Micheal Ramsbacker, Chief Product Officer of Trulioo, one of the world’s leading ID Verification fintechs, gives us his take on the changes we will see take place over the next 12 months in the security space as well as in crypto.
#1 Identity verification will be a major focus as the economic slowdown leads to an escalation in fraud risk.
Whether or not the anticipated economic slowdown takes shape around the world, 2023 is poised to be a year that will bring global enterprises a fair share of challenges. Ongoing regulatory changes, growing inflation and shake-ups in emerging technologies will keep business leaders on their toes in the new year.
#2 There will be consolidation in identity verification systems
For enterprises, there will undoubtedly be a focus on efficiencies and organisations will be scrutinising how they can reduce their customer acquisition costs. Identity verification will come under the spotlight, with business leaders looking to cut spending and work with a smaller number of technology providers which have broader coverage.
Wherever possible, business leaders will be looking to eliminate unnecessary software and systems and strip out the associated maintenance costs.
#3 There will be a heightened threat in terms of fraud
We have seen previously that in times of recession or economic uncertainty, there is typically a marked uptick in fraud. Covid was a great example of how bad actors look for new attack vectors at times like this.
Across all industries, organisations will need to identify and prevent new threats, including money laundering, account takeover, or identity theft. Businesses are likely to be dealing with a highly complex, varied, and constantly evolving threat landscape and therefore they will be looking to work with identity verification companies that can help them to manage the broadest possible range of fraud risks.
#4 Crypto users will gravitate towards exchanges that embrace regulation
Diving down into specific sectors, it’s likely that we’ll see identity verification take on an even more critical role within the crypto sector. Recent events will likely lead to increased regulation across all areas of cryptocurrency and decentralized finance and, in particular, exchange functions. Regulators will look to bring in rules to protect consumers.
From a consumer perspective, confidence and trust around crypto is probably at the lowest level it’s ever been. Our own research last month found that 83% of crypto users said crypto companies should be doing more to reassure and protect customers.
Against this backdrop, I think it will increasingly be a case of the market deciding how the crypto sector recovers and the direction it takes going forward. I predict that we’ll see mainstream crypto investors voting with their wallets and favouring platforms (and jurisdictions) that are embracing, rather than trying to escape, regulation. Consumers will be looking much more closely at how and where exchanges are being regulated, and they’ll choose platforms that are taking compliance, trust, and security seriously.
The same research showed that consumers now want to see visible signs that organisations are focused on protecting them. 66% of crypto users claim that they have become more tolerant of identity verification measures during the past three years and 78% are more comfortable with identity verification checks taking longer.
#5 Financial services firms will lean on identity verification platforms to accelerate moves into crypto
Another big trend during 2023 will be traditional financial services institutions accelerating their moves into cryptocurrencies. Capital markets firms will recognize a growing opportunity to play a pivotal role in the market, providing trusted infrastructure for consumers to safely access the whole range of digital assets that are now available, including cryptocurrencies, stablecoins, central bank digital currencies (CBDCs), tokenized securities, and non-fungible tokens (NFTs).
But in order to do this, financial services firms will need to play catch up with native players who have already developed sophisticated operations and go-to-market strategies. For this reason, agile identity verification platforms will be extremely attractive to them, providing a flexible and resilient route into new markets and an opportunity to build trust with customers.
#6 Online marketplaces will thrive, but will also be targeted by fraudsters
Looking elsewhere, we can expect to see rapid growth for online marketplaces during 2023 and beyond. As the global economic slowdown starts to take shape, marketplaces and peer-to-peer platforms that allow people to save money on essential products and services, or to earn additional income, will see a surge in demand.
But alongside this, these marketplaces will also become an attractive (and perceived easy) target for bad actors to launder money and defraud consumers, many of whom may be relatively new to digital services and therefore vulnerable. Business leaders in this sector should be doing all they can to ensure that their systems and data are secure and that people using their platforms are protected.
#7 National ID system programmes will be fast-tracked
At a national level, outside of the U.S., we’re likely to see strong advancement in consumer, privacy-centric, national ID systems. Already significant progress is being made in this area in countries such as South Korea, India, and Singapore, which are deploying digital ID systems that use biometrics, blockchain, and other advanced technologies to make it easy for their citizens to verify their identities when accessing government and financial services online. Other countries, and indeed the EU, will make big strides in this area over the next 12 months.
While the protocols, standards, and other specific details of these systems will inevitably differ, as countries increasingly implement strategies to provide all their citizens with a digital means to authenticate their identities, the vast majority of governments will succeed in providing their citizens with a secure digital ID over the next five or so years.
With a patchwork of national ID systems emerging, it will be more important than ever for enterprises to work with identity verification platforms that can enable them to navigate these differences and global complexities.
#8 AI and Machine Learning will become critical in the new threat landscape
Finally, from a technology perspective, organisations (and the identity verification industry itself) will lean on technologies such as AI and Machine Learning to cope with the escalation in fraud attempts. Of course, fraud is a never-ending, unsolvable problem, but AI and Machine Learning present business leaders with a way to keep pace with a constantly changing and increasingly complex landscape, protecting customers while also eliminating friction across the customer lifecycle.
Over the next 12 months, businesses will continue to operate in a rapidly changing landscape. Organisations that are able to demonstrate operational agility, responding quickly to changing customer needs while also protecting customers, will be in the best position to succeed. Identity verification will therefore be critical for organisations across all sectors in 2023, providing a platform for deeper and more sustainable relationships with customers at a time of great uncertainty