Businesses that still rely on paper-based records to prove identity are partly to blame for the growing risk of ID fraud, according to new report.

The study by global information services firm Experian found that around 70 per cent of all the UK's financial services firms still use utility bills, bank statements or passports to prove ID. More than a third of all telecoms and retail firms were also found to use such out-dated methods.

Those figures come as a surprise considering that 71 per cent of businesses admit that identification fraud is a concern for them, and the 80,000 cases that were reported in the UK last year cost the country's economy an estimated £1.7 billion.

"It's staggering to think that today's businesses are still using paper documents to confirm a person's identity," commented Anne Green, a fraud consultant at Experian.

"Take passports for example. They actually date back to the 15th century and were intended for travel, not verifying a person who wants to open a bank account.

"Companies need to break the paper chain and move with the times."

The report found that many consumers are put off by having to provide paper-based documents, with two-thirds calling the practice inconvenient and 30 per cent of the 18 to 24-year-olds quizzed admitting to having given up applying for a new account or offer when they were asked to supply paper ID.

In a recent survey of SMEs for Connect, the two most important benefits of outsourcing were 'guaranteed response times' and 'allowing in-house IT staff to concentrate on more strategic issues'