Mobile's role in ID verification for age-restricted merchants
By Michael Hagen, managing director and corporate ID strategist, Mitek
It's no secret that the mobile channel is exploding in popularity and customers of all ages demand a mobile presence from retailers. Identity verification, whether online or in person, requires the handling of a consumer's ID and consumers are familiar with the process. This same method can be used in the mobile channel, but in real time and with higher accuracy.
With 86 percent of Millennials making purchases and conducting transactions from their smartphones, fraudsters see the channel as a place to make easy money. Mobile commerce now makes up 29 percent of all e-commerce transactions in the U.S. according to Criteo and retailers are increasingly more vulnerable in the channel. No longer do fraudsters have to skim a card or steal a wallet, they can gain most of the information needed to steal from Internet retailers from online sources.
According to the 2014 LexisNexis True Cost of mCommerce Fraud Report, 21 percent of the fraud that hits merchants comes by way of mobile — including fraudulent transactions and fraudulent refund requests. And in 2015, the FTC released new stats showing that the agency received more than 490,000 identity theft complaints last year, a 47 percent increase from 2014.
For age-restricted commerce retailers, the need to stop fraud becomes more urgent when you consider the fines and regulations they would be facing by selling to kids. New mobile capture technology is proving extremely useful when it comes to preventing minors from purchasing and accessing age-restricted goods and services.
According to a study done by researchers at the University of North Carolina, nearly 60 percent of companies selling alcohol online made little effort to verify the age of customers. This will have to change for retailers to continue to operate without legal ramifications. Internet retailers could save money, be compliant and avoid legal risk by implementing mobile identity verification at the point of sale.
Kids are hoping that Internet retailers lack the verification needed to prevent them from scoring the products online and therefore avoiding anyone seeing they are under age at the point of sale. Retailers take on the responsibility, legally, to ensure that their products are going to those old enough to consume them and passing this task off to the mailman won't prevent them from being subpoenaed in court.
Heavily regulated industries such as tobacco, pharmaceuticals, e-cigarettes, alcohol and video games are implementing mobile identity verification solutions to protect themselves from these fines and legal ramifications by ensuring access is restricted to those of the legal age.
For example, The Prevent All Cigarette Trafficking (PACT) Act requires tobacco e-retailers to verify the age and identity of a customer before accepting any order. A top tobacco retailer in the U.S. has implemented a mobile pre-fill solution and now requires mobile users to take a photo of their driver's license with their mobile device. New technology can automatically capture and verify their date of birth.
The use of this new technology could even be marketed as a selling point. For example, Drizzly, is using mobile ID verification technology to set its self apart from other Internet-based alcohol retailers. The Boston-based company has worked with state alcohol regulators to ensure they are serving customers of age, by partnering with a mobile verification system that is used by over 10 law enforcement agencies. The company offers alcohol delivery through a subscription model, and scans the IDs of its customers to ensure that they are of age and using a real ID.
Incorporating a mobile identity verification strategy is critical for online merchants looking to prevent fraud in the mobile channel while still transacting safely and quickly with their target customers. While the mobile device itself may be the gateway to reaching customers in the mobile channel, for merchants selling age restricted goods, it can also be a way to verify their customers age. With new mobile ID verification solutions leveraging the camera, all Internet retailers can now participate freely in the mobile channel.