Identity Verification Payments Challenges in the Age of AI

By Austin Talley, CEO of Everyware
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As demand for online transactions continues to accelerate, digitalization remains a key driver for businesses looking to meet the needs of today’s shoppers. In fact, recent data shows U.S. e-commerce sales grew 7.6% to $1.119 trillion in 2023 from $1.040 trillion in 2022. But as digital preferences in everyone’s lives rise, so do the cybersecurity and fraud related risks.

According to an Experian report, 92% of U.S. businesses recognize the need for online customer identification strategies, however the same study shows there is still a large percentage of companies (70%) who have experienced climbing fraud losses in recent years. As cybercriminals become more sophisticated, companies and consumers expect proactive defenses in every payment experience. For payments and B2B software platforms, as well as small business owners, this necessity is compounded by the rapid advancements in artificial intelligence (AI).

We know AI and cybersecurity are interconnected, but this integration continues to progress as technology evolves and fraudsters become more sophisticated. We can’t ignore that cybersecurity teams and hackers are both using AI to their advantage. Small businesses, often lacking the resources of larger entities, find themselves particularly vulnerable to these advanced threats.

AI-driven fraud tactics and challenges 

In a 2024 survey of CISOs and security leaders, 89% of organizations agree that AI-powered threats will remain a major challenge into the foreseeable future. As we continue to learn more about fraudsters, a few AI-driven tactics to be aware of include:

Synthetic identity: According to Reuters, over 80% of all new account fraud can be attributed to synthetic identity fraud, with losses in the multi-billions. This is where fraudsters use a piece of real identifying information, such as a real credit card and the associated name, and combine it with fictitious data, such as an incorrect delivery address or email controlled by the hacker, to create a new identity. This new identity can then be used to open bank accounts, loans, credit cards and more. The challenge is that as fraudsters build strong credit scores and credibility of the synthetic identity, more merchants and banks are willing to extend credit over time and the fraud will continue to fly under the radar. To appear even more legitimate, real identities can also be combined with other real identities. In this case, fraudsters can piece together identifying factors of one ‘Bob Johnson’ in Atlanta – name and credit card – with another ‘Bob Johnson’ in New York for their email address.

Generative AI: Garnering extensive attention in recent months, generative AI can produce text, images and videos, while learning patterns through input training data. It has a startling ability to replicate human expression and produce human-sounding content. For those who have experimented with generative AI tools, it’s very easy and fast to create the content you’ve requested. Think about how easy it would be for a fraudster to generate a list of phone numbers in a targeted city or real email addresses that use the name ‘Bob Johnson’. This level of simplicity and speed can lead to large volumes of highly personalized phishing attacks or data poisoning, which is when an attacker tampers with the data that an AI model is trained on.

How AI is reshaping payments fraud strategies

The security sector and fraudsters are in a constant arms race, with each advancement in defensive technology matched by an evolution in attack methods. As traditional verification methods are often highly manual, have limited scope and produce delayed results, business leaders risk losing customers to competitors who can offer a more seamless, secure payments experience. Purchasers have to trust their personal payments information will be safeguarded.

As Juniper Research estimates the cumulative losses to online payment fraud globally between now and 2027 will exceed $343 billion, a significant amount of sales are being left on the table. Companies must adapt to more modern technologies to combat rising payments fraud and cement customer confidence. In essence, AI-powered solutions can help combat AI-powered threats. Here’s why:

  • Real-time detection: By using AI, companies can analyze massive amounts of data and respond to threats in real-time. This not only fortifies businesses against identity theft and fraud but also ensures a smooth, secure and consistent user experience across digital financial interactions. Flagging a fraud attempt quickly helps ensure merchants and retailers do not distribute goods to a synthetic identity.
  • Automated processes: The ISACA has recently reported 59% of cybersecurity teams are understaffed and less than half of organizations (42%) have a high degree of confidence in their cybersecurity team’s ability to detect and respond to threats. In the absence of a robust team, AI-driven tools can be integrated into a company’s tech stack quickly to help automate security tasks. For example, Everyware—a leading customer payments and engagement company—has a new Identity Match tool that conducts instant verification against U.S. census and credit bureau data and can be implemented as part of digital invoice payment processing. This will hold transactions where the identity is not verified. Automation can help alleviate the pressure of an understaffed team to focus on other security prevention methods that require a human touch.
  • Always-on learning: Machine learning and deep learning processes help security leaders learn from past experiences and become more resilient to cyberattacks at checkout. This helps identify trends between security incidents as well as weak areas of an organization’s digital footprint.

AI technology presents a double-edged sword

While offering groundbreaking solutions for security and fraud prevention, AI also escalates the complexity of fraud tactics. In addition to generative AI and synthetic identity fraud, future challenges will likely include even more advanced forms of AI-driven tactics, necessitating a proactive approach to secure payments strategies. By staying up to date on emerging risks and tools, payments and B2B software platforms, as well as small businesses, can not only ensure compliance but also fortify their defenses against the most sophisticated threats. To help stay one step ahead of fraudsters, companies must leverage the latest advancements in AI technology to reap the benefits of automation, real-time detection, learning over time and loyal customers.

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About Austin Talley:

With the birth of Everyware in 2015, Austin Talley is and has always been the mastermind behind certifying the mobile number as a form of payment.

Everyware is a leading customer engagement, billing, and payments company based in Austin, Texas. Launched in 2015, the company provides services to more than 9,000 merchants across multiple verticals including healthcare, travel, utilities, not-for-profit, and automotive. The platform provides an easy, fast, and secure way to move money while enhancing the ability for merchants to communicate with customers in real-time with text messaging. It saves them money by improving cash flow and reducing paper billing costs, chargebacks, and fraud. Additionally, Everyware works alongside existing systems for easy integration.

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