Fraud Prevention in a COVID-19 World – The Importance of Orchestration Hubs

June 16, 2020

The COVID-19 pandemic has accelerated the importance of digital channels, and by extension, digital identification and verification methods. While the underlying trend had already existed, the pandemic meant that companies have had to quickly adapt to a surge in online traffic and a change in consumers’ habits.

According to Statista, online traffic across 20 different industries saw a 25.4% increase in April compared to January and February. The number of online transactions saw an even higher surge of  42.8% over the same period.

While this is a positive for businesses with the ability to transact online, it is not without its challenges, namely, security and combating fraud.

Fraud Increasing in Tandem with Online Traffic

About 52% of US merchants expect to see higher online sales from the outbreak. Similar sentiments are reflected globally—payments company ACI Worldwide estimates a 209% increase in global retail sales in April, with a corresponding 23.5% growth in average transaction volume. More business is migrating online. And so are the fraudsters. Taking advantage of the pandemic, they are attempting to disguise themselves among the mass of legitimate customers to exploit merchants. A few sobering fraud-related statistics:

Both Europol and the Financial Action Task Force (FATF) have issued warnings to businesses and the public urging to be more vigilant considering the increased instances of fraud. In its May 2020 report titled COVID-19-Related Money Laundering and Terrorist Financing: Risks and Policy Responses, the FATF identified “criminals finding ways to bypass customer due diligence measures” as a critical risk for businesses.

These should serve as a stark reminder to businesses everywhere about the importance of robust identity authentication and verification procedures. To combat fraud, the FATF report also identified the full use of a risk-based approach to customer due diligence as a major and necessary response.

However, when implementing such measures, businesses are faced with challenges—balancing security with customer experience and associated costs with resources for implementation.

The Challenge of Security vs. Customer Experience in Identity Verification

Businesses must implement robust identity authentication and verification procedures to maintain compliance and protect themselves from fraud—now more than ever. However, they are also in a competitive space where customer experience is a crucial differentiating factor. If their KYC measures are too stringent to the point where customer experience is impacted, their business will also be negatively affected.

The ideal KYC solution is thus one that is both sufficiently thorough to ensure maximum protection, yet also fast and agile enough to maintain a smooth customer onboarding experience. All while ensuring that the KYC activation process is as smooth and streamlined as possible with a minimal touch on business operations. The search for such a solution is what has led to the growing popularity of orchestration hubs.

Understanding Orchestration Hubs and Their Role in KYC Procedures

Orchestration hubs are the heart of any KYC solution that succeeds in balancing security with user experience and reduced operational costs & resources. Think of them as a central hub that connects businesses on one end—the customers of a KYC solution provider—with the myriad data vendors that supply the databases that enable the cross-referencing necessary for thorough identity verification. All this can be done via a single API.

It is also essential to differentiate between orchestration hubs and aggregation hubs. On the surface, the two can appear similar. Aggregation hubs allow the consolidation of multiple data sources on one end for another user to access via a single API on the other. However, aggregation hubs are generalized, while orchestration hubs are specialized. Orchestration hubs integrate automated and dynamic anti-fraud technology into their makeup, making it specific for KYB, KYC, and identity verification purposes. They can do everything aggregation hubs can, and more.

Orchestration Hubs – A Comprehensive Approach to Risk-Proofing a Business

The structure of orchestration hubs creates speed, scale, and security, meaning businesses can use them to enforce robust business (KYB) and identity (KYC) verification protocols without compromising on the smoothness of the user experience. 

One example of a world-class KYB and KYC solution that makes use of orchestration hubs is 4Stop—a global leader in KYB, KYC, compliance, and anti-fraud technology. Through its orchestration hub, 4Stop’s clients can access hundreds of KYB and KYC data services to perform real-time business underwriting and KYC identity verification. 4Stop also recently integrated Jumio’s AI-powered identity verification technology into its orchestration hub. Jumio’s technology leverages AI, biometrics, and machine learning to allow it to provide certified liveness detection to prevent deepfakes, bots, and advanced spoofing attacks.

In today’s world, orchestration hubs are an essential tool that businesses should make use of if they want to remain both secure and competitive. And as we progress even further into the digital age—with more digital channels to secure and more corresponding data sources to tap from—their importance will only grow.