Consumer confidence in new digital methods of identity authentication grows – passwords are not among top 3 most secure methods

More and more consumers are digitally engaging with businesses to shop, bank, or pay bills; since the start of the COVID-19 pandemic, online transactions have increased by 20%. Results from Experian’s latest “Global Identity & Fraud Report 2021” show that consumers continue to place a high value on security when they go online. At the same time, new physical and behavioral methods of fraud prevention have become increasingly important since the start of the pandemic.

The companies surveyed were very aware of the importance of security. In a global comparison, German companies invested more than the average in fraud prevention. The report also showed that there is a considerable catch up needed in areas such as advanced analytics and artificial intelligence (AI). Germany is the worst performer in this area when compared with other countries in Europe. Against the background of the high security expectations placed on companies by customers, this could prove to be a disadvantage in the long term. Since advanced analytics and AI tools ensure today’s identification processes are more secure, faster, and less error-prone, when used intelligently they can significantly strengthen consumers’ sense of security.

Perception of security changes – trust in new digital approaches increases

The research showed that German consumers now consider newer methods of authentication to be more secure than the traditional password. Among the top performers for the first time is authentication using payment or identity information from “mobile wallets”. There has been a significant increase in consumer confidence in this technology since the pandemic took hold, up 16 percentage points to 56%, compared to 40% at the start.

In parallel with the increasing reliance on this method of authentication, the use of mobile wallets in Germany also increased from 59% to 72% as the pandemic took hold – this development could also be partially attributed to the repeated lockdown situations. Also catching up is the category of pin codes – the use of “one time passwords” (OTPs), for example, in the form of SMS transaction authentication number codes (TANs) sent to mobile devices: Compared with the start of the pandemic, they are now rated as 6 percentage points safer (68%) than before (62%). Physical biometrics, for example the verification of biometric features such as faces and fingerprints, remains almost unchanged at the top with 69% – the figure was already 70% at the beginning of the pandemic.

At 55%, digital behavioral biometrics methods also rank ahead of passwords in these survey results and passwords are not placed in the top three most secure customer identity authentication methods. This indicates that consumers are more aware of the risk of traditional authentication as a result of increased media attention. The convenience of invisible authentication and security checks is increasingly appreciated and trust in these new methods has increased.

Interest in use of personal data high

Against the backdrop of rising fraud attempts in the online environment however consumers continue to place a high value on security and data protection when they are online. More than half the German survey respondents (55%) expect companies to provide more information about how their data is protected and stored for example – this applies in particular to younger consumers – and Germany is significantly higher when compared to the UK (47%), France (41%) or Spain (46%).

German consumers like to be informed much more frequently about what companies are requesting their personal data for: 52% expect more information from companies while in the UK only 44% are interested, with 40% of French and 35% of Spanish consumers agreeing.

Stronger sense of security increases willingness to share personal data

As confidence in new methods of identity recognition and security checks increases, so does a sense of digital security. As the pandemic has progressed, German consumers’ fear of falling victim to online fraud fell from 28% to 25% compared with the pre-COVID-19 period. This development is also reflected in the increased willingness to share personal information with companies they trust and with whom they have a long-term relationship:

German consumers now feel nine percent safer about sharing their personal data than they did before COVID-19. At the same time, the percentage of those who do not want to share any personal identity data with companies before the pandemic decreased from 20% to 13%. A concern about the security of their personal data is now only the top priority for 44% of respondents down from 51% at the beginning of the pandemic.

German companies well positioned in fraud detection, but need to catch up in advanced analytics and artificial intelligence

The latest Experian “Global Identity & Fraud Report 2021” study shows that German companies are more likely to have addressed concerns around fraud detection when compared to other countries. 52% of them have invested in software and methods for fraud detection which puts Germany in the top cohort in a country comparison.

The use of online identity verification strategies is already well advanced in Germany: 78% of all companies surveyed are already active in this area. The situation is different for investments in advanced analytics and AI when compared with other European countries with Germany performing worst at 41%. Given that trust in companies is one of the most decisive factors for consumers online today, this lack of focus could develop into an increasing gap between the customer journey experience offered and the high customer expectation of security.

Benefits of advanced analytics in fraud detection

One of the advantages of using advanced analytics and self-learning AI tools to detect fraud is that, unlike traditional fraud solutions, they can also safely interpret a variety of data formats from a wide range of sources and make them usable for risk assessments. In an era of increasing complexity in fraud cases, those companies that rely only on classic fraud detection software or costly and time-intensive manual approaches run a growing risk of missing out on customer acquisition, because processes take too long or incorrect assessments are made (e.g. “false positives”). This means that there is a risk of the purchase being discontinued or, worse still, a loss of confidence, with lower sales as a result.

Commenting on the results in the latest Experian study, and specific insights in Germany, Kai Kalchthaler, CEO of Experian DACH, said: “Consumer behavior on the Internet has changed with people wanting convenient security above all without additional steps to identify themselves and for which they don’t have to remember yet another new password. Companies in Germany are already making progress in investing in fraud detection solutions though many do not realize that the same data they use to optimize their customers’ online experience can also be used to improve security and fraud detection and advanced analytics can play a key and bridging role here. Forward-looking analytics that enable companies to turn their data into information and insights in the first place is an important prerequisite for keeping pace with changing consumer habits.“

To compile the study, Experian surveyed more than 9,000 consumers and 2,700+ companies in 10 countries in Europe, North America, Latin America and Asia in three waves. 900 of the consumers surveyed and 270 companies were from Germany. The complete Global Identity & Fraud Report is available for download here.

Source:  Experian Press Release