Victor Fredung is the CEO of Shufti Pro, an innovator in identity verification solutions.
Digital interactions have become the norm today, and I believe we are steadily moving toward a future where advanced cybersecurity systems and identity verification solutions will streamline processes like boarding flights or checking in at hotels.
While digital transformation entails significant advances in human civilization, it can come at the cost of trust. As our behavior and interaction in virtual spaces are reshaped, we must be mindful of the potential risks arising from digital shifts.
Early adopters of the internet were unaware of the security risks posed by sharing personally identifiable information (PII). However, times have changed. As CEO of an identity verification service, I have observed that customers and users are now more vigilant about their data rights—and expect businesses to have proper security measures in place.
It can be said that the modern digital economy is fueled by trust. And it falls on those of us working in this space to educate businesses about safeguarding customer privacy and data.
The Era Of The Digital Economy
The digital economy has revolutionized the way we conduct business. As e-commerce, online banking and digital financial services are becoming more prevalent, consumers and enterprises increasingly rely on the digital realm for their day-to-day activities. A 2021 report from the Bureau of Economic Analysis revealed that 10.3% of the U.S. GDP was directly related to the digital economy. This translates to about $2.4 trillion, which is by no means an amount to ignore.
With the disruption of traditional business models, companies have been compelled to revitalize their strategies and adapt to the digital landscape. One of the core traits of the digital economy is the extensive connectivity it has enabled. Therefore, establishing trust in these interactions is essential for continued growth and development.
Exploring The Impact Of Identity Fraud
The risk of identity fraud has also intensified. As more transactions and interactions occur online, cybercriminals seek to exploit vulnerabilities to perpetrate identity theft and fraudulent activities. The consequences of identity fraud can be devastating for both businesses and consumers.
In 2021 alone, Javelin Strategy reported that an estimated 15 million U.S. citizens were affected by identity fraud. They revealed that America lost $52 billion to identity thieves. Adding fuel to this digital fire, the Federal Trade Commission reported 1.4 million identity theft cases in 2021.
In a digital-first setting, customers share their personal data with businesses to access services and make purchases online. However, when identity fraud occurs, customer trust erodes, leading to hesitancy in sharing personal information with businesses. Restoring trust is a challenging process that requires a commitment to robust security measures.
Identity fraud also poses legal and compliance challenges. Businesses that fail to protect customer data and identities may face lawsuits, regulatory fines and other legal consequences.
The Rise Of Identity Verification Solutions
To combat this growing threat of identity fraud in the digital economy, many businesses and service providers are implementing robust identity verification processes. (Disclosure: My company provides these solutions, as do others.) They act as a safeguard, ensuring that the individuals accessing services or making transactions are who they claim to be.
Companies are implementing identity verification methods such as biometric authentication, knowledge-based verification and document validation to reduce the risk of fraudulent activities. Know Your Customer (KYC), in particular, offers a highly secure and reliable method to verify a user’s identity through unique enhanced verifications, including checks on government-issued IDs, addresses and financial affiliations.
That said, it’s important to be mindful of some common challenges companies might face when using IDV solutions.
1. Integration with existing systems: Integration can cause compatibility issues for legacy systems. The best way to go around this issue is to look for a provider that layers the IDV solution over your existing workflows.
2. Multi-jurisdictional considerations: Enterprises operating across global locations need to navigate different regulatory frameworks. Adapting to legal requirements while maintaining consistency across IDV solutions can be a challenge. Look for best-in-class IDV solutions that provide flexible data retention and customization options to comply with KYC laws, such as GDPR, providing a tailored solution for your needs.
3. User accessibility and inclusion: Identity verification solutions should accommodate individuals with disabilities or limited access to technology. Ensuring that the verification process is inclusive and accessible to all users is a challenge that requires careful design and testing. Choose a solution that best reflects your values and ensures equality across its services.
For entrepreneurs aspiring to enter this field, the most important thing to understand is that business is all about trust and confidence. And I’ve found the best way to achieve this in the IDV industry is to understand the specific problems of your targeted audience and build the solution around them.
The Digital Economy Is All About Trust
Building trust in the modern economy is easier said than done, as it is a multifaceted endeavor that encompasses several key elements.
• Data security: Many companies are now using data as the foundation of their entire business decisions. With the introduction of laws like GDPR, users now possess greater control over how their data is utilized. Businesses must invest in secure infrastructure, encryption protocols, and regular security audits to protect customer data from unauthorized access. For example, my company went through a SOC Type 2 auditing procedure. This helped us gain the confidence of our customers as it assessed the operational effectiveness of safeguarding customer data.
• Transparent policies: Building upon the previous point, being transparent about data usage and privacy policies fosters trust among customers. Communicating how data is collected, used and stored helps build confidence in the digital ecosystem.
• User education: Look for solutions that play an active role in educating users about the effectiveness of maintaining a secure digital profile. Sharing product demos, case studies and cybersecurity reports on your social platforms and web presence can help.
As we continue to witness the growth of the digital economy, it is evident that trust serves as the lifeblood of successful digital interactions. Business leaders should keep an eye on the evolution of identity verification to fuel their growth and build lasting customer relationships.
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