How to Limit Fraud and Reputational Risk with Proper Identity Verification

Online marketplaces have become vital platforms for businesses and consumers alike to connect and transact. However, the exponential growth of e-commerce has given rise to an increased number of fraudulent activities in online marketplaces. According to a report by Sift, fraudulent activities on e-commerce platforms have increased by 10% since the onset of the pandemic in March 2020.

What if your favorite online marketplace got shut down due to fraudulent activities? Do you trust the identity of the people you do business with online? Have you ever been a victim of online marketplace fraud?

Online marketplaces have been a target for fraudsters because of the level of anonymity that comes with online transactions. With the use of stolen identities, fraudsters can bypass traditional authentication measures effortlessly. As a result, fraudsters are continually coming up with new schemes that target online marketplaces.

One of the most common types of online marketplace fraud is account takeover. In this type of fraud, a fraudster gains access to a legitimate user's account and uses it for fraudulent activities. A report by Forter revealed that account takeover attacks grew by 282% between Q2 2019 and Q2 2020.

Another common type of fraud is fake product listings. Fraudsters create fake listings for non-existent products or products they don't have. Buyers are then convinced to send money for the product and never receive it. According to a report by the Better Business Bureau (BBB), fake product listings are the most common form of fraud in online marketplaces.

So, how can online marketplaces protect themselves from fraud and reputational risk? The answer lies in proper identity verification. Online marketplaces need to ensure that their customers' identities are verified, and the transactions are legitimate. Verification can be done through a range of methods, including government-issued photo IDs, biometric authentication, and identity verification services.

But beyond that, identity verification can also help to prevent fraud by making it more difficult for scammers to operate on the marketplace. When every user has a verified identity, it becomes much harder for criminals to create fake accounts and engage in fraudulent activity. This not only protects buyers and sellers, but also helps to maintain the overall integrity of the marketplace.

As we continue to rely more and more on online marketplaces to buy and sell goods, the issue of fraud becomes increasingly important. In fact, fraud is one of the biggest threats to online marketplaces today, and it can have serious consequences for both buyers and sellers.

Of course, implementing proper identity verification is not always easy. It requires careful planning and execution, as well as a commitment to ongoing monitoring and improvement. However, the benefits of doing so are clear: reduced fraud, increased trust, and a stronger reputation for the marketplace as a whole.