As summer approaches it is usually accompanied by a series of rock festivals and there is a trend these days for those events to feature bands from yesterday attempting to reactivate their glory days and perhaps make a late top up to their fast approaching pension plans, writes David Lanc, CEO of Payfont
"Yesterday" is a key word here because, like those rockers from yesterday, the banks are still clinging to ‘golden oldie’ online security systems that were fine when Status Quo started out "Rocking all over the world" but are now seriously out of tune with the beat on the street.
Go deeper with GlobalData
At the heart of the problem is the fact that fraudsters operating in the field of electronic payment have become highly sophisticated, hi-tech operators, far ahead of the banks’ existing online security systems that are supposed to deal with the viral growth of identity theft.
As I sat down to pen this piece news came through that eBay had been the latest victim of attack by hackers and up to 231m passwords were put in jeopardy.
Keeping with our musical theme, I would like to blow our own trumpet for a moment to highlight that our Payfont online security system has just been accredited by the University of Greenwich as being over 99% more secure than existing bank and technology security for e-commerce and money transfer.
The University of Greenwich, London team is led by world renowned e-commerce security expert, Professor Lachlan Mackinnon, who told us: "Currently, millions of transactions online in the UK are breached resulting in well over £3bn ($5bn) of identified fraud reported. In the US it’s over $21bn with one adult every three seconds defrauded by identity theft, it is therefore a huge problem that existing security models don’t solve."
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataResearch by "UK Fraud Resolution" indicates 65% of fraudsters in the UK now rely on identity theft to obtain their ill-gotten gains.
It’s not just a problem for consumers, research from the British Retail Consortium estimates that some £205m worth of e-commerce transactions were abandoned because the person online was bogus and had either obtained someone else’s identity or financial details enabling them to obtain goods that they never paid for.
To quote from an old Bob Dylan song: "You don’t need to be a weatherman to know which way the wind’s blowing" on that little statistic.
Online commerce is now very much a way of life across all age groups, from silver surfers to tiny tots, but consumer confidence is a delicate flower that is in danger of being crushed in the relentless grinding millstone that is the unchallenged growth of online crime.
At the core of the problem is that underpinning the blizzard of new technology that has hit us, the basic proposition is that business is still about people and banks don’t treat their customers as individuals in the context of their online identity.
Criminals rely on a standard method where the consumer provides identity and financial details in a predictable manner and that is the Achilles Heel in the whole process.
Bank and industry online security today is such that we read news of global banks being fined $1.9bn by regulators for money laundering breaches because they are not judged to comprehensively monitor or prevent it. Online fraud rates are now reported to be outstripping growth in ecommerce, proving that existing security is not stopping identity fraud. After all, how can we be secure when the security meant to protect us actually protects transactions processed by fraudsters as it does today? Clearly, there’s a gap between what we have and what we need to keep consumers and merchants safe online.
For around 1% of that $1.9bn fine, the global financial services industry could have a realistic and relevant global counter to money laundering and identity fraud protection for ecommerce and online banking. It would pay back in a very short timescale, building trust and confidence with customers and regulators. It would also provide a stellar return for stockholders.
Lots of technologists and risk specialists in banks are working on fraud detection. Lots of marketers are working on the "consumer-centric" experience. By thinking differently, banks can now have a validated transformation in identity protection, with the promise of vastly lower costs of operation and significant ease of use in one proposition. What business regulator, hard pressed merchant or vulnerable consumer wouldn’t want that?
The way to deal with identity fraud is to create an online identity for them that is as unique as their own DNA; it can be done now for a cost that is miniscule compared to the current losses resulting from identity fraud.
To end with our old rockers theme, it’s time the banks got their act together and back on the road with a new beat that matches the rhythm of the online world we’ve all joined in with!
David Lanc is the CEO of Payfont
