Finding the identity verification sweet spot

Payment service providers are searching for the balance between security and experience

Online payment service providers (PSPs) have a balance problem.

On the one hand, platforms are in an arms race with fraudsters who want to cheat security measures, take over accounts and steal money. On the other, PSPs want to onboard legitimate customers quickly and conveniently and provide ongoing experiences that are as near to frictionless as possible.

That’s a tough balance to strike because the more security steps there are, the more friction customers face. The more steps removed, the bigger the fraud risk.

So, what’s the sweet spot between security and experience? New research from Trulioo, a leading global identity verification company, provides answers to some of the PSP sector’s most pressing questions.

The pandemic effect

The right balance isn’t a constant, and it isn’t the same for everyone. Priorities differ between jurisdictions and platforms, and even from one year to the next.

The pandemic shifted the dial in favour of security. The Trulioo consumer and business research found that 73% of online payment service customers consider security more than they did three years ago, and 52% are less trusting of online brands.

COVID-19 accelerated the transition to digital commerce, and bad actors seized the opportunity. An explosion of information around online safety prompted consumers to prioritise security over convenience.

That remains today. More people transact online, but they’re on high alert when engaging with online companies. That has huge implications for PSP platforms.

Consumers want reassurance

The biggest implication might be that, if a platform doesn’t provide reassurance, customers will go elsewhere. People want to feel protected at the moment they open an account and through the customer journey.

That’s made them more tolerant of friction. The research found that 78% of online payment service customers say they are comfortable with identity verification taking longer or involving more steps.

For years, smooth, fast, convenient customer experiences have been the digital dream. Today, customers want to be safe, even if that makes online life a little bumpier.

The Trulioo research goes further. It found that security, at 79%, was the top factor for PSPs in building trust with customers through identity verification. Creating accounts with as few steps as possible came in fourth at 48%.

So has security won the day, with experience only a secondary consideration? Well no, it isn’t that simple.

The right kind of friction

As the research found, consumers are tolerant of security measures, to an extent. But they like security that isn’t overly burdensome. PSP customers in the research had similar expectations.

“Consumers will accept friction, but it has to be the right type of friction,” says Michael Ramsbacker, Trulioo chief product officer. “That means it has to be at the right level and at the right time. Platforms that get that balance wrong risk losing customers to rivals.”

PSPs can’t necessarily match an iPhone for ease of identity verification, but they can provide fast, smooth, transparent digital experiences. If setting up an account becomes too onerous, consumers might walk away.

Getting the balance right

Coexistence requires compromise, which is why PSPs often struggle to find the sweet spot between security and experience. The Trulioo research shows how difficult it is. More than half (57%) of PSPs have added more identity verification steps to counter new security risks. At the same time, 40% removed or simplified steps to speed up customer onboarding.

That illustrates the industry’s dilemma. For Ramsbacker, it’s easy to see why. “PSPs are balancing a range of factors,” he says. “They want to onboard as many good customers as possible. They’ve got fraud teams trying to keep bad actors out. They’ve got compliance regulations to think about. And on top of it all, if they’re operating internationally, there might be big differences in customer experience, acceptable methods of customer identification and applicable regulations from one country to the next.”

PSPs are clearly being pulled in multiple directions in their quest for the most secure, convenient and globally compliant experience. What’s more, as technology advances, regulations evolve and fraudsters react. It’s no wonder more PSPs are looking for help.

Creating strategic partnerships

So, how can PSPs provide exceptional experiences and keep customers safe? For a start, they can try to understand the customer journey in detail, starting with onboarding. They can then use that information to create an identity verification strategy that deploys a well-considered mix of passive and active anti-fraud techniques.

While passive measures are largely friction-free, active measures inconvenience customers to some degree. Getting the timing and sequencing of active verification right can be the key to keeping customers. Typically, PSPs start with low-friction activities, such as entering a name, birth date or national ID number. High-friction activities, such as a document scan, might be reserved for high value transactions.

As customers progress on their journey, unusual activity should then prompt additional security measures.

Data-driven, automated and accurate processes can help PSPs maximise the number of legitimate customers getting through and bad actors locked out. That complexity increases for PSPs operating internationally.

That’s why more PSPs are turning to Trulioo as a strategic partner in identity verification. Trulioo leverages industry-leading identity verification tools with access to hundreds of data sources worldwide.

The company offers expertise to monitor the threat landscape, tailors identity verification strategies for PSPs’ unique needs, and provides coverage around the world.

Trulioo can help PSPs find the identity verification sweet spot and strike the balance between robust security and smooth digital experiences.

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