The Pandemic And Its Effect On Identity Fraud In North America
How Digital Fraud Varied Across Industries Affected By The Pandemic
The world is in the middle of a crisis for at least 3 months now. Several businesses collapsed, unemployment rates are at an all-time high and nobody knows when this situation is going to be better.
But the pandemic has proven to be a silver lining for a few businesses. We all have already heard about how Zoom shot to fame among consumers. Netflix added 15 million subscribers in a quarter, more than double the 7.2 million that was projected.
With such success comes risk. Such exorbitant success is a ripe ground for fraudsters to game the systems. We, at TeleSign, a digital identity and programmable communications company, tried to analyze the trend in our North American business, and this is what we noticed.
Sign-ups and Anticipated Fraud Rose for The Internet Giants
Work from home was not supposed to be mainstream until at least 3–4 years from now. Covid-19 accelerated the transition drastically. The Result? A lot of additional business flew to the internet giants. But additional sign-ups, especially when these products were made open to consumers, come with the added risk of fraud, and that was rightly captured.
Basic 2FA comprises one-time passcodes whereas Digital Identity provides advanced intelligence to mitigate fraud.
The February to March jump directly correlates with the work-from-home transition. As people settled in after the initial rush to sign-up to these services, the adoption growth rate of these services is settling but since Digital Identity continues to provide additional actional insights during events across the customer lifecycle, its usage is increasing steadily.
Travel Industry Will See Longstanding Effects
Travel Industry is probably one of the most affected and the chart below supports it. But why did Digital Identity gain 60% in February while OTP usage fell? We anticipate that these are cancellations. Since Digital Identity provides information across the entire customer lifecycle, customers use these products at various stages beyond registration. And one such area is when customers anticipate fraud amongst mass cancellations.
While Digital Identity traffic comes back to normal (compared to the January baseline), one-time passcode usage continues to fall suggesting that fewer customers are turning up each month with new travel plans.
Ticketing Industry Is Struggling
The ticketing industry is a thriving business usually, and we work with them on a number of use cases including, but not limited to, verifying the identity of the consumers, ensuring minimization of black-marketing deals, and preventing account takeover.
But this industry’s business is almost correlated to travel. By April 2020, the transactions fell by almost 100% from the January baseline for digital identity. We do see a surge from January to February that started declining gradually.
The surge would have been for cancellations when a major chunk of events was canceled. As time progressed, a small fraction of consumers kept canceling their tickets for events that were further out into the year.
Supply Chain Is Thriving And Is Adopting Advanced Fraud Analytics
Irrespective of where you buy items from, you need them delivered, right? Supply chain companies are truly thriving at this point. Not only are they seeing increased orders from their existing businesses, but more and more new businesses (mostly E-Commerce) are also signing up.
I recently bought a mask and a hand sanitizer from a small business in New York and they took 2 weeks to deliver it. Evidently, they never had experience with this. Either way, the supply chain companies are getting new business exponentially.
Growing business correlates to growing frauds such as charge back and stolen merchandise. This makes supply chain companies fast adopt to fraud detection mechanisms.
Both basic 2FA and Digital Identity adoption is growing in this industry.
Gaming Witnessed A Lot of New Customers
What would you do when you’re locked inside? Read new books, binge shows, develop a new hobby — like playing games?
Beyond streaming and productivity tools, the gaming industry is one of the big beneficiaries of the current situation. Gaming has witnessed an exorbitant 200% growth from January until March when the curve flattened. All this traffic is divided into two parts: (1) surge in new people signing up for games, and thus gaming companies trying to curb fraud at registration and (2) the gaming companies proactively adopting identity checks at multiple other points in the customer lifecycle such as in-game purchases and gamer to gamer communications.
Not only does it reduce fraud, but it also helps to reduce communication channel abuse thus improving customer satisfaction.
Nevertheless, a 200% surge in 2 months is no small feat.
Fintech Is Thriving And Is Fast Adopting To Advanced Fraud Analytics
TeleSign has seen a lot of digital identity adoption lately. As with other industries, our digital identity products are able to detect potential fraud at various touchpoints across a customer lifecycle.
This, coupled with the fact that the pandemic has made more people turn to products such as lending and credit cards to help them through the situation, we have noticed an increased usage of digital identity products within this industry.
Beyond trying to understand the initial risks, financial services use digital identity to understand real-time transaction risks.