Telecoms turn to identity verification as fraud concerns soar

By Henry Patishman, Executive VP of Identity Verification Solutions at Regula

According to the identity verification survey* conducted by Regula in 2023, 9 out of 10 organizations in the telecommunications industry consider identity verification (IDV) a crucial tool in combating the increasing threat of identity fraud. Additionally, businesses are leveraging IDV solutions to enhance the user experience. In this article, we will delve into how telecom businesses navigate the diverse range of IDV methods at their disposal and decide where to allocate their resources. Furthermore, we will explore the tangible business outcomes that can be anticipated as a result.

One of the highlights of the survey is the pressing need to prevent identity fraud. The integration of telecommunication services with various financial sectors, such as banking and trading, along with universal usage of a phone number for two-factor authentication, has made them prime targets for criminals aiming to exploit the identities of legitimate customers and gain illicit access to their funds.

Criminals employ a wide range of fraudulent schemes to achieve their goals. In 2021, the FBI issued a warning about a significant increase in scams involving SIM-swapping, where criminals deceive or manipulate mobile network providers to transfer a victim’s phone number to a SIM card under their control. Afterwards, they can bypass security measures, gain unauthorized access to personal accounts, and conduct various fraudulent activities, potentially leading to financial losses and identity theft. The bureau reported receiving 1,611 complaints related to SIM-swapping, resulting in losses exceeding $68 million. And the situation isn’t getting any better, with more and more breach incidents happening to telecom providers involving the data of millions of their customers.

Based on Regula’s survey, conducted at the beginning of 2023, an alarming 47 percent of organizations within the telecom industry have reported encountering synthetic identity fraud, commonly referred to as “Frankenstein identity.” This particular scam involves the combination of both real and fake identification information to create entirely new and artificial identities. Furthermore, 45 percent of these organizations have had to contend with the use of fake or modified physical documents, highlighting the urgent necessity for robust digital document verification solutions.

On average, these telecom organizations experience approximately 18 incidents of identity fraud within a span of 12 months. Shockingly, 9 percent of the surveyed organizations faced a staggering number of over 500 incidents in a single year. The financial ramifications of such fraudulent activities are significant, with the average cost associated with these cases reaching approximately $260,000. Furthermore, a concerning 26 percent of businesses reported losses exceeding half a million dollars.

However, it is important to note that the costs for organizations are not only the ill-gotten funds that end up in the hands of fraudsters. Instead, the three most significant costs of identity fraud to organizations are often perceived to be business disruption, legal expenses, and the loss of existing or potential clients.

IDV methods

Telecom businesses are embracing IDV solutions for a multitude of reasons. Foremost among these is the need to prevent identity fraud incidents. Additionally, four other significant factors are the digitalization of processes, intense competition with a focus on user satisfaction, the demand for time efficiency, and recent security incidents within organizations.

To fulfill their requirements, organizations employ various IDV methods. Biometric (fingerprint) verification stands out as the most prevalent, with 66 percent of organizations currently utilizing it. Digital document verification follows closely, with 63 percent implementation. Interestingly, among organizations not currently using digital document verification, a staggering 97 percent express a willingness to adopt it within the next year. Face recognition emerges as the third most widely adopted method, with 61 percent utilization. Moreover, it is perceived as the most effective method for protecting against identity fraud, gaining the top spot in terms of effectiveness.

While various IDV methods offer valuable layers of security, the ultimate answer lies in implementing a comprehensive IDV solution that combines document and biometric checks. This holistic approach ensures a robust and fraud-resilient identity verification process.

Digital nomads as a fresh influence

On top of that, the survey shows that telecom providers, alongside other industries, have encountered a relatively new trend: a rise in the demand for document verification of new foreign customers, with a 16 percent increase over the past 12 months compared to the previous period. The rapid growth of global migration and the digital nomad community has specifically emphasized the importance for businesses to have access to extensive databases containing a diverse range of document templates, including rare specimens. Failure to use such comprehensive databases may increase the risk of fraud since the lack of templates and familiarity with specific documents may lead to less accurate and thorough document verification checks. Currently, the situation is far from ideal, as 61 percent of telecom organizations are spending more time manually verifying foreign documents, while 52 percent state that their IDV solution lacks the required document templates in their database.

Consequently, a significant portion of respondents (28 percent) identified global coverage of supported ID documents as a crucial characteristic they would prioritize when selecting an IDV solution.

No business without satisfied users

It comes as no surprise that improved customer experience (53 percent) and reduced security risks through the number of prevented fraud attempts (51 percent) are the main success criteria for IDV solution deployment.

The speed of onboarding a new customer and the convenience of interaction with their services directly impact the growth of telecom providers’ user base and customers’ overall satisfaction. Usually, additional security measures negatively impact these parameters. However, for the telecom industry, IDV appears to be a tool that’s capable of reducing this impact through simplified interactions.

The telecom sector is notably adept at striking this balance in a clever manner.

*The research was initiated by Regula, a global developer of forensic devices and identity verification solutions, and conducted by Sapio Research in December 2022 and January 2023 using an online survey of more than 300 decision makers from the telecom industry to learn the market attitude towards IDV and the trends impacting it. The respondent geography included Australia, France, Germany, Mexico, Turkey, the UAE, the UK, and the USA.

About the author

As Executive VP of Identity Verification solutions, Henry Patishman is responsible for driving Regula’s strategic initiatives across different industries in the cutting-edge field of identity verification and biometrics. Henry has a broad view and extensive experience across the entire breadth of the IT industry, particularly in digital transformation, security and data storage. He has held senior positions with multiple global tech companies, such as ABBYY and ACA Pacific. Henry graduated from Deakin University in Victoria, Australia with two degrees: Bachelor of Commerce and Bachelor of Science.

DISCLAIMER: Biometric Update’s Industry Insights are submitted content. The views expressed in this post are that of the author, and don’t necessarily reflect the views of Biometric Update.

Article Topics

biometrics  |  digital identity  |  fraud prevention  |  identity verification  |  Regula  |  synthetic identity fraud