A report published today by Experian suggests that for many a business we are still living in the dark ages as far as making sure customers are who they say they are. Furthermore, the Electronic Authentication: Breaking the Paper Chain report at least partly blames those businesses for the growth of ID fraud, by relying upon fraud friendly paper documents when far more reliable digital alternatives are readily available.
Looking at the numbers, 71 percent of companies surveyed claimed that ID fraud presented a significant challenge to their business yet half relied heavily on paper for authentication purposes. The break down sees 36 percent of retailers fall into this bracket, 40 percent of telecommunication companies, and most concerning of all an astonishing 70 percent of those in the financial services sector.
On the flip side, 70 percent of consumers argue that it is too easy to forge utility bills and bank statements, while 68 percent find it inconvenient having to provide such paper based documents in the first place. The dissatisfaction being greatest with the younger age groups, nearly a third of those in the 18 to 24 category have either delayed or given up on applying for a new account as a direct result of difficulties in providing the required proof of ID.
Anne Green is a fraud consultant at Experian, and she says that "it's staggering to think that today's businesses are still using paper documents to confirm a person's identity. Take passports for example. They actually date back to the 15th century and were intended for travel, not verifying a person who wants to open a bank account. Companies need to break the paper chain and move with the times. It is the 21st century after all. Businesses need to start using electronic authentication; it's faster, safer and cheaper than paper processes. Unlike relying on paper identity documents, it tracks the key financial events in people's lives, together with their data history, and cross-references them electronically. This means organizations can be confident that the customer really is who they say they are. It's great news for today's consumers as well, as there's no need to send vital documents through the post, which is a major risk."
It is the part of the report that relates to reputation, and how companies perceive publicity regarding ID fraud would effect it, that shocked me the most it has to be said. While 76 percent of customers said they would be unlikely to use a company in the future if it had received such negative publicity over a sensitive data breach, 37 percent of financial services organizations declared it would have no effect on their reputation at all. I am hard pressed to decide if this is ignorance or arrogance, perhaps a mixture of both? Only the telecommunications industry, perhaps due to a generically greater understanding of new technology coupled to a strong customer research culture, proved to be really worried by the reputation risk. 80 percent of telecommunications companies said identity fraud would have a detrimental impact on their reputation.
As Anne Green comments "companies are clearly blind to the negative publicity associated with identity fraud. They are not only playing Russian Roulette with their own exposure to potential fraud but also with their customers'. Losing customers' trust can do significant and often irreparable damage to brand value. Customers have opened their eyes to the dangers of identity fraud; it is time that businesses came out of the dark ages, woke up and did the same."