Since the Covid-19 pandemic, most of the financial industry has gone digital. Manual verification methods and 10-year-old digital verification methods aren’t up to mark compared to technologies used by fraudsters. Old technologies like sending small test amount to an account to verify a linked account. They are useless because of account takeover fraud.
The technology banks use to verify IDs and authenticate customers leave a huge impact on the customer onboarding experience. Online bank account enrollment has an application drop-off rate of more than 19%. And, the drop-off rate keeps on improving the longer an application takes. And obviously, banks and financial institutions can’t skip on robust identity verification and authentication. Now that the instance of fraud is at an all-time high, and AML & KYC compliance is the only wall standing between fraudsters and the financial services industry. Banks and FIs need to take careful steps while building their customer onboarding process.
Fortunately, established, and upcoming FinTechs are always finding new and better ways to help the financial services industry. They find ways to comply with technologies without reducing the customer experience.
Risk Associated with Identity Verification Platforms
As technologies are becoming a part of our day-to-day lives, customers want quick and friction-proof mobile and onboarding experiences. Historically, ID verification in the financial industry hasn’t been up to standard. New technology companies have stepped up to help, using customers’ mobile cameras and other tools to automatically verify customer IDs and distinguish potential fraudsters.
Banks don’t just have to verify a person’s face with the photo on their ID, it’s also important to authenticate that the ID documents provided by customers are valid and government-issued. Additionally, it’s vital to make sure that the photo a user submits is taken at the moment and wasn’t obtained at an earlier time or fetched by a bot. Banks need to make sure that the person that’s going through the onboarding process on the other end is a real-live person, it’s also called liveness detection.
These ID solution providers and others use data like a user’s IP address, geolocation, social reputation, and more to determine whether someone is who they say they are. National registries are also useful in flagging identities that have been reported as stolen or if someone is using the identities of someone deceased.
Verification and Authentication Beyond Customer Onboarding
ID verification and authentication are a vital part of financial services onboarding. Banks and financial service providers need to know that customers are who they claim to be before creating a financial relationship.
Streamlined ID verification can help in improving the customer experience of other key moments in a financial customer’s journey.
- High-value transactions such as money transfers, loans, or lines of credit, the high-value transaction should trigger a process. This process should ensures that the activity is initiated by the real customer, and not someone else. This is as simple as asking for a new selfie at the transaction request, which facial recognition technology verifies.
- Reduce customer drop-off rate. When applying for loans and credit, customers usually abandon the process because it takes too long. With technologies like instant online bank account verification, customer drop-off rates can be reduced.
- Improved security. By making sure that every account belongs to a verified customer and that each sign-in is authenticated, banks and financial institutions can reduce the rate of fraud. This can prevent fraudsters and bad actors from accessing the internal systems.
- Regulatory compliance. AML compliance and KYC verification can prevent illegal activities. Regulatory bodies are trying their best to build the best possible regulations. AML/KYC regulations are complex but complying with them shouldn’t have to be complicated. With online KYC verification software, financial organizations can surpass requirements for added security.