Christina Luttrell, Chief Operating Officer, IDology http://www.idology.com/
Our team recently shared the results of our Annual Consumer Digital Identity Study. For the third year in a row, we’ve surveyed a panel of 1,500 consumers representative of the U.S. population to gather data on the state of fraud, trust and account opening. The insights we uncovered provide visibility into the experiences, preferences and practices trending among Americans as they navigate their digital lives, engage with new and existing online services and seek to establish trust in commerce.
As with nearly everything we’ve encountered since March, this year’s report is unique. Fielded in late February and early March, it not only provides data for organic, natural shifts in consumer behavior relative to identity, onboarding and mobile transactions, its timing provides a glimpse, and in many ways a baseline, into COVID-19’s effects on trust, fraud, account opening and digital transformation.
The number one fraud challenge cited by executives is optimizing the balance between fraud and friction according to our 7th Annual Fraud Report. The pivotal question is: how much fraud deterrence and how many barriers, also known as “friction,” should be placed in the user experience to mitigate risk before it has a negative impact on a new customer’s ease of signing up and engaging with services? As the country heads further into economic compression, will companies begin to tighten the screws and move in favor of fraud deterrence at the expense of an effortless customer experience?
Data from the Third Annual Consumer Digital Identity Report shows Americans are on edge about fraud attacks, and for good reason. Fifty-six million online adults had a new account opened in the past 12 months without their authorization. The result is an elevated sense of concern and, as one would expect, distrust.
Fifty-seven percent of online adults are extremely to very concerned that new account fraud (NAF) will happen to them. Consequentially, 2/3 of Americans want companies to do more to safeguard their personal information and will give preference to companies that do. In fact, 77% of consumers prefer doing business with a firm that utilizes more advanced verification methods.
The Downstream Consequences of New Account Fraud and Identity Mistrust
A lack of identity verification trust and new account fraud lead to a myriad of harmful repercussions, not just potential financial loss. The fallout from a disjointed new account opening experience with a clunky identity verification process and a primitive digital handshake is not only abandonment, but a loss of future revenue producing behavior.
When asked which actions consumers will take if they deem the identity verification process during account opening to be untrustworthy, over 50% say they’ll likely bail on signing up. In addition, 43% say they would be more likely to use the one-time guest checkout option. And, even if they do register for a username and password, they’ll be less likely to keep a payment card on file to streamline future purchases if they don’t feel the process of verifying and sharing their information is safe or secure.
For new account fraud the risks are not just the one time financial loss and brand hit but potentially a new customer in the future. When a consumer learns that they have been victimized by a fraudster and need to resolve the matter with a company, they typically report relative ease in correcting the fraud with minimal expense except their time and hassle. And even if the process to resolve the fraud was fairly painless the American consumer is likely to have a negative brand connotation and less likely to trust and select that company in the future. In fact, three out of four consumers say they are less likely to open a new account with a company when a new account was previously opened without their authorization.
Friction and New Account Abandonment
There is no doubt businesses are sensitive to introducing additional steps into the digital account opening experience. There is an awareness that, although the intention is to prevent fraud, requiring too much effort can backfire. The abandonment rate among American consumers has steadily grown each year according to the prior annual Consumer Digital Identity reports. Nearly half of Americans have bailed out of signing up for a new account because the process was untrustworthy or too time consuming.
Patience for cumbersome, unintuitive experiences is declining and equipped with the ease and power of finding a competitive service, consumers today have the option to quickly abandon and explore other options. In addition to lower trust and friction thresholds, consumers also expect convenience, so it’s not surprising that mobile devices are now the leading channel for new account openings and thus, new account abandonment.
What does this mean for businesses?
Now more than ever, Americans desire trust, security and ease. The number one thing consumers want when they sign up for a new account is a secure process. Consumers want companies to know and believe who they are and at that pivotal trust moment, during verification, they expect ease and simplicity. Second guessing a consumer’s identity with additional hoops and barriers is a recipe for mutual distrust.
Consumers want to know businesses respect and will protect their most important personal information, yet that care should be invisible to them and done behind the scenes. While businesses must continue to evolve their identity verification and anti-fraud processes and technology to combat fraud, it’s more critical than ever that they also lower effort and build trust in these unique times.