One of the many by-products of progressing technology is payment systems that have cropped up over the years. The extinction of cash payments has long been threatened by credit and debit cards. Online payment processing systems take this to a whole other level by allowing users to make online purchases effortlessly. However, issues like large scale data breaches, frauds and scams like identity theft and credit card fraud put a hamper in this process. These issues directly affect everyone involved in a transaction including a merchant, consumer as well as the payment processor. Each party has to deal with the costs of fraud and cybercrime, both structurally as well as financially. But the fraud prevention solutions currently available in the market have enabled businesses to detect fraud in real time. Mobile ID verification is one of these solutions that can secure online transactions including payment systems.
According to reports, in 2018, merchants in the US ended up losing upwards of $6.4 billion due to payment card fraud. For businesses that are still in their infancy, online fraud might not be much of a problem to consider as they would be processing a minimal number of transactions in a day. However, as businesses grow they have to consider the volume of transactions they receive in a day. The utmost priority of the business must be to secure these transactions effectively.
How Does Mobile ID Verification Work?
The fact remains that companies cannot afford to continue losing billions of dollars due to frauds and need to be proactive about implementing fraud prevention solutions. An ID verification solution can perhaps prove to be the most effective form of anti-fraud measure for payment systems to adopt. Digital ID verification systems use a multi-layered system that can verify users through different verification methods. Firstly, it involves document verification, wherein the user scans their ID document (passport, ID card, driver’s licence etc.) to be verified through an ID verification software. A user can be further authenticated through a facial verification system that uses facial recognition software to authenticate users remotely. Another way to verify users is through an address verification system. An AVS allows online merchants to verify the address of a customer using their recent utility bills.
Here are a few reasons why a customer identity proofing system is important for payment processors and gateway systems;
Among other things, the first and foremost priority for businesses and their payment systems is the prevention of fraud. The convenience and speed that comes with online payment processing are normally at the expense of security. In 2018, the case of Venmo serves as the perfect example. Venmo is a payment service owned by the renowned payment gateway Paypal. The former was subjected to a humongous $40 million in payment fraud in the first quarter of the previous year. This is not an isolated case; payment processors are often vulnerable to fraud due to the lack of prevention measures they implement in their systems.
Establishing Contactless Payment Systems
Online payment systems are meant to be fast and efficient. Verifying individual users online can be a challenge for businesses and payment channels. ID verification presents itself as the perfect solution in the landscape of payment processing systems. With online payment systems, e-commerce merchants found a way to establish a contactless transaction system. But authenticating those transactions is an entirely different matter. A number of businesses and payment systems still use elaborate passwords and knowledge-based authentication (KBA) techniques for user verification. An online identity verification system can establish a seamless verification process, allowing users to authenticate themselves instantly through thier IDs and facial scans.
Eliminating Ongoing Issues in Payment Systems
Online payment systems tend to have a number of other operational issues that affect their efficiency. Some of these issues include chargebacks, card-not-present fraud and false positives. All such problems cost payment processors profoundly. Data breaches are an added evil in this situation, inhibiting the performance of payment systems. Payment processors can, however, combat the problem of payment fraud through a mobile KYC solution.
Cater to More Services
Integrating a mobile ID verification solution can enable payment processors to provide services to a wide range of businesses or services. There is a range of apps and website that look for secure payment systems to incorporate into their interfaces. By adding payment functionality to online businesses payment providers can cater to more services and scale their services to a wider set of audience.
Build a KYC Compliant Payment Solution
With the increasing regulations by financial regulators across the globe payment processors need to be vigilant about complying with KYC (Know Your Customer) regulations that require businesses to properly verify their customers. Businesses face chargebacks in case of credit card fraud and identity theft. On top of that, they have to pay a fine to the bank or credit card company of their customer for not implementing sufficient KYC measures. Integrating an identity verification software, businesses can comply with KYC regulations and requirements thereby avoiding massive chargebacks and fines in case of fraud.
Organisations still implement outdated KYC methods that are slow and inefficient. Most of them use lengthy passwords and two-factor authentication to verify customers. All such methods are subject to spoofing and data breaches. Secure payment processes can be established through robust client verification procedures that are least subject to fraud. A mobile verify ID verification service is currently the most effective solution. It enables payment processors to verify credit card payments with increased accuracy, thereby eliminating fraud.
Shufti Pro is a KYC verification services provider that caters to a wide range of businesses. It provides mobile ID verification services based on an AI-enabled verification system. It can verify users from over 230 countries in real-time using a hybrid verification technology of AI and Human Intelligence.