ID Verification and Biometrics: Safeguarding Online Shopping

Published Date : 25/11/2024 

These templates are made up of the unique mathematical and dynamic patterns of the user's face and can be 2D or 3D. While 2D facial recognition can be spoofed by HD photographs, 3D facial recognition is much more secure when combined with liveness detection. 

Michael Greenwood, Senior Research Analyst at Juniper Research, delves into the critical role of ID verification and biometrics in safeguarding online shopping.

Online shopping has rapidly become the norm, with nearly three billion people making online purchases in 2023, according to Juniper Research.

This surge in global ecommerce adoption has also opened up a range of new fraud threats to both consumers and merchants.

These threats include transaction fraud, account takeover (ATO) fraud, and other forms of fraud such as the creation of fraudulent accounts, use of stolen payment credentials, and fraudulent returns.

Merchants and ecommerce platforms are now employing identity verification solutions to mitigate these risks.

Identity verification is the process of validating that an individual is who they claim to be and that their attributes are correct.

This includes age verification, address verification, and verifying ownership of a payment credential.

Verification is typically performed by the user’s bank or payment provider.

These institutions are required to conduct verification checks, while merchants often are not.

Banks must meet stringent know-your-customer (KYC) and anti-money laundering (AML) requirements.

Therefore, if a payment is authorised by the bank, there is a high likelihood that the user is legitimate.

However, this presents two primary issues if the bank’s checks fail to catch fraud, the merchant won’t either; and this does not protect the merchant from legitimate accounts committing fraud, such as chargeback fraud.

In heavily regulated industries like gambling, merchants are already required to conduct their own identity verification checks.

During the onboarding stage, a trusted identity is created, with age and address checks being performed.

When a customer uses the service, they are verified against this trusted identity.

Many ecommerce websites, such as Amazon, have expanded into the grocery sector, and supermarkets have significantly grown their online presence.

These services often offer age-restricted products like alcohol and kitchen knives, requiring merchants to perform age verification checks.

Merchants must digitalize their age verification methods by requiring users to present an ID and take a selfie to confirm the identity on the ID.

If IDs have NFC (Near Field Communication) chips, the information can be extracted using an NFC-enabled smartphone.

If not, a photo of the ID can be read using OCR (Optical Character Recognition).

With digital IDs being rolled out over the coming years, the process of checking a user’s identity will become entirely digital, enhancing customer convenience as the ID will be stored on the device used to make the purchase.

These ID verification methods are more secure than simply requiring ID at delivery.

Delivery drivers are not trained to spot fake IDs, and time pressure for deliveries can lead to less careful checks.

Digital methods can use artificial intelligence (AI) to check documents for security features, preventing minors from using fraudulent IDs or another adult’s ID.

The challenge lies in balancing a low-friction service with fraud prevention.

Increased friction can reduce completed sales, costing the merchant.

However, fraud also incurs costs, so merchants aim to strike a balance that minimizes losses in both areas.

This balance is not static; identity verification technology is evolving, increasingly utilizing mobile devices’ biometric capabilities to offer seamless user verification.

Types of fraud are also changing, with some categories, such as refund fraud, seeing growth.

As shown in Figure 1, these trends will lead to an increase in the number of identity verification checks for ecommerce.

A key technology for facilitating these checks is biometric verification, especially facial recognition.

Facial biometrics use the pattern of a user’s face to compare it to a trusted template, thus verifying their identity.

These templates are made up of the unique mathematical and dynamic patterns of the user’s face and can be 2D or 3D.

While 2D facial recognition can be spoofed by HD photographs, 3D facial recognition is much more secure, especially when combined with liveness detection, which makes it almost impossible to trick.

The evolution of deepfakes poses a potential threat, but currently, liveness detection catches the majority of deepfakes.

Identity verification is crucial in protecting users from account takeover and merchants from various forms of fraud.

Ecommerce platforms must adopt biometric verification in combination with eID documents to create a trusted ecommerce environment. 

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Frequently Asked Questions (FAQS):

Q: What is identity verification in the context of online shopping?

A: Identity verification in online shopping is the process of confirming that a user is who they claim to be and that their attributes, such as age and address, are accurate.

Q: Why is identity verification important for ecommerce platforms?

A: Identity verification is crucial for ecommerce platforms to prevent various types of fraud, including transaction fraud, account takeover fraud, and fraudulent returns.

Q: How do banks and payment providers contribute to identity verification?

A: Banks and payment providers are required to conduct verification checks and meet stringent KYC and AML requirements, which helps in verifying the legitimacy of a user before authorizing a payment.

Q: What are the challenges in implementing strong identity checks for ecommerce?

A: The main challenges include balancing a low-friction service to reduce abandoned sales and preventing fraud, as increased friction can deter users but reduce fraud risks.

Q: How does biometric verification, especially facial recognition, enhance security in online transactions?

A: Biometric verification, particularly facial recognition, enhances security by using unique mathematical and dynamic patterns of a user’s face. When combined with liveness detection, it becomes very difficult to spoof, making it a robust method for identity verification. 

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