Growth Of Identity Fraud Requires A New Response

Identity fraud is labeled as the fastest growing crime in America. Consumer protection organizations, including the nonprofit Privacy Rights Clearinghouse, report 700,000 Americans will have their identities stolen this year. Victims can expect to spend two years or more removing an average of $18,000 in fraudulent charges from their credit reports. And consumers are not the only victims. Both brick and click retailers are losing millions of dollars annually due to return/refund, credit, debit, check, and other identity-related crimes.

Each year consumers experience the anxiety and inconvenience of identity fraud, and many are asking businesses to do a better job of protecting them. Smart retailers across the country are responding to this concern on all fronts, including providing better training for employees and re-examining the way they think about fraud prevention.

Not Just A Cost Of Doing Business
A quick look at increasing fraud losses will show that the traditional approach of verifying the check, ID, or other financial instrument just isn't working. Many businesses we talk to consider such losses as just another cost of doing business. Having been a victim of identity fraud myself when my credit card was stolen and used to make hundreds of dollars of unauthorized purchases, I can attest to the frustration felt by consumers. I was extremely frustrated that no effective system was in place that could detect or prevent the fraudulent use of my card.

There are a number of new technology solutions to consider in the market of fraud prevention. How do you, as a retailer, choose the one that strikes the appropriate balance between the interests of your customers and those of your business? The answer is to listen to your customers.

Your customers want protection from identity fraud. They are asking for a convenient, secure, and seamless shopping experience, whether they're shopping in person or online. Consumers are also becoming more sensitive to how much of their personal information businesses collect. Surveys show that such concerns are negatively influencing consumer purchasing decisions, both in stores and on Web sites. Consumers don't want to trade convenience for security. They will not accept complicated transaction processes that confuse clerks and result in consumers spending more time in line. And they certainly don't want the costs of expensive loss prevention systems passed on to them.

What Makes An Ideal Solution?
When reviewing new loss prevention systems, consider these questions:

• Does the system rely on secure identity verification to ensure the consumer presenting the financial instrument is in fact authorized to use the account?
• Does the system offer clear benefits for both your business and customers? Such benefits include accuracy and efficiency in the data collection process, effective dispute resolution, reduced checkout time, ease of use for both consumers and employees, and guaranteed protection for data security.
• Does it provide for a secure transaction audit trail? Employee theft is a major cause of concern for retailers. If your system doesn't help detect, prevent, and prosecute such fraud, you're missing an important element in effective fraud prevention. A secure audit trail also provides for more effective dispute resolution.
• Will it provide your loss prevention officers with the tools they need to successfully investigate and prosecute identity-related crimes?
• Does it respond to consumer privacy sensitivities by collecting only the data needed for fraud prevention? There are systems that enhance consumer privacy by reducing data exposure.

Finally, don't overlook employee training as an important part of your fraud prevention system. Employees are your first line of defense. Strong, effective action to prevent identity fraud from happening to your customers will protect you from two types of losses. It will prevent those caused by identity crime, and it will prevent loss caused by worried customers who don't buy because they think you're not protecting a priceless possession – their identities.