August 19, 2016
Is Your Alternative Identity Verification Clicking with Millennials?
By Michael Hagen, Corporate ID Strategist, Mitek
Millennials have become one of the most important market segments for any business. In 2015, millennials surpassed baby boomers as the nation’s largest living generation according to the U.S. Census Bureau . While this group may be hard to categorize, one thing we are sure of is millenials prefer mobile-friendly payment features. In fact, according to a comScore report , one in five of them no longer uses a desktop computer to go online, instead relying exclusively on smartphones and tablets. As this move to mobile increases, many merchants accepting card-not-present transactions will find that they are not properly protecting themselves or their customers from fraud in the mobile channel.
Millennials Mean Mobile
Merchants and payments processors need secure and convenient user authentication and verification solutions more than ever. Mobile commerce now makes up 29 percent of e-commerce transactions in the U.S., according to Criteo . Card-not-present fraud now represents 45 percent of total U.S. card fraud according to Aité Group . In addition, a recent millennial survey found that 54 percent said security trumps convenience when using a mobile device. The survey also found that this highly influential group doesn’t mind taking a few extra steps to validate their ID in the mobile channel. Merchants and payments processors must upgrade their identity verification process to keep pace with this new platform and this new mobile generation.
For merchants and payments processors to get ahead of their competition, this can no longer be an afterthought. It must be a primary consideration if organizations want to appeal to the most numerous demographic in the U.S. Fifty-two percent of millenials have made a decision about where to spend their money, or switched companies, based on what the organization allowed users to accomplish with a mobile device. But, while millenials may have started the mobile revolution, all consumers now expect merchants to have mobile capabilities. Seventy-four percent of Internet users 55 years and older now use mobile devices, according to comScore .
Mobile payments are becoming the preferred card-not-present purchase method. For example, in late 2015, Walmart announced is was launching its own mobile payment system that will allow shoppers to pay through its app at the cash register in the store. As the largest retailer in the U.S., Walmart’s step towards in-store card-not-present purchases suggests that, in the near future, merchants face an increasing need for effective mobile identity verification.
Mobile Enables New Thinking on ID Verification
By incorporating new authentication steps, current mobile payment services can easily and quickly be strengthened. One method of mobile identity verification that has been shown to work well with card-not-present transactions is the use of mobile capture for document authentication. While there is no way to know if a shopper conducting a card-not-present purchase is using their actual credit card vs. a stolen card, the mobile device camera is capable of accurately detecting a government issued document. By using the camera, either on a mobile device or a mobile payment enabled cash register, a merchant or payment processor can be sure that a user’s ID is legitimate. Since it’s unlikely that a fraudster would submit their own driver’s license to commit a crime, this step would greatly reduce losses and capitalize on the camera already built into most mobile devices for quick, easy user verification. Major merchants are utilizing these solutions to fight existing and developing fraud patterns that plague the mobile channel. For example, PayPal has developed complex end-to-end encryption to help consumers and merchants combat the anticipated increase in card-not-present fraud from the transition to EMV cards.
Mobile identity verification solutions can also lower the manual review queue for merchants, meaning more profit on each sale. According to JP Morgan , 27 percent of orders are routed to manual review. And, according to the 2015 LexisNexis True Cost of Fraud Study , despite many merchants employing multiple layers of fraud-prevention technology, they still devote far too many resources to manual reviews.
For consumers, the adoption of mobile-friendly processes means that they would be less likely to abandon the mobile channel. According to Akamai , 50 percent of consumers will abandon their purchase if a website is slow loading or crashes. And, mobile and tablet users are even more likely to abandon a website than desktop users in that situation. The potential for major loses if a merchant can’t quickly validate that transactions are legitimate is significant. New verification technology matches the ID to the payment information in near real time to quickly complete a transaction, all while helping merchants spot fake or altered ID documents.
A Flexible Solution
For merchants worried about when and on which transactions to incorporate mobile identity verification, this step can and should be left up to their discretion. A retailer might not care as much about a small purchase, but for big-ticket items or age-restricted commerce, adding this strategy would help ensure that no money is lost and that no product is sold to a fraudster. One example where this method could help is with online gift cards. When fraudsters buy online gift cards, the money is instantly gone due to the code going out via email almost immediately. On purchases like these where it would be hard to regain the lost item, mobile identity verification would be essential during the purchase stage to stop the loss before it happens.
Unfortunately, even with advancements in technology, fraud in some form will always exist. But, with sophisticated mobile identity verification solutions, merchants can prevent and detect fraud that will cost them the most time and money. Incorporating a mobile identity verification strategy is critical for merchants that want to survive in the new mobile world. This provides a place for safe transactions that also increase revenue. It’s a combination of convenience and security for the consumer and increases convergence rates for the merchant.
Merchants of all kind should be using mobile identity verification to protect themselves from fraud and regulatory compliance issues (such as with age restricted commerce). More consumers are turning to the mobile channel to make their purchases. Instead of allowing these sales to go to competitors, risk loses to fraud or missing opportunities through slow manual review, merchants and payments processors should look for mobile identity verification solutions that increase revenue.
Michael Hagen is the corporate ID strategist for Mitek, a global leader in mobile capture and identity verification software solutions. Mitek’s ID document verification allows an enterprise to verify a user’s identity during a mobile transaction, enabling financial institutions, payments companies and other businesses operating in highly regulated markets to transact business safely while increasing revenue from the mobile channel.