IDV - A Perfect Fit to Counter Frauds in Sharing Economy

One of the first lessons we all learn or make our next generations learn is how to share. As a result, we quickly discover how to differentiate between trustworthy people from others that are less so. The same thing applies when it comes to the sharing economy. How can someone trust a driver, caregiver, and renter or vice versa? Enterprises need to make sure that a trust level exists among all the parties who use their platform.

Sharing economy is a business model that includes peer-to-peer (P2P) earning, rendering, or giving access to goods and services, brokered through an automated or mobile app resource. One of the first platforms in the sharing economy was eBay, which currently has 187 million users worldwide. eBay enables P2P buying and selling of automobile parts, household products along with many others.

Emerging Concerns in the Sharing Economy

With the rise in the sharing economy, a few emerging concerns in the industry are illegal ownership of accommodations, the potential buying, and selling of fraudulent products, robbery, and violence. Based on the type of the sharing economy industry, there are particular identity verification and Customer Due Diligence (CDD) solutions that organizations must comply with when enrolling new customers.

Increasing Fraud Cases in the Sharing Economy 2021

TransUnion Observed a 15.2% Increase in Rental Fraud

A prompt increase in the use of digital rental applications has been observed since the onset of the coronavirus pandemic. This resulted in red flags for fraud in the industry. TransUnion associated fraud surge to the failed authentication of customer applications. The fraud cases are largely about stealing the identity of the occupant. It involves deploying someone else’s Social Security number, their driver’s license from the dark web, and creating an entirely new identity known as synthetic fraud. TransUnion observed a 15.2% increased scam rate in 2020 and predicted that it would keep on increasing unless the merchants follow swift identity verification protocols.

Uber Loses its London Licence after TfL Catches Drivers’ Faked Identity

The ride-hailing service provider company, Uber, has been deprived of its license after the regulatory authorities found out that more than 14,000 trips were completed by drivers with forged identities on the company’s app. Post the probation period of two months, TfL declared that it will not review the drivers’ license. The ride-hailing service provider was advised to address concerns with checks on drivers, safety, and insurance but the company failed to satisfy the TfL’s requirements. Later the Transport for London issued a statement including major security breaches that caused a threat to the rider’s security.

Fraud Risks Associated in the Sharing Economy

The major reason behind the emerging threats in the peer-to-peer platforms is weak user verification, a method used to confirm customers are who they say they are. If the risks exist, the users’ trust may be broken and the companies may be left with a damaged reputation. Therefore, it is necessary that every sharing industry must adhere to the security protocols, identity verification, and ongoing customer authentication. Failure to involve these measures may expose firms to the following threats:

Identity fraud and Account Takeover

Sharing platforms are generally employing emails to identify new customers which is not a solid way to authenticate the identity. Loopholes in verifying the identities may open ways for fraudsters to commit frauds such as account takeover. Cybercriminals getting access to sensitive personal data in the account takeover fraud possesses a significant threat for the customers and businesses.

Catfishing

It is a fraudulent activity that involves developing a thread of forged profiles to develop a fake persona. Such an artificially created personality can then be deployed for financial gains.

Malicious Bots

These act as software to perform automation activities on the internet. Malicious bots can be deployed as a tool to distort forums, grow website traffic, and can pose a real person. The last one carries the biggest risk to customer security.

Threats to the Individual Safety Outside Internet

Cyberattacks possess a threat to the mental, physical, and financial security of the customer in the real world. A weak onboarding process might cause disastrous consequences for the enterprises.

Role of Identity Verification in the Sharing Economy

Identity verification can play a significant role in reducing most of the issues in the sharing economy. It is a perfect fit for businesses to secure financial data and reduce fraud threats to a great extent. By identifying customers, companies can secure they are dealing with genuine customers.

Identity verification also assists merchants in growing their businesses. Using advanced IDV solutions can validate customers which naturally enhances the efficiency and speed of an automated onboarding.

Another major role IDV provides is compliance. KYC (Know Your Customer) and AML (Anti-money Laundering) regulations are part of the identity verification. It assists companies in complying with the KYC/AML directives that prevent them from facing any legal percussions.

In a Nutshell

The concept of P2P can only be made successful if the business and the consumer both share a trust level. Identity verification is one of the most talked-about problems as a lot of businesses are incorporating faster onboarding and cloud computing. As ease of use is crucial, safety must be one of the major concerns for the sharing economy. Businesses that take no heed in safe onboarding possess the risk of losing their customers.