On December 15, Kevin Gosschalk, founder and CEO at Arkose Labs, and I met virtually to talk about fraud trends we believe will impact 2021 and the years to come, including the overlapping effects of the COVID-19 pandemic.
As Kevin explained it, Arkose Labs bankrupts the business model of fraud with an innovative approach to determining user intent and remediates attacks in real time for use cases including compromised accounts due to credential stuffing, enrollment fraud, and gift card fraud. Risk assessments combined with interactive authentication challenges undermine the ROI behind attacks.
As founder and CEO of Socure, I’m proud to say our team has built a predictive analytics platform that verifies a consumer is who they say they are with respect to any new identity across B2C digital applications in the U.S.. Be it a bank, fintech, online gaming operator, or online prescription refill business, we verify for both fraud risk and regulatory purposes.
Here, you can read about our first four predictions and a recap of that conversation below, or you can view the webinar in its entirety here. Part 2 of this recap, including the final three predictions, will be published next week.
The Long Tail of COVID: The Digital World Has Changed Forever
No conversation about the future can be devoid of talk about the impact of COVID and the long tail effect on everyday lives and businesses in the future. Some experts say that five years of digital transformation took place in six months due to the number of services and products that have moved to online access.
Kevin delved into how for many retailers this meant a move to cashless, digital platforms to support curbside pickup and other similar services which significantly broadened the attack surface for unsophisticated merchants who didn’t understand the space. Other categories, such as video games and streaming services, were equally impacted because the user bases grew so fast that keeping up with the demands of dramatic growth left them far more vulnerable to fraud attacks than would be the case otherwise.
With digital banking, consumers outside the traditional financial system rushed to open bank accounts at neobanks to be able to receive stimulus and unemployment funds. We saw a different impact in the investment space where employed millennials were opening trading accounts to invest savings and a different lens, still, with credit cards where credit availability tightened as unemployment rates soared. With such a flurry of activity, it broadened the attack surfaces all around.
The world is in for a long recovery, and this new reliance on digital services will become a way of life. Long term, we think the impact may be that digital banks, with full suites of financial services, will grow faster than top tier traditional banks.
New Stars of the Digital Landscape Will Flourish in 2021
In a new post-COVID, digital-first world, a number of industries are moving and growing online that were almost exclusively physical interactions previously, including online gaming, cannabis distribution, prescription refills, and alcohol delivery. These products and services have particular age and identity verification requirements that are going to have to be fully digitized in order for them to operate, so this poses an exciting new revenue opportunity but also a nefarious situation due to bad actors. Further, Kevin explained how online gaming is well known for offering generous incentives to attract users which becomes a massive fraud vector for scammers trying to use stolen credit cards to collect rewards.
If the business environment isn’t challenging enough, these are all highly regulated industries. In the future, operators will be asking how to broaden their customer base and verify users at a quick pace under the construct of an ever-evolving regulatory framework. For example, 60% of U.S. states still have not authorized online gambling.
Moving forward, as customers return to casinos and other betting venues in person, operators will be looking to support gamblers digitally. Imagine that they will load payment into a mobile application that they can just tap at the blackjack table or slot machine. This need to blend our digital and physical worlds will accelerate at a rapid pace and create new attack vectors where fraudsters will try to use stolen identities and payment credentials to “game” the system. The question will become how to balance responsible growth of these platforms at record speed with the proper controls to mitigate fraud.
Businesses Will Rewrite Customer Engagement for a Post-COVID World
We spoke about emerging industries moving online, but what about businesses that have traditionally been facilitated in person but now require a digital channel? Think in terms of establishing bank accounts for the unbanked and underbanked that would include non-resident aliens, international students, and teenagers who would traditionally just present their birth certificate or identification credentials at a bank location. You can’t do that anymore. Then, there are common needs like renewing a driver’s license or onboarding new employees, sometimes at the pace of thousands of new associates a month.
Companies and government agencies will be building new platforms to support these interactions, which present yet another broadening attack vector for fraudsters.
Opportunity Knocks: Pandemic Scams Will Continue into the New Year
It’s a well-known fact that scams related to the COVID pandemic proliferated throughout this year. Consumer offers to expedite receipt of stimulus checks and, now, fake vaccines are being promoted before the vaccine has even been fully distributed.
Many people are unemployed and need to feed their families, making them vulnerable to these scams. The more desperate they are, the more likely they are to believe or hope such offers are legitimate. While some people work to solve this crisis, others are trying to profit from it. We expect this trend to continue.
Want to learn more about our 2021 fraud predictions? Look for Part 2 of the “Top 7 Fraud Trends: 2021 and Beyond” next week. In the meantime, reach out to us if you have further questions or want to learn more about Socure at firstname.lastname@example.org.