By Kirsten Doyle

Payment and identity fraud has become a growing threat to people, companies, and the global economy. These threats have skyrocketed alongside a significant increase in daily online financial transactions worldwide. After all, cybercriminals are like pickpockets – they go where the crowds (and money) are.

In addition to the rapid expansion of e-commerce, digital banking, and mobile financial services, it’s easy to see why the digital economic landscape has become a hotbed for cyber fraud. It is clear that financial institutions must step up their game and introduce effective identity verification measures to ensure that transactions are safe and secure.

An Immeasurable Loss of Trust

Internet fraud can be highly damaging to entities in every sector, causing substantial financial losses. The number varies, but a recent report said half of all respondents to a survey lost $500,000 or more to fraud last year – primarily via internet-based platforms and mobile channels – and that figure is only expected to rise. Over and above financial losses, when bad actors steal sensitive or proprietary data, it can lead to additional security investments, forensic costs, legal expenses, regulatory fines, and an immeasurable loss of customer trust and goodwill. Moreover, losing intellectual property and trade secrets can hamper future growth and competitiveness.

Verifying Identity for Know Your Customer (KYC) Requirements

Robust identity verification is the best way for businesses to satisfy Know Your Customer (KYC) requirements by using a range of methods to confirm the identity of users. This involves gathering and analyzing many types of information, such as government-issued IDs, biometric data (like fingerprints or automated facial recognition), and corroborating data from other sources.

A good digital onboarding and access management solution will be able to examine all documents meticulously to ensure their authenticity. Using these advanced verification tools, businesses can ensure the accuracy and legitimacy of users’ identities, mitigating risks associated with fraud, money laundering, and other illegal activities. This helps maintain compliance with regulatory standards and fosters trust between businesses and their customers.

The most commonly used identity verification methods for KYC compliance are:

• ID Document Verification: the digital gatekeeper for financial services, using AI to analyze documents like passports or licenses for authenticity, checking fonts, roundness, and security features to distinguish real from fake.
• Facial Biometrics: uses a face like a password, extracts data from images to compare with verified sources like ID documents, and confirms the identity based on matching datasets.
• Beneficial Biometrics: combines biometric verification with ID document checks to boost trust and ensure that remote users match the identity on the documents they are using.
• Liveness Detection: confirms the presence of a natural person in front of the camera, employing techniques from basic movements to advanced thermal imaging, applicable even in commercial settings.
• Identity affirmation or Identity Proofing: leverages risk management capabilities not just to verify a document but also to offer a higher level of assurance.

Choosing the Right Identity Verification Solution

It’s important to remember that not all identity verification methods are created equally and must be tailored to the specific KYC requirements of the business. Financial institutions must consider the type of transactions to manage security and compliance. Different interactions and transactions carry varying levels of risk. A one-size-fits-all approach to identity verification will result in unnecessary friction for low-risk interactions or unacceptable vulnerabilities for high-risk ones.

By customizing the verification process based on the transaction’s sensitivity and regulatory requirements, businesses can strike a balance between security and customer experience to build trust and confidence among users. It is also essential to adopt a solution that can scale. A scalable identity verification solution allows businesses to handle increasing verification needs, adapt to market changes, and manage peak loads. It also helps them optimize costs and prepare for future growth.

Benefits Beyond Fraud Prevention

Over and above preventing financial fraud, a solid digital onboarding and identity verification platform helps ensure seamless onboarding experiences, expediting the process and removing customer friction. Furthermore, a good implementation of digital onboarding tools helps to tailor products and services to the needs of the individual customer. These include identity verification, identity affirmation, user journey orchestration, and consent/preference management – all of which help pave the way for happy, long-term relationships built on transparency and trust.

 A well-thought-out digital onboarding program also plays a pivotal role in compliance. It gives organizations a deep understanding of their customers and enables them to assess and mitigate risks more effectively. It can ensure they comply with KYC regulations, verify who their clients are, screen them against global sanctions lists, and pinpoint any anomalous or suspicious activities. This also helps them stay compliant with anti-money laundering (AML) and counter-terrorism financing (CTF) regulations, ensuring regulatory obligations are fulfilled and reputations, relationships, and data are safeguarded.

Protecting Entities in Every Sector

Prioritizing identity verification as an essential aspect of KYC and fraud prevention is critical to protecting entities in every sector against risks and ensuring compliance. Business leaders must recognize the crucial role of robust verification processes and look for suitable solutions to protect their organizations from financial losses, reputational damage, and legal repercussions. 

The Digital Trust Index report highlighted how 80% of respondents expected a fully digital onboarding experience. This is why having a carefully considered ID Verification strategy goes beyond combatting and preventing fraud; it is a business’s first opportunity to establish trust and fuel long-term growth and sustainability.

Kirsten Doyle has been in the technology journalism and editing space for nearly 24 years, during which time she has developed a great love for all aspects of technology, as well as words themselves. Her experience spans B2B tech, with a lot of focus on cybersecurity, cloud, enterprise, digital transformation, and data centers. Her specialties are in news, thought leadership, features, white papers, and PR writing, and she is an experienced editor for both print and online publications. She is also a regular writer at Bora.