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Marketplaces have revolutionized the way we shop, responding to the needs of modern people with convenience, competitive prices and the ease of a few clicks. It is not so bold to say that the pandemic has accelerated the shift of trade to digital space. Despite rapid ongoing growth, there is a flaw in this idyllic landscape – what level of security does online shopping provide? What should be improved and how to prepare for threats? Identity verification service for marketplaces may become the most essential step.

Challenges

The number of cyberattacks on marketplaces have increased along with rapid development of the e-commerce industry. Also, more and more sophisticated tools are emerging to carry them.  It is estimated that 60% of fraudulent payment transactions take place on marketplaces.

Transparency and liability for fraud are currently discussed issues of marketplaces’ regulations. In July this year, the US Congress rejected the long-debated The Inform Act with a small number of votes. Its primary purpose was to make marketplaces responsible for authenticating the identity of high-volume third-party sellers. However, other bills (The Inform bills) are still under discussion in Congress. According to them, third-party sellers will have to be verified by marketplaces on the basis of banking information, government issued identity documents and tax filings. Moreover, marketplaces will be obligated to disclose information about the seller’s identity and address and to conduct annual verification to confirm the accuracy of that information. The digital law package is also under discussion in the EU. The Digital Markets Act aims to establish the marketplaces duties to verify third-party sellers in order to increase transparency. The new European Board for Digital Services and European Digital Service Coordinator will be responsible for the enforcement of proposed acts. The major changes in the legislative space regarding online trading are expected in many countries, and thus identity verification service for marketplaces may be necessary.

Trust and safety

Marketplaces face the serious challenge of building a community of trust and safety. There is a fog of fear that has been circulating around them built on lack of face to face interactions between users. So the doubts occur – if the person on the other side of the screen is who he claims to be? Will the buyer get the ordered product and won’t become a victim of fraud? Therefore, it is up to the marketplace’s operator to create a trusted ecosystem of verified users. As the platform grows, bad actors may appear among sellers and buyers with the use of false identity, exposing others to fraud. It should be emphasized that trust becomes the supreme value in the marketplace, responsible for its success and the loyalty of customers who feel safe. The key to create an atmosphere of trust is video identity verification. It allows to build a community where each user is who they claim to be and generates additional level of security.

Onboarding

Customers onboarding in the e-commerce industry should reflect the advantages of using a marketplace. Users expect fast, friction-free and convenient process. However, the user experience needs to be balanced with regulations compliance, reliability of process and comprehensive confirmation of user’s identity. Digital verification solutions fulfill those demands and can be customised to marketplace’s needs. Video identity verification with the presence of trained operator is the safest way to onboarding and provide a combination of technology, artificial and human intelligence. It is also the first contact of the customer with the brand, thus it is necessary to provide first-class service. It converts into creating a good first impression and guiding the user in a way they don’t drop the process at any stage. By cooperating with Fully-Verified, the customer is ready to use a marketplace and carry out transactions after a successful verification process.

Handling the risks and frauds

The expansion of marketplaces is associated with the emergence of cybercrimes. It should be borne in mind that fraudsters use more and more innovative tools. Presumably, the risk from frauds will be constantly present in the e-commerce industry and platforms’ operators have to be prepared to constantly monitor and prevent them. The current threats include:

  • Chargeback frauds – the fraudster registers on the platform, makes a purchase and then denies the transaction, claiming that their credit card was stolen or lost. As a result, the user gets a refund and the marketplace and payment service provider receive a fine.
  • Purchase fraud – non-delivery of goods by a dishonest seller after receiving payment from the buyer
  • Fake seller profile – fraudster copies the profile of legitimate merchant to sell non-existent goods. As a result, it works on the detriment of authorised buyer and seller
  • Closed loop – in this case, both the seller and buyer profiles are fake to display non-existent products. Profits are made by using stolen financial data.

Marketplaces can also be used for money laundering. Shopping platforms are responsible for not snatching the criminal wanted by law enforcement agencies under the penalty of fine. Constant purchases of valuable items from the same seller and by the same buyer may also indicate criminal activity. Anti-money laundering (AML) regulations require marketplaces to monitor and capture illegal activity. Platforms that don’t make every effort to detect money laundering and other scams face severe financial penalties. This also applies to payment solution providers and banks. If they fail to be compliant with AML regulations, they risk the marketplace’s reputation, based on the credibility of the products, services and users. Shopping platform bears the responsibility for allowing bad actors, who may use stolen or synthetic identities, to enter its community. This is another reason that KYC solutions are necessary for the industry.

Compliance with regulations

Currently, marketplaces are subject not only to good practices, but also to specific legal regulations that impose an obligation to control the sellers. Most of them apply to the payment environment, e.g. The EU Payment Service Directive (PSD and PSD2). Marketplaces are described here as the “commercial agents” that must process financial transactions in the same standard as banks or other payment service providers. Furthermore, marketplaces must be in compliance with KYC (Know Your Customer) and KYB (Know Your Business). The second one refers to identifying third-party sellers and suppliers. Also, marketplaces are subject to the AML procedures mentioned above.

Brand protection

Properly selected identity verification solutions serve to protect the brand and care for its reputation. Moreover, they help to fill the gap which is a result of lack of face-to-face interactions. The absence of direct relationship between a buyer and seller creates a natural fear of being deceived or exposed to danger. Identity verification service for marketplaces shows the entire community that the company takes precautions to protect its users from frauds. Trust, security and identity verification are the basis to build a good reputation. By adhering to these values and tools marketplaces can expect customer loyalty and further success.

Marketplaces based on sharing economy

Many marketplaces are fueled by the sharing economy business model. In this case, identity verification is an essential part of user onboarding. Companies such as Uber, Airbnb or Lyft hire their employees through digital channels without face-to-face interactions. Then, they provide services in direct contact with the clients. Thus, trust and safety are even more important here. The recipients of the sharing economy services want to be sure that the person who uses their home or drives them up has been properly verified. We have written about trust and identity verification as the key components of the sharing economy here.

Identity verification – a future for marketplaces?

It is not so bold to say that the identity verification service for marketplaces is currently undergoing a transformation from a well-perceived category to a necessary one. In the light of the debated legislative changes in many countries, an increased activity of cybercriminals and the need for transparency, KYC solutions become a priority. It all comes down to building users’ trust in marketplaces and preventing frauds. The awareness of threats among the users is increasing, which is visible in fact that 91% of surveyed Americans are more likely to use online shopping platform if it verifies its users. The pressure placed on identity verification for marketplaces is intensified by the fact that in the pandemic era online shopping platforms have become a replacement for public places. The increased pace of digitalization of many aspects of everyday life transfers to the need of appropriate KYC solutions for marketplaces.

How Fully-Verified can help marketplaces?

Fully-Verified offers verification services that combine the highest security standards with good user experience. Confirmation of identity takes place during video call with the help of a specialized operator. Our services incorporate technology, biometrics, AI and human intelligence into the process in the form of two options:

Live-Verify: The verification takes place on the live video call, during which the verification specialist guides the user through all the steps and evaluates the process supported by the technology.

Self-Verify: the user goes through the process on their own by following the instructions. Then the verification specialist evaluates the recorded process.

Thanks to identity verification operators of marketplaces can prove that they pay utmost attention to building trust in their community and be in compliance with regulations, eliminating the problem of identity thefts to the most possible level.

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