Identity verification is a critical element of any financial institution. Financial institutions are protected against fines for non-compliance with anti-money laundering laws when they use them to curb identity-related fraud.
It has been part of the digital onboarding process to enhance financial inclusion, especially when opening a bank account. The main aim of the process is to ensure the identity of those opening bank accounts is real, enhancing security and fighting against identity fraud crimes in financial services. So what is digital identity verification in the financial services industry?
Digital Identity Verification
It is a process that reviews clients’ identities, ensuring they are who they claim to be. In the current cyber world, there has been an increase in data breaches, identity theft, and account takeover crimes.
That is why financial institutions need to use digital identities to verify individuals. Digital identity methods include digitized ID document verification, face recognition, and biometric verification. The techniques enable institutions to identify and verify their clients online.
Institutions can use digital identity verification even when the customer and their ID documents are not physically present. This method can also be applied to speed up ID verifications, like using e-gates to scan airport passports.
What Are The Benefits Of Digital Identity Verification?
There are endless benefits to digital identity verification. Below are the primary advantages of the procedure.
Enhances security
When a financial institution uses several layers of authentication in its network, security is enhanced. A company can use multi-factor authentication as it is considered one of the best ways to authenticate clients and give access to the right individuals.
The process helps in fighting money laundering activities. Through verification, financial institutions can prevent fraud from happening.
Increases client experience and confidence
Having tight security measures is one of the ways of enhancing the customer experience. Today, more clients are willing to give out their financial and personal information to institutions to enhance transactions.
They may also embrace various open banking methods to save their credit card number so they don’t have to re-enter it when logging in.
It is possible, however, for the situation to change if they learn that the institution has an insecure and weak privacy policy. Therefore having safe and transparent identity verification solutions will enhance the user experience and help them feel secure.
Leads to long-term relationships
It is easier and more secure for clients to conduct internal procedures with a company that has efficient digital data verification. Customers will always return to you and recommend you to their friends.
On the other hand, a slow and vulnerable identification process makes consumers walk away in search of safe institutions.
What are the Main Regulations to Follow?
Identity verification regulations differ depending on location and sector. Businesses must perform due diligence procedures during onboarding, including customer identification verification, under the directives, legislation, and guidelines.
There are some beneficial owners in charge of setting standards for the verification process in areas like the UK and the USA. They are:
- Electronic Identification, Authentication, and Trust Services Regulation
- The Customer Identification Program (CIP).
- The UK Bribery Act and the UK Slavery Act
- Anti-Money Laundering Directives
Steps of Digital Identity Verification
Below are the steps involved in digital identity verification:
Collecting client details
When a client wants to create a bank account, they will be required to submit their details like:
- Full names
- ID documents
- Date of birth
Data authentication and client identity verification
At this stage, the institution extracts the user’s identity document using various technologies and software like OCR. The software obtains and validates data to ensure the documents are safe from digital or manual alteration.
Ownership confirmation and document validation
In this phase, identity theft risks and financial crime risks are eliminated. There is a rise in cybercrime, so institutions need to make sure the documents they are giving to the person who is presenting them are authentic.
Identification of data can be made quickly using biometric checks like face verification to eliminate any fraudulent attempts.
Further steps
Business needs dictate the additional steps needed to obtain and verify data. Here are some of the extra steps that can be done:
- Phone number confirmation (TAN) ensures safe transaction authentication.
- Proof of address
- PEP and other sanction lists
- Interview questions that vary with the needs of your business
Kyle Noble is the visionary founder and owner of DAPLA.org, a leading platform dedicated to exploring the enigmatic realms of dark plasma theory. With a profound expertise in theoretical particle physics, Kyle has carved a niche in the scientific community by delving into the fluid-like behavior of dark plasma, a self-interacting form of dark matter.