As an online business, have you held back implementing phone number verification because you questioned its effectiveness in combating credit card fraud?
How does phone number verification fight against credit card fraud?
Phone number verification helps you confirm that a user has a phone. Unfortunately, without knowing the phone number pre-registered with a credit card, the link between phone ownership and credit card ownership is tenuous at best.
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However, as a business owner, when you perform phone number verification, even if you cannot associate the phone with a credit card in use, it enforces accountability. Most countries require a person to provide her particulars, complete with copies of her identification, such as driver’s license, or biometric, in order to acquire a SIM card, which a mobile phone requires (see image below). Therefore, when you enforce phone number verification on your payment page, a person with stolen credit card details will not proceed unless she also has a stolen phone (this can be any phone, not necessarily the one belonging to the credit card owner) to help her avoid accountability.
Stealing a phone is more difficult, as well as more noticeable than stealing credit card details; you can copy the credit card details from a card without being noticed and use it multiple times, but you cannot verify a phone unless you dispossess it from the owner, but she will notice it rather quickly and deactivate it.
Therefore, with merely phone number verification, you significantly increase your defence against credit card fraud through accountability.
If you are not yet convinced that phone number verification accountability is a fantastic way to reduce credit card fraud, let me share you with a single term, and a phenomenon: accountability and sharing economy.
Accountability: The Cornerstone of the Sharing Economy
10 years ago, people scoffed at the idea of sharing economy – sitting in a stranger’s car, eating food prepared by a stranger, living in a stranger’s home, etc. The today sharing economy is thriving because it has successfully created trust among strangers through accountability.
Prior to sharing economy we too were enjoying the services of strangers, when sitting in a taxi, eating food in a restaurant, living in a hotel, etc. However, back then, trust was rooted on a clearly-delineated accountability backbone of the operating entity who hires all these strangers, binds them through contracts, etc.
In sharing economy, accountability is still the root of trust, but it is now more complex as the binding between all parties – consumers, providers, & platform, are now looser.
Instead of well-defined and objective forms of accountability found in conventional businesses, e.g., a supervisor checks through all hotel rooms to inspect quality, the sharing economy platform has to rely on less structured, and subjective forms of accountability, e.g., the cross-rating between consumers and providers, which it has to make up for, by collecting, tracking and analyzing other pieces of disparate data about its consumers and providers, to gain insights into interactions that happen offline, and it has no visibility of.
The platform aggregates all these data and formulates them to create incentives, and expulsion policies, to build distributed accountability that is at least on par with conventional centralised accountability.
In short, all forms of security, including accountability, can never be perfect; the cost of a perfect security overwhelms the economic benefits as well as hinders usability. Instead, it is up to the platform to glue together pieces of security that each offers protection against different types of risk, to elevate the overall defence.
The basic piece of security mechanism that all sharing economy juggernauts are built upon to provide accountability is ____?
You guessed it – phone number verification.
Even though phone number verification does not enable you to link a phone number back to the true credit card owner, implementing phone number verification on your web service offers accountability. This raises the bar against credit card fraud; a fraudster with just stolen credit card details will not proceed without having to commit another crime to steal a phone that helps her to avoid accountability.