- Purchasing high value items using mobile phones is on the rise
- Most businesses lose 5-8% to online fraud
- Globally, more than $3.5 trillion is lost each year to financial crimes
- Varga says we need to create a layer of trust throughout the internet to solve this problem
The convergence of our financial lives and online personas is happening fast.
From fulfilling our most basic household purchases on Amazon to buying a car or even a new home online, we are increasingly completing higher value or sensitive transactions online or with our mobile phones. And with the growth in virtual currencies such as Bitcoin or universal payment protocols like Ripple, this is only going to accelerate as we create a value web closely mirroring today's information web.
This desire to do more online has also caused a corresponding growth in fraud and personal risk. Take for example one recent victim of identity fraud who lost nearly $10,000 after fraudulent PayPal accounts were used to buy his bitcoins off eBay. Or consider that most businesses consider fraud-related losses of 5-8% as an accepted cost of doing business online.
A lack of trust, control and traceability are at the root of this fraud with more than $3.5 trillion lost each year to financial crimes globally. In the U.S. alone, identity theft results in more than $21 billion in annual losses affecting over 12 million consumers. And in the United Kingdom, there is one instance of fraud or identity related theft every two minutes. That's at least one more victim by the time you finish reading this article.
Unfortunately, as we continue to move more of our spending online and even adopt new virtual currencies, these rates of fraud and the number of fraudsters will only increase. So how do we combat this growing crisis? We must build a layer of trust throughout the Internet that restores the confidence, protection and control consumers need and deserve.
This is an issue being addressed by many governments and industry bodies such as NSTIC in the U.S., the UK ID Assurance Program and Trust in Digital Life in Europe.
As they seek a successful standard and invest in new technologies, they must find a way to quickly and easily prove real identities at all times without putting consumer information at risk. Consumers must also be confident in the system without being asked to share too much in order to meet this high standard of trust.
It should be obvious that this goes beyond just filling in your name, date of birth and address. The Internet has shifted from its early origins in anonymity to an environment now filled with our personal information via our social accounts or more drastic occurrences like the recent breaches at Target, LinkedIn and hundreds of others.
This basic information is now readily available online and no longer provides a degree of security or verification. So we cannot reverse this course and suddenly eliminate this personal information -- nor would we want to -- but we can protect it.
I believe the best way to build a better identity system is to separate our identity from our personal information online. This will protect consumers from impersonation and account takeover. Consumers need a single, trusted identity that includes and gives them control over their own personal information but is verified separately and protected behind multiple layers of security. It is the equivalent of checking someone's passport or ID in the physical world -- but happens purely online and in just seconds.
This single, trusted identity can then be used easily and conveniently however they choose, but without sharing additional information or exposing them to fraud. By using a consumer-driven identity, we can both empower individuals and enable businesses.
The result will be more and greater online engagement and transactions in healthcare, banking, investing, and social interactions without the fraud or dropout rates that plague much of the industry today.
We are on the verge of solving today's online identity crisis, and the result will make significant progress towards saving the world $3.5 trillion in fraud every year. The first step is for business and industry to embrace the need and deploy identity requirements.
With new solutions available in the marketplace, a growing awareness amongst consumers, and willingness on the part of national governments, the answer is within our grasp.