Identity Verification for the Gig Economy
Gig workers are expected to comprise the majority of the American workforce by 2027. However, many gig marketplace sites use lenient identity verification procedures that make them an easy target for account fraud. Let’s examine common fraud issues affecting the gig economy and how identity verification strategies can help enhance defenses.
Gig Marketplace Fraud
Many freelancers and clients report being defrauded by fake gig marketplace accounts. Here are some of the ways that bad actors trick gig economy platforms and users into facilitating their criminal activity.
Impersonating a Gig Worker
Reportedly, 48% of employers in the gig industry have dealt with identity fraud amongst freelancers. The issue is that anyone can make a fake account if there are not sufficient security measures in place. A bad actor can pose as a gig worker and wreak all kinds of havoc with no real-life repercussions because they are under the cover of a false identity. They can claim to have any number of desirable skills and be selected for a project that is well outside their abilities. With a stolen credit card, they can rent a car from a carshare site and never return it. The possibilities for cons and scams are endless.
Another way that bad actors exploit the gig economy is by posting fraudulent offers. The typical story goes: the scammer posts a job offer, but, upon receiving the completed project, they refuse to pay the freelancer. The scammer gets away with a completed project without having to pay a penny. Between fraudulent gig offers and other issues, 51% of freelancers report that they have not been paid for completed work at least once in their career.
Money Laundering Loop
Another way that bad actors abuse gig platforms is by using them for money laundering. They set up a fake account as an employer and employee and funnel illegally-obtained money between the accounts under the guise of a legitimate partnership. Depending on what jurisdiction the gig platform operates under, the business may end up facing legal action for unwittingly facilitating this criminal activity.
Why Cognito Identity Verification to Fight Fraud?
Some sites take a relaxed approach to identity verification and allow users to confirm their identity via linking their account to their social media profile. This tends to be a user-friendly approach, but it is not optimal considering social media accounts can be easily fabricated. Another common method of identity verification is to submit proof of a government-issued ID. Though this method of identity verification is more robust than the former, it only provides a one-dimensional view of the customer’s identity. Cognito’s identity verification is uniquely tailored to the needs of the gig economy by being both secure and low friction. With as little as a name and phone number, we take a multidimensional approach to verification. By confirming a user is in possession of their phone, we can then determine whether a number is tied to their identity.Leveraging highly regulated data, Cognito has increased the barrier to fraud exponentially while keeping the process simple for users.