In an increasingly competitive market, many retailers are finding it challenging to attract and retain customers. Growing use of digital channels, and rapidly evolving privacy regulations make the task even tougher. Techniques that might have worked well in the past may no longer deliver the results that are required.
At the heart of the challenge is customer loyalty. When shopping digitally, it is easy for customers to switch between retailers and brands so building a long-term relationship is much more difficult.
The role of identity
To overcome this challenge, a growing number of retailers are focusing on using identity to improve the online experience they offer to customers. This allows them to streamline interactions and boost revenues.
Identity is also important when it comes to reducing fraud. If a retailer can be confident that the person undertaking a transaction is actually who they claim to be, the risk of loss is greatly reduced.
To achieve these goals, it’s necessary for a retailer to have an effective identity verification method in place. The chosen method needs to be accurate but not too arduous for new potential customers. It must also be backed by strong privacy controls to ensure that any personal data collected remains secure.
The chosen method must also be aligned with the type of activity the customer is seeking to undertake. For example, it will need to be more rigorous for someone opening a new retail bank account than it would be for someone ordering a pizza.
Data-centric versus document-centric
Broadly speaking, the methods can be grouped into two categories: data-centric and document centric. Data centric (or data affirmation) methods involve a prospective customer providing personally identifiable information such as name, address, and phone number.
This data is then checked against known databases to ensure they correspond with a real, live person. If matches are obtained, the customer’s identity is deemed to have been confirmed and they are then able to proceed with their transaction.
The key benefits of using a data-centric approach include the creation of a smooth experience for new customers. Details such as their address are also routinely checked which ensures that deliveries can be completed as seamlessly as possible.
Used correctly, this method can also make it easier for retailers to offer options such as ‘buy now, pay later’ without the need for traditional credit checks. This, in turn, helps to boost customer loyalty as it provides a feeling of instant gratification.
Document-centric (or identity proofing) methods, on the other hand, involve a combination of government-issued documents together with a live facial capture facility. The documents are checked against central databases while the image is analysed to ensure it is actually that of a ‘live’ person.
There are a growing number of use cases for both groups of methods. They are also popular among both retailers and customers as they are simple to undertake and an identity can be confirmed very quickly.
As well as traditional retail, use cases include limiting access to products intended for adult consumption, car rentals, early hotel check-in services, and even online dating.
The future of digital identities
In the current online environment, users are required to confirm their identity with a growing number of organisations. Each time they transact with a new retailer or source a service from a new provider, they’ll be required to once again confirm their identity.
In the future, however, this is set to change. Increasingly, identity will shift to a user-centric identity management model. Using nothing more than a smartphone, users will be able to prove their identity to any retailer with which they want to establish a relationship.
In a user-centric model, organisations issue identity credentials which are stored in a digital wallet on a customer’s smartphone. The customer then presents these credentials to a retailer which can confirm them without needing to contact the issuer.
The evolution of identity in this way will deliver some significant benefits to both retailers and customers. Even more friction will be removed from the transaction process and the likelihood of fraudulent transactions reduced even further. The future will be one of user-centric identity.
Ashley Diffey is vice president sales APAC and Japan at Ping Identity.