Since time immemorial, business deals have been sealed with a handshake. In the digital age, this is simply not possible. Nevertheless, trust has always been the foundation of any business transaction. However, this trust is increasingly being undermined, as so-called synthetic identity fraud – the creation of fake identities – is now possible with little effort and at low cost, which is contributing to the widespread spread of the phenomenon. Popular targets for this type of fraud are financial service providers and banks, particularly when onboarding new customers. However, enormous losses are also incurred in online retail: on average, around 3% of all online orders are categorised as fraud, with identity theft being one of the most common types of fraud. Fraudsters usually use a combination of real and fake data to create a credible synthetic identity and reach their target – other people’s money.
Identity theft – an underestimated danger in a digital world
According to the Bavarian police’s ‘Cybercrime Annual Situation Report 2023’, the total damage caused by cybercrime amounted to 18.4 million euros in 2023. In Bavaria alone, around 13,200 reports of account takeovers were registered in the same year, which represents a significant increase compared to 8,500 reports in the previous year.
There were also around 14,000 reports of accounts being opened with stolen real personal details. Overall, the phenomenon of identity theft rose to around 27,200 reports.
Consumers are well aware of the dangers of identity theft and fraud on the Internet. Unsurprisingly, customers therefore expect companies to make greater efforts to protect their data and identity. Although security measures are widely accepted, consumers still expect simple and smooth processes when it comes to identity verification. Complicated or time-consuming procedures usually lead to frustration. This suggests the use of automated verification solutions that effectively support companies in identifying their customers and minimising risk on the one hand, and on the other hand create trust among customers without overburdening them with lengthy processes.
Consequences of incorrect data entry
The start of a business relationship on the Internet is usually a form of onboarding. This involves the customer disclosing personal data. Information such as name and account details are the absolute minimum for almost all types of online business relationships. This is where fraudsters often start, for example by linking the name to a false or stolen IBAN number. But it doesn’t always have to be malicious intent – false information is also sometimes provided when a typo creeps into the 22-digit IBAN number commonly used in Germany or the last digit is accidentally left out when copying and pasting. Both types of misrepresentation entail an equal amount of administrative effort on the part of the creditor to limit the damage, and in the case of unintentional misinformation, the customer’s annoyance at not being able to complete the transaction is added to the mix.
Using financial data effectively
Nevertheless, the financial data of a new customer is a valuable source for risk management that can effectively prevent trouble on both sides. Companies need access to this information so that they can use it to verify their customers. To do this, they are usually dependent on a BaFin-certified partner who makes access to this data possible in the first place via its interfaces. Verification solutions offer all of this.
Financial Ident Verification from Qwist, for example, offers improved protection against identity theft and forged accounts. The solution also helps to meet legal requirements and fulfil compliance obligations. By automating the verification processes, manual checks can be eliminated, saving time and resources.
This is how it works: with a financial identity verification service, the end user’s name in the system can be easily matched with the name of the account holder that they have registered with their bank. In this way, companies can ensure that the person has actually entered the correct name in their application. To protect against fraud, the account verification service can also be used to check whether the IBAN provided by an end user is actually in their name.
Conclusion: Trust is good, control is better – even in the digital world
So let’s summarise: Nobody needs to do business with the great unknown these days. Data is an extremely valuable asset (and not just for this purpose). It is the new oil, and just as you have to get hold of oil (extract it) and process it (refine it) before you can use it, companies that want to know who they are dealing with must first get hold of the financial data of potential business partners, analyse it and then use it to minimise risk in the form of identity verification. Ideally, all of this happens in real time to avoid waiting times and frustration on the part of customers. Partners for this are the providers of market-proven financing solutions that reliably and quickly verify the identity of a new customer during the onboarding process – to the benefit of both parties.
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