How ID Verification Helps in Fighting Digital Scams?

Digital scams are a common phenomenon and they affect all types of businesses in every corner of the world. The most common are fake identities, data breaches, credit card fraud and account takeover fraud. The bill has grown with them. IBM’s Cost of a Data Breach Report 2026 put the global average cost of a breach at $4.99 million, a record and 12 per cent up on the year, and named phishing as the most common initial attack vector for the fourth year running.

Online businesses have been the victims of various types of fraud which cause financial and non-financial damage. The financial losses include loss of profit, penalties and extra expenses incurred for fraud management. Non-financial loss includes the loss of credit rating, customer value, and competitive edge of the company.

Fraudsters are always in search of advanced methods to defraud businesses. Regulatory compliance has been amended in response to these multi-faceted frauds happening globally. KYC and AML compliance is an integral part of business these days. Digital KYC backed by AI-based solutions is the risk prevention approach used by online businesses worldwide.

How online businesses are defrauded?

The categories below overlap in practice, because one stolen credential set can feed several of them. What separates them is where the money leaves the business and which check would have caught it earlier.

Credit card frauds

Online businesses are exposed to credit card fraud simply because they accept online card payments. It happens in different ways, the most common being card not present (CNP), friendly fraud, lost and stolen card, and counterfeit card fraud.

CNP is where the volume sits. UK Finance recorded £423.5 million in remote purchase card fraud losses across 3.2 million cases in 2025, up 13% in case volume on the year. For a merchant, most of that arrives as a chargeback rather than as a fraud report.

Account takeover fraud

The account credentials of a genuine customer are stolen to carry out illegal transactions. This fraud happens often in the financial and fintech sector, where money launderers and fraudsters steal a client’s account credentials to transfer funds to suspicious accounts. At times account takeover is conducted for monetary gain, and at other times the intention is to move funds anonymously to criminals.

Such fraud causes financial loss in two forms. The business bears the loss when it refunds a customer whose account was used illegally. The larger loss usually comes as penalties and lost credibility from failing to meet KYC and AML obligations.

To prevent that loss, online businesses are introducing digital KYC and AML screening into their systems.

Fake identities

Identity theft feeds most of the fraud above. The FTC’s Consumer Sentinel Network logged 6.5 million consumer reports in 2024, including more than 1.1 million identity theft reports, and consumers reported losing $12.5 billion to fraud that year, a 25 per cent rise.

Stolen identities are sold on the dark web to commit fraud and crime, targeting businesses, government organizations and even non-profits.

Fake identity fraud is committed using fake or stolen ID cards and other identity documents. The harder variant is synthetic identity fraud, where real data is combined with invented details to build a person who does not exist. Because nobody is impersonated, nobody reports it, and it usually surfaces as a credit write-off rather than as fraud.

Common frauds committed with fake identities are account opening for illegal fund transfers, buying age-restricted goods, money laundering and terrorist financing.

Fake merchant identities are also used to conduct business with credible entities. Shell company owners hide behind stolen identities to trade. Financial proceeds are then manipulated to fold black money into a business’s legitimate revenue. Digital ID verification and AML compliance reduce both the fraud and the lost revenue.

Data breaches

Data is a valuable asset, and the customer data a business holds is exactly what makes it a target. Data protection regulations such as GDPR (General Data Protection Regulation) and the CCPA (California Consumer Privacy Act) exist to constrain how personal data is collected, used and shared, and a wave of further US state privacy laws has followed them.

Data breaches are a common fraud, costing businesses millions of dollars. Online businesses hold large volumes of data that they use for revenue generation and for improving customer experience. Hackers steal an employee’s credentials and use them to reach confidential data. Breaches target a business from many angles and use several channels.

System hacking

Collaboration software is used inside companies for communication between teams. That software also carries data transfers, often confidential, which would harm the company if a competitor or an attacker reached them.

B2B relations

Businesses share confidential customer data with partners, processors and suppliers, under regional regulation and in-house protocols. Scammers know how valuable that data is, and they exploit the loopholes in those arrangements to reach it.

The Equifax breach of 2017 remains the clearest example. Equifax held data on many individuals and business entities, and that data was compromised. The businesses in a B2B relationship with Equifax carried the consequences alongside the consumers.

Serious damage follows a breach of that kind. The fraud and losses that come with it can be reduced if organizations use digital identity verification before granting access to databases. Biometric authentication and ID verification are practical controls for preventing breaches that start with a stolen credential.

Where ID verification actually helps

ID verification matters for online businesses because it screens every client that tries to reach your portal, website or app. It does three separate jobs, and they are worth separating. It keeps fraudulent accounts out at the point of creation. It gives you the evidence trail a regulator asks for later. And it lets you re-check a person at the moments where risk concentrates, such as a password reset, a new device or a large withdrawal.

The threat it has to survive has changed. A document check that reads a passport but never tests whether a real person is holding it can be beaten with a printed photo, a replayed video or a generated face. Deepfake detection and liveness are what keep the rest of the check meaningful.

Digital identity verification does more than prevent fraud. It helps businesses build trustworthy relationships with clients and merchants, and it makes regulatory compliance a routine part of onboarding rather than a separate exercise.

How digital identity verification works

Digital identity verification is a straightforward process. Shufti’s identity proofing returns a result in under three seconds. It gathers information from an ID card or other identity document in real time and matches it against the information entered by the end user.

For added security, the end user’s selfie is captured and matched against the image on the ID card, with liveness checks confirming a real person is present rather than a photograph or a replay. Documents are scanned for the expected format and for forged information.

The detailed screening of documents and information provided by the end user removes fraud at the first stage.

Online businesses have huge growth potential, and their exposure to cybercrime grows with it. Digital identity verification reduces fraud losses and protects the revenue that fraud would otherwise eat into.

KYC and AML compliance is unavoidable. Shufti helps you meet it with solutions configured to your compliance needs, across 240+ countries and territories and more than 10,000 document types. Every business is a separate entity, and its compliance and security needs are its own.

See how identity verification would sit in your onboarding flow in a 20-minute demo.