Black swan effect

by Mark Rowe

Whether consumers are browsing for post-holiday deals online, listening to their favourite Spotify playlist, or checking their banking balance in app, they’re unconsciously relying on identity-based technology that powers our digital lives, writes Gus Tomlinson, General Manager at the identity intelligence platform GBG.

These days, our lives are driven by this type of technology; shaped by data, analysed and acted upon by each respective company and service provider to ensure bespoke, personal interactions. It’s a mini-economy, all about the individual, where identity expands beyond your date of birth, your passport, or your identity number.

The year 2020 has seen its share of what I call ‘Black Swan’ events, or events that cause society to undergo a sudden digital acceleration, catapulting our reliance on technology forward, whether or not consumers and businesses are ready for it. For companies, a digital-first business model is no longer a luxury or a forward-looking strategy, and as focus shifts from whether to go digital-first, to how to do it, the concept of digital identity becomes an increasingly strategic imperative to address.

The pandemic has effectively driven this digital revolution over the past year, as swathes of vulnerable consumers have moved to new digital channels. Some of our most recent research looked at just how prevalent the uptick in this shift to digital has been, and found that one-third of consumers over the age of 75 signed up to a new online account this year, while nearly half (47pc) of overall UK consumers opened a new shopping point in the past year. As new audiences move towards leading increasingly digital lives, the resulting spike in transaction volumes and interactions has also meant the presence of fraudulent activity, opening up opportunity to fraudsters seemingly overnight.

What’s more – consumers have noticed. A third of consumers are concerned about identity fraud, as the result of COVID-19, and with data breaches and new forms of fraud continuing to hit the headlines, fears and anxiety over online security are rising.

This leaves businesses with a critical challenge: they must get to grips with identity fraud, educate their most vulnerable customers on how to stay safe, and evaluate the techniques and tactics they should be using to verify and interact with their customers in the digital age, from passcodes and authentication, to behavioural biometrics and document verification.

Competing realities

As we move into 2021, I’m hopeful that the ‘Black Swan’ events of 2020 will illustrate the true power of technology: from decision-making conquered with AI, to countries harnessing the power and use of data analysis, we’re entering a brave new (digital) world. But with progress come challenges, and we can expect that these evolutions will also expose fractures in the foundations of our new, digital-first existence.

Our research this year reveals that signing up to, and transacting with, businesses online isn’t as easy as it needs to be. It also isn’t as safe, nor does it feel as safe, as it should be – it’s all powered by the internet, which was built without ever having identity or ‘digital trust’ in mind. This is the crux of the matter: during the ongoing digital acceleration, we’re seeing issues around the presence of trust – or lack thereof – being played out at scale.

Generally speaking, businesses are finding it increasingly challenging to balance eliminating fraud and managing friction for their customers. This pressure has only increased over the past year, as businesses need to compete and grow market share in an increasingly borderless global market, while continuing to emphasise a “frictionless user experience” rather than fraud prevention and security. Our research found that more than half (54pc) of businesses believe that striking this balance has become more complex over the past three years, despite a quarter of businesses (28pc) saying that “high” or “extreme” levels of fraud are accepted within their organisation. Curiously though, businesses believe their customers have a high degree of confidence in the safety and security of their online services. But is this the case?

While businesses continue to prioritise ‘frictionless’ experiences, consumers tell a different story: less than a fifth (15pc) of customers think it’s important for account opening processes to be quick, and less than a quarter (23pc) think simplicity is important. Rather, over half (52pc) believe security should be the main priority.
To complicate things further, there’s no “one size fits all” approach: younger customers, between 18-34, were more interested in speed and ease-of-use than in a secure sign-up process, and around two in five (38pc) consumers admit to abandoning a sign-up process simply because it “took too long”. At the same time, more than three in five (63pc) say they’d be more likely to use a service if it employed advanced fraud prevention methods.

Faced with these contradictory customer expectations, it’s no wonder businesses are having a tough time finding balance.

Communication, it seems, is key to overcoming these challenges. When asked at face value, consumers showed moderate preference for companies using advanced identity verification methods, as part of their onboarding processes. But that becomes more pronounced when told these methods are designed to prevent fraud: about a third (32pc) were ‘much more likely’ to choose that service provider, compared with about a quarter (26pc) unaware of the aim to prevent fraud.

Of course, many businesses are already using sophisticated methods to protect against fraud – employing a mix of active and passive approaches. But with many of these techniques taking place in the background, perhaps the answer isn’t a ‘frictionless’ approach but rather the introduction of ‘friendly friction’: more active involvement in the verification process, without losing the slick onboarding or transaction process consumers have come to expect.


Customer expectation is clear: make this experience as easy and as safe as possible, and earn my trust throughout. With that in mind, there are a few key steps businesses should be taking to find the right balance. Firstly, businesses need to know their user base, going beyond ‘standard practice’ to get closer to their customers when it comes to experience, fraud and compliance.

Once they understand their customers, they should build with them in mind; addressing cart abandonment and onboarding drop-out is a huge commercial opportunity for businesses operating online. Better connect your product, security, compliance and marketing functions, with end-to-end experiences that feel totally tailored.

Finally, introduce ‘friendly friction’ into action. Manually entering information is still the most trusted means of signing up for a new online account – even among younger customers – as they want to feel a sense of control over the process. Improving conversion rate through more automation is sometimes effective, but not always the answer – building around your customer base requires deep insight into their perceptions, and knowing how to earn their trust through education.

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