Hello, It’s Me: Preventing Identity Fraud for Banks and Retailers

The holiday season brings a powerful dopamine rush for shoppers - the excitement of holiday sales, discovering new retailers, and finding that perfect gift.

For digital banks and e-commerce platforms, the holidays offer an equally exciting opportunity: a chance to launch massive campaigns, attract new customers, and maximize revenue.

All this online shopping means an influx of traffic, transactions, and—unfortunately—fraud attempts. This International Fraud Awareness Week, while your teams are bracing for the usual holiday "Grinches", like phishing scams, account takeovers, and credential stuffing, here’s the uncomfortable truth: if that’s your primary focus, you are missing an even greater threat.  

While these threats are real, today’s most sophisticated fraudsters don’t need these old school strategies when they are being invited in as new customers. Leveraging advanced AI tools like deepfakes and generative voice models, they can create entirely new, believable digital personas—at massive scale. 

And once your system verifies and validates this fake identity, the fraudster now has a "legitimate" account that will allow them to breeze through security checks and exploit your systems from the inside.

New Fraud, Who Dis?

Old-school fraud prevention focused on monitoring existing user behavior, looking for logins from unusual locations or suspicious purchase patterns. But what happens when that user signing up for a new account or applying for a holiday line of credit doesn’t raise any flags because they didn't exist an hour ago? 

That was good enough for back then, but a lot has changed. The new fraud begins at account creation. Fraudulent identities present a clear and present danger for eCommerce, Banks, and Credit Unions, as well as their vendors, partners, and customers. 

Fake eCommerce Customers

But why does it matter? A customer is a customer, right? If the customer makes a purchase, what does it matter if they aren’t who they say they are? 

Not so fast. For e-commerce platforms, fake identities are no idle threat. While many organizations tend to see all new user activity as an indicator of success, some new users could actually be bad actors looking for credentials so they can harm your business. 

Even if the goal isn’t to attempt to breach your security, fake identities can be deployed to:

• Abuse Promotions: Stacking "new user" holiday discounts and "first-time buyer" offers to drain your marketing budget.
• Generate Fake Reviews: Artificially boosting a product's rating or burying a competitor.
• Test Stolen Cards: Using your checkout as a testbed for stolen credit card numbers.

Fake Identities at Banks and Credit Unions

For banks and credit unions, the threat is even more serious, since fake identities can be used to: 

• Commit New Account Fraud: Apply for loans and lines of credit with no intention of paying them back.
• Thwart Risk Evaluation: Fake identities have no "prior history", so they don’t get flagged by traditional risk models.
• Launder Money: Open "clean" new accounts to move illicit funds.

Legacy CIAM and fraud prevention tools rely on static rules of engagement to monitor unusual user behavior, but they are simply not equipped to second guess your decision to assign login credentials to someone who doesn’t even exist. 

Stop Verifying and Start Vetting

We get it. You can’t afford to either block good customers or let in bad ones. So how do you differentiate a real, high-value new shopper from a malicious poser? Effective fraud prevention is about asking the right questions from your very first interaction – before you give them login credentials. 

Financial institutions and online retailers need advanced CIAM capabilities to prevent identity fraud:

• Stop Fraud at the Front Door: Checks new account requests for suspicious behavior (like bots or known bad actors) and automatically prevents suspicious users from completing registration.
• Verify Identity with Proof: Requires users to prove who they are during signup, using ID scans, biometrics, or verified phone codes to ensure the account is real before issuing credentials.
• Run Quick Background Checks: Automatically screens new users against global sanctions and legal compliance lists (like KYC) to make sure they are legally permitted to open an account.
• Track Where New Account Requests Come From: Analyzes the device and location of the registration request, denying or delaying approval if the user is attempting to sign up from a highly restricted or high-fraud region.
• Approve Access Based on Rules: Grants login credentials only after the user has met all preset policy rules (e.g., approved documentation, minimum age or required verification tiers).

Secure Your Holiday Revenue

This holiday season, the Grinches have a whole new bag of tricks. Financial institutions and retailers need robust CIAM to detect fraudulent users and block them from ever gaining access to your data.  

Don't let fraudulent identities turn your Q4 profits into Q1 liabilities. Partner with KeyData Cyber to implement a CIAM strategy that intelligently vets every identity, safeguarding your customers, your revenue, and your reputation.