances of customer onboarding that require authentication that it is getting increasingly time-consuming to go through the identical steps for each service. As digitalisation grows in popularity, so will the number of expected identity verification processes. The Bring Your Own Identity (BYOI) approach will gain traction, using an underlying ledger architecture. However, the market for schemes like this remains fragmented, with regional variants and no interoperability standards, however, a worldwide standard for portable decentralised identities is expected to develop in the coming years as use cases arise at an increasing rate.
Identity Theft and Privacy
The message is clear: presume that everyone has access to all of your personally identifiable information (PII). Stolen static identity credentials, such as names, passwords, and email addresses, are being used to impersonate people online and perpetrate synthetic identity fraud.
Users are more concerned about data management, with almost four-fifths eager to invest time and money in methods that will improve their privacy. Self-management of data by consumers, as provided by digital identity wallet solutions, minimises an organization’s responsibility to acquire, handle, and preserve PII, making it a more enticing notion to the corporate sector.
Fraud scenario in 2023
Unfortunately, when the economy is shaky, scammers take advantage. As the global cost-of-living crisis worsens, ransomware regionally focused phishing, and threats connected to cloud security and IoT are all projected to rise in 2023.
Deepfake is one way to keep an eye on the next year. As machine learning (ML) grows more powerful and face databases include more information on people’s likenesses, bad actors can use deepfake technology to construct millions of fake identities.
Other sorts of digital fraud have also been facilitated by technology. The tools needed to usurp a person’s identity are all available on the dark web, so those looking to engage in unlawful behaviour no longer need to generate counterfeit physical documents. As rapidly as technology advances, fraudsters keep up, making it difficult for identity service providers to build anti-fraud safeguards. ‘Liveness detection‘ helps in the field of biometrics since the underlying AI assures that the digital contact or transaction is with another person rather than a fake, lifeless image or video.
With the rise of fraud and its associated complexity, the emphasis will shift to detecting hazardous persons and genuine consumers across platforms.
Crypto Currency Regulations
Governments must develop well-thought-out legislative frameworks if the adoption of digital identity concepts is to be encouraged. Authorities must establish clear and consistent regulations for the collecting, processing, and sharing of personal data. This appears to be especially true in the cryptocurrency industry.
Following the November crash of FTX, the crypto market had a turbulent close to 2022. An expansion of the European Transfer of Funds Regulation (TFR) to include crypto assets is planned to take effect in the EU in 2023, requiring the sender and beneficiary of all related crypto transactions to be named.
Transaction signing will spread beyond digital assets such as non-fungible tokens (NFTs) and crypto exchanges to traditional financial markets in the coming year, with big banks using the technology.
To those in the know, transaction signing adds an extra degree of protection to conventional two-factor authentication techniques by asking users to provide data contained in their transactions in order to produce a random one-time QR code that is then validated using an authenticator app. This method guards against “man-in-the-middle” attacks, in which malware is used to intercept or change transactions. While the friction caused by this has hampered adoption, client demand is increasing.
Companies that use tamper-resistant transaction signatures can obtain a competitive edge. Investments in use cases such as digital asset transaction signatures can prevent fraudulent activities that cost the cryptocurrency market $2.5 billion in only the first three quarters of 2022, broadening its attractiveness to a broader range of high-value, high-risk transactions.
Biometric Know Your Customer (KYC) Procedures
KYC is likely to grow more comprehensive in terms of establishing clients’ identities and corporations’ understanding of who these customers are.
It is no longer acceptable to work in silos. It poses a serious danger to customer service and satisfaction. Companies will need to embrace the capabilities of multi-purpose technology solutions in order to improve communication across departments. As a result, their operations will be optimised.
The financial services industry and its institutions are excellent examples. Departments such as Compliance, Sanctions, and KYC are now working on distinct agendas, and the dots are not connecting. The finest technology and KYC suppliers will understand how departments interact with one another and allow multi-purpose use. This will provide significant advantages because KYC processes impact how other departments, such as Fraud and other financial crime sectors approach culprits.
VPNs give way to an identity-based passwordless authentication
When the corporate “network” now includes every employee’s bedroom, breakfast nook, and favourite coffee shop, depending on VPNs for perimeter security is akin to locking the rear window while leaving the front door open. VPNs are simply no match for compromised credentials, as recent assaults have proved.
Fraudsters now have easy access to company secrets, data, and more thanks to the 2 billion login credentials stolen in recent years, whether they’re from corporate systems, email accounts, or the VPN itself. It doesn’t help that 64% of us reuse passwords across several accounts—and frequently share them with coworkers.
Traditional types of multifactor authentication (MFA) are also becoming ineffective. As a result, expect next-generation biometric verification solutions to gain popularity in the next year.
Industry giants opt for Biometric Logins over Passwords
The same forces that drove the transition away from VPNs and conventional MFA will increase the push for passwordless authentication initiatives in 2023. We expect that by the end of the year, 80% of Fortune 500 organisations will have structured and funded these initiatives, and 50% will have implemented it in at least two of the most typically targeted systems—remote access and operating systems.
Passwordless authentication nowadays can include a one-time passcode (OTP), SMS confirmation, and a PIN. However, while useful, these can be easily circumvented by hackers.
Recession Fraud: Increase in Identity Theft
The likelihood of an economic slump in the coming year currently ranges between 60% and 70%. If the economy does tank, one thing is certain: there will be a significant increase in fraud. The Great Recession, which began in 2008, is the most significant historical example of online fraud dynamics.
According to Reuters, the number of internet fraud complaints registered to the FBI increased by 33%—the first rise in three years. Between August and November, the number of phishing emails quadrupled from 400,000 to 800,000 each day.
Meanwhile, financial services businesses have seen an increase in busted-out scams carried out by fraudsters armed with synthetic identity information. By 2014, it was estimated that this scam accounted for 10% to 15% of all banks’ unsecured bad debt.
If comparable trends continue, the financial services sector will most likely transition away from traditional types of MFA and toward biometrics- and device-based authentication and dispersed identity. This will compel enterprises and customers to adapt to these new procedures, potentially hastening passwordless authentication adoption across industries.
Exclusive Identity Scoring over traditional credit ratings
Individual consumers will maintain and nurture our digital reputation, or “identity score,” as ownership and management of personal data shifts away from tech businesses and credit bureaus. The possibility to keep personal information in a privacy-focused wallet or similar decentralised verification method is a possible scenario.
Individuals will own government identity documents, bank account relationships, and verified credentials or receipts that create transaction and credit history rather than a credit bureau or digital platform. When a person chooses to submit this data, it may be scored without revealing any private user information or metadata to third-party providers. It can also be time-based and erased after a set length of time.
Finally, unlike existing credit bureau-based reputation systems, this type of digital identity score is validated to be correct and up to date.
These trends indicate that the industry is shifting away from passwords and toward more secure forms of digital identity verification, which will also attempt to increase privacy by giving users choice over their personal information and who they share it with.
IDcentral’s digital identity verification system works in a similar manner, Face Trace uses private & pre-determined databases like an institutional database of employees’ photos and IDs or a database of student information from a university to cross-verify both ID and face biometrics using advanced AI.
With the prime benefits of Digital Identity Verification being reduced verification time and increased precision without bias, it is easy for all public and private sectors to implement the technology into their identity-proofing procedures.
Learn more about IDcentral’s Face Trace Solution
Sumanth Kumar is a Marketing Associate at IDcentral (A Subex Company). With hands-on experience with all of IDcentral’s KYC and Onboarding Technology, he loves to create indispensable digital content about the trends in User Onboarding across multiple industries.