It might not have been inevitable, perhaps, but it was certainly expected: a regulatory backlash concerning the booming trade (both online and in brick-and-mortar stores) of eCigarettes, with their different flavors attractive to younger consumers — including underaged ones. However, that backlash also promises to drive the eCigarette business online, and provide even more opportunities for ID verification and authentication providers.
To dig deeper into the ongoing changes, PYMNTS caught up with Reinhard Hochrieser, director of product management at Jumio, an authentication services provider. With more age-restrictive products and services moving online (more sports gambling options are going digital and mobile as the result of a 2018 U.S. Supreme Court decision), verification and authentication are becoming increasingly vital parts of the global digital economy.
Earlier in March, the U.S. Food and Drug Administration (FDA) issued what essentially amounts to a prohibition against the sale of flavored eCigarettes in brick-and-mortar stores, including gas stations and convenience stores. That stands as one the biggest regulatory responses so far to the growing eCigarette market, which will reach $47.1 billion by 2025, experiencing a compound annual growth rate (CAGR) of nearly 24 percent, according to one report.
“This will have a huge impact,” Hochrieser told PYMNTS. “It will force brick-and-mortar stores to not sell eCigarettes, or have a separate section in their stores” where those flavors are sold, but which are inaccessible to minors. “It will mean huge hassles” for those physical stores, he said, and that will drive “movement to the web” for more eCigarette sales. That will also work in favor of companies such as Jumio: The FDA said retail sites selling those flavored products must use third-party authentication services to prevent sales to underaged consumers.
As one can imagine, the FDA’s recent decision is hardly popular in all parts of the retail world. Jeff Lenard, a spokesman for the National Association of Convenience Stores, told The Wall Street Journal that the “government should not be picking winners and losers,” and that the “FDA’s own data shows that 86 percent of students who used eCigarettes did not get them from stores — they came from online retailers or a social source.”
The trend is pretty clear, Hochrieser said, and it favors more use of online ID authentication methods. While the FDA decision shows that the U.S., for the moment, is stricter about eCigarette sales than most other countries (at least when it comes to one big aspect of that trade), Europe is not terribly far behind.
There, countries have gotten on board the ban bandwagon, prohibiting smoking in public places (even in Paris cafes, which might be nice to some seasoned travelers, but still odd). In addition, age restrictions on the purchase of tobacco products — and fines for violations — are not as enforced or heavily imposed as they are in the U.S. In contrast, rules about authenticating the ages of gamblers are enforced more strictly in Europe than in the U.S., he noted.
However, things are likely to change.
“We do think Europe will kind of adopt this regulation,” Hochrieser said, referring to the recent FDA ruling. He added that public smoking bans are “the first” stop toward more regulations. “The next step is to target the selling process.”
That, of course, means more business for online and mobile authentication service providers. Underage consumers are often clever enough to fool even digital authentication checks (granted, some are rudimentary and even meant to be tricked, as per the wishes of shady operators), but technology is making that harder.
In Jumio’s case, the authentication effort comes down to ID data points, biometrics and computer intelligence. A consumer who tries to make an online purchase of eCigarettes might be asked to prove their age by — depending on the retailer — submitting a scan of their driver’s license, for instance, or entering the last four digits of their Social Security number, with that merchant then doing a background check.
Jumio’s authentication technology asks for those ID details, and requests for the shopper to submit a selfie. That provides another layer of proof that the consumer is who they have said they are — not a parent, grandparent or an older, ne’er-do-well uncle, cousin or friend.
To authenticate the consumer, Jumio does not use information from any government databases, which are not exactly accessible to anyone. Instead, the company relies on its artificial intelligence (AI) and machine learning technologies, and its experience with analyzing more than 150 million documents. Furthermore, Jumio has human experts ready to review any borderline cases, with the results then fed back into the system so it can get better, he explained.
Are retailers ready for a potential “surge” in online eCigarette sales, to use Hochrieser’s words? Some are, but many are not, as they have not deployed robust authentication technology methods. Many underaged consumers do, in fact, gain access to eCigarettes, and not always because some older friend or relative makes the purchase. Hochrieser expects the FDA to crack down on some sites, with some retailers being pushed out of business.
“It will happen quickly, because the FDA is strict,” he said.
Not only that, but the use of eCigarettes among teens is a natural and ongoing news story. The next few months, no doubt, will bring further demonstrations of how authentication is becoming a more vital part of online retail.