5 lessons about consumer identity in the mobile era

June 12, 2019 10:01 AM

Long gone are the days when consumers had their Social Security and driver’s license numbers pre-printed on their paper checks for faster identity verification. Consumers now understand that such precious elements of their identity need to be better protected.

So while checks have been disappearing for some time (according to the Federal Reserve Payments Study) and consumers no longer have Social Security numbers preprinted on them, they still pose a threat by exposing checking account and bank routing numbers along with name, address and phone. So while payment cards are easier to use in stores and especially online than checks, it may the fact that checks advertise consumers’ identities and financial details that will ultimately lead to their demise.

Over the past few years consumers have been regularly jolted with news of data breaches by thieves hacking into retailers, insurance companies and more, leaving them feeling vulnerable and questioning how well financial institutions are able to correctly identify them. Two events last year — the Equifax and Marriott breaches — drove that point home. Equifax exposed the credit records of almost 150 million consumers and Marriott exposed 383 million consumer records that also included passport details.

Given this heightened sensitivity over identity, most consumers stated that would use a financial services provider more if they knew it was using more advanced identity verification methods. According to a study conducted with 1,499 adults 18 years and older in the U.S. by IDology, a combined 71% of consumers surveyed stated that they would much more and somewhat more likely use a financial services provider that they knew was using particularly more advanced identity verification methods. Twenty-four percent of survey respondents stated that it would have no effect on their decision.

According the FBI’s Internet Crime Complaint Center or IC3 the annual losses due to internet crime almost doubled in 2018 from the previous year. Consumers reported over $2.7 billion in losses in 2018 due to crimes perpetrated through the internet, including identity theft, account takeovers and scams enabled by social engineering. Unfortunately since these losses are only the ones reported, the actual losses are likely to be much higher as not all victims will want to come forward due to perceived shame or threat of further vulnerabilities.

The states with the largest populations — California, Texas, Florida and New York — were also, not surprisingly, the states with the largest numbers of internet crime victims, according to the IC3 report. California had reported over $450 million lost and the No. 2 was New York at $201 million in losses.

Despite older consumers being favorite targets of thieves, younger consumers were targeted almost equally, based on victim count. The main difference is that older consumers lost more money in aggregate than younger consumers did. This is more likely due to the fact that older consumers have built more wealth and thus have more to lose.

The growing penetration of smartphones among consumers is leading more people to sign up for new accounts through the mobile channel than through the PC/laptop channel. Based on data from a study by IDology, 61% of consumers used a mobile phone to open a new online account, up from 41% in 2018. This compares with a significant drop in consumers using a PC/laptop to open a new online account — 56% in 2019 vs. 71% in 2018. There was little change in the use of a table to open a new account, 22% in 2019 vs. 20% in 2018.

The IDology study does highlight an interesting factor that could be driving the growth in mobile account openings — the rise of smartphone-only internet users. The study highlights the statistic that 20% of U.S. adults do not use broadband at home but own a smartphone in 2018, up from just 12% in 2016. So as more consumers begin to rely on the smartphones for internet access, it makes sense that mobile account openings are rising as well.

The younger the consumer, the more likely they are to abandon an application if it becomes too bothersome or difficult to complete. Fifty-one percent of 18-24 year old consumers (Gen Z) have abandoned an application in mid-stream in the last 12 months, according to IDology. This figure is staggeringly high when compared to older Baby Boomers aged 65-74, who abandoned an application process mid-stream at only 29%.

Apparently, the ability to use one-click technology on mobile devices has conditioned consumers to expect instant gratification. It’s also a factor that as more people use a mobile device to open an application that the amount of data that needs to be input becomes a larger barrier as more is asked of the applicant. Financial institutions that can streamline the amount of data that needs to be input by leveraging tools and partnerships with mobile network operators stand a far better chance of mitigating application abandonment.

Enabling consumers to scan a driver’s license or a credit card makes these processes easier, and can also act as fraud deterrents.

An increasingly used method for account opening and identity verification has been to leverage social media accounts – something not everyone is keen about their use. Based on data from IDology, 39% of consumers are not at all comfortable with companies using their social media profiles to verify their identity, for example when trying to open a new bank account. Only 25% of consumers surveyed in the study said that they would be either extremely comfortable or very comfortable with companies using their social media profiles to verify their identity.

The most likely reasons behind the low levels of trust with social media being used to verify identities is that social accounts can easily be opened in someone else’s name, and the social media giants aren't well trusted to keep data private. Just this year Facebook exposed hundreds of millions of its users records on an Amazon cloud server, and was hacked last year to the tune of 50 million users. Instagram, a Facebook subsidiary, was breached in May exposing the records of 49 million users. Last year Twitter closed 70 million fake social accounts on its platform.