What you need to know about the New INFORM Consumers Act and how it can help with transparency and building customer trust
With the recent passing of the INFORM Consumers Act, eCommerce marketplaces are now expected to meet new regulatory standards. The INFORM Act looks to ensure that when consumers buy products from online marketplaces, the identity of the seller is clear. Ultimately, the goal of this new act is to add more transparency to online transactions and to deter criminals from acquiring stolen, counterfeit or unsafe items and selling them through those marketplaces.
Non-compliance may result in seller suspensions and a marketplace incurring stiff fines. While some online marketplaces may already meet some of these requirements, many will likely need to implement measures to avoid the substantial liability risks that the act creates for non-compliance
What exactly do businesses need to do to be compliant?
Staying compliant with the INFORM Act requires the collection and verification of specific data like bank account, tax ID and contact information. In addition to facing stiff fines for not properly protecting the data collected, brands could face lasting damage to their reputation. 65% of consumers say they are concerned about companies collecting identity data online without their permission or knowledge. There’s also a high level of mistrust over how businesses handle data, with 60% of consumers saying they don’t believe companies do enough to safeguard the data they collect.
The INFORM Consumers Act applies to online marketplaces with high-volume third-party sellers offering new or unused consumer products. If a marketplace meets the definition set forth by the act, it must comply with specific requirements:
- Collect bank account information, contact information, and a Tax ID number from high-volume third-party sellers.
- Verify information from high-volume third-party sellers and require sellers to keep information current and accurate annually for identity verification.
- Provide specific information about high-volume third-party sellers who meet a certain level of sales in their product listings or order confirmations.
- Suspend high-volume third-party sellers who do not comply with the law.
- Provide a simple way for consumers to report suspicious activity related to high-volume third-party sellers’ product listings.
Creating a transparent digital experience that respects consumer privacy can help rebuild that trust. For example, 76% of consumers reported that if they knew an online company was using advanced identity verification, it would positively influence their decision to use that company’s services. In some cases, consumers could be open to sharing their data if a company is transparent and offers them opportunities to manage what is collected. Conversely, if a digital experience is not trustworthy, consumers will likely respond accordingly since 37% of consumers abandoned signing up for a new online account last year because the process was too difficult, time-consuming, or untrustworthy.
How to turn this to a positive and build consumer trust
From keeping up with regulations to fighting fraud, marketplaces have a lot to consider as they look to drive revenue. While compliance can be a labor-intensive process, but it’s necessary to avoid fines and reputational damage. Successfully implementing intelligent verification tech makes compliance a more efficient process, and staying compliant also helps businesses protect themselves from fraud.
The rise in the digital economy gave the eCommerce industry a supercharged burst in revenue but also meant a rise in fraud. According to Ravelin’s 2023 Global Fraud Trends Survey online retail sales are set to reach over $6.5 trillion this year. However, 38% of online merchants saw new fraud in 2022 compared to 20% in 2021. The industry is responding accordingly, with 75% of global merchants expecting their fraud prevention budgets to grow in the next 12 months.
A modern verification solution can elevate fraud detection and prevention, dramatically reduce false positives and boost the efficiency of compliance teams. Businesses must also realize that not all verification solutions are the same. Truly automated verification that has oversight by a human team of fraud professionals provides actionable fraud detection businesses need to deter more threats. It can also facilitate the transparency required to explain decisions to regulators.
Fraud doesn’t have to be a financial burden; with a risk-based approach and automation, cost-focused compliance teams can do more with less. Relying on integrated solutions that support automated KYC, KYB due diligence, and risk assessments, can ensure a business stays compliant. Consolidating these critical functions with one provider empowers companies to realize significant efficiency gains. And fortunately, it is possible to collect what data is required to stay compliant while respecting privacy and even building consumer trust.
Register for our upcoming webinar, Actionable Insights from GBG’s Global State of Digital Identity Report, where we will cover fraud trends, building consumer trust and this new regulation.