Digital Nomadism, a Catalyst for Growth but also Fraud Surge

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Digital Nomadism, a Catalyst for Growth but also Fraud Surge

Switzerland

News / Switzerland 234 Views 0

Digital Nomadism, a Catalyst for Growth but also Fraud Surge by February 23, 2024

For companies, the digital nomad movement is a double-edged sword.

Bringing about new growth opportunities but also increasing fraud cases involving forgeries and counterfeit documents, a new study conducted by Regula, a global developer and provider of forensic devices and identity verification solutions, found.

This ambivalence is requiring businesses to adopt new methods of verifying users’ identities that are not only secure and reliable, but also seamless and user-friendly, the report says.

The study, conducted in partnership with UK-based market research agency Sapio Research, surveyed 750 fraud prevention decision makers and 750 digital nomads from the US, UK, Germany, Spain, the United Arab Emirates (UAE), and Mexico in September 2023 to explore emerging trends and identify effective strategies for businesses to navigate and capitalize on the rise of remote working.

According to the survey, companies worldwide are witnessing an influx of business coming from digital nomads and remote workers. Globally, 92% of the businesses surveyed by Regula and Sapio Research in 2023 indicated that the number of foreign documents they needed to verify had gone up since the summer of 2021. More than a third of businesses in the UAE (37%) reported that the number of these cases had increased by more than 25%. Industry-wise, insurance (27%) and finance (25%) recorded the biggest increase.

For many of these companies, the influx of business has been considerable. Worldwide, 50% of businesses indicated that at least 21% of their new revenue could be attributed to digital nomads. That’s also true for as many as 62% of businesses in the US and 64% of large enterprises. The retail, telecom, insurance, and banking sectors are benefiting the most from the rise of digital nomads, with 64% to 68% of businesses attributing almost a half of their new revenue to digital nomads.

While remote workers are opening up new growth opportunities for businesses, the study also found that it is introducing new risks. 80% of the businesses polled reported that digital nomads are increasing the number of fraud cases they need to deal with. On average, this increase was estimated at 14% with the highest rates being reported by the insurance (22%) and finance (19%) industries.

Identification challenges faced by businesses

Despite the rise of fraud attempts, the study found that businesses are facing a number of challenges when it comes to verifying the identities of digital nomads holding foreign documentations. 41% of respondents indicated the lack of unified document standards as their primary issue, followed by the increase in fraud cases using, for example, forged documents (40%), issues relating to language barriers (36%), different document formats (32%) and internal expertise gap (32%).

Primary business challenges when it comes to verifying foreign identities, Source: Identity Verification in a Globalized World, Regula, Feb 2024

Primary business challenges when it comes to verifying foreign identities, Source: Identity Verification in a Globalized World, Regula, Feb 2024

Looking at the processes the most impacted by foreign documents, the study found that 71% of finance and banking businesses reported an increase in foreign document verification when customers open a new bank account.

In government services, there’s an even split between visa applications (45%), work permit applications (44%) and applications for new documents (42%), contributing to the increase in foreign documents needing verification.

Similarly, insurance applications (64%), bookings (54%), medical treatments (65%), online account creation (71%) and new phone activations (65%) are also responsible for increasing workloads across industries.

Technology adoption

To address the shifting landscape, businesses are adopting innovative methods and technologies to appropriately and accurately verify users. Among the top methods adopted, biometric verification tops the list, with 57% of those surveyed having it already implemented in their workflows, followed by electronic document verification (53%).

Adoption of biometric verification is the highest in the financial services and banking sector where 70% of respondents said that they had already implemented the technology, a rate that stands at 68% for insurance businesses. Similarly, 61% of businesses in both of these sectors are already equipped with the necessary capabilities to verify documents electronically.

Globally, a third of businesses (34%) said that they’ll need to increase their spending on identity verification by 11%-20%, with 38% of respondents sharing plans to implement blockchain-based identity verification within the next 12 months, followed by device fingerprinting (36%) and behavioral biometrics (36%). In particular, businesses in finance, banking and insurance were found to be the most serious about increasing their investments in identity verification solutions.

Technologies for detecting and preventing fraud currently used and planned for future implementation, Source: Identity Verification in a Globalized World, Regula, Feb 2024

Technologies for detecting and preventing fraud currently used and planned for future implementation, Source: Identity Verification in a Globalized World, Regula, Feb 2024

Digital nomads represent a booming demographic and a massive business opportunity. According to the 2023 Digital Nomads Report by US-based consultancy MBO Partners, 17.3 million US workers were digital nomads last year, up 131% from the pre-pandemic year 2019 to 2022. 24 million other American adults said they aspired to join them within the next two to three years.

A 2023 study by travel writer Carlos Grider estimates the global population of digital nomads to be standing at approximately 35 million members with a collective economic value of approximately US$787 billion. SafetyWing, an insurance provider for digital nomads and remote teams, made US$24 million in revenue in 2022, a twofold year-on-year (YoY) increase from US$12 million the year prior.

Featured image credit: edited from freepik

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