When a business is onboarding customers using a risk-based approach, some identifications require enhanced due diligence.
Payment providers, for example, must consider factors such as the country of origin, where the money is going to, the source of funds and the transaction value. If potential risks are identified during due diligence, adding layers of identity verification to onboarding workflows helps provide more robust fraud prevention measures without adding substantially more friction or effort.
Using digital identity, ID document and bank account verification can enable organizations to utilize a few reliable ways to verify and authenticate that someone is who they claim to be. By cross-referencing multiple networks, businesses can implement an even more robust fraud and risk mitigation system. Corroborating information from different identity streams creates a higher barrier for any would-be fraudster to overcome.
While fraud prevention and compliance measures are always necessary, requiring every customer to go through the highest level of scrutiny is often unnecessary and can sometimes even lead to transaction abandonment.
The individual, scenario and numerous other factors will affect the risk profile and, thus, the rule sets and workflows should also vary. They can be customized to offer the most appropriate onboarding experience, based on risk, allowing lower-risk accounts to onboard seamlessly while requiring higher-risk ones to go through more robust measures, as part of a balanced, risk-based approach.
For instance, Stake, an Australian-based investment platform that challenges traditional banks and brokers on investing costs and user experience, uses Trulioo to onboard and verify customers in four different locations (Australia, New Zealand, the UK and Brazil) with multiple legislations and other requirements.
One of the founding principles of the company was to address three major legacy issues within the investment industry for customers: paper forms, excessive fees and poor execution. Stake needed to undertake appropriate anti-money laundering and know your customer (KYC) procedures for every customer, and provide the appropriate level of security, without compromising on service. Using its risk-based approach, Trulioo has helped Stake with this due diligence while enabling the company to scale globally, delivering verification to a vast market.
Validating personal identification information as a first step can provide insight into what further checks should be deployed. Beyond the information provided by the consumer, the simultaneous collection of significant metadata presents numerous signals that are useful for fraud prevention. For the consumer, it’s just a few simple questions, but for a sophisticated identity verification system, it’s a multitude of data points and signals to determine the risk profile and the associated workflow. If during the initial analysis, a need for enhanced due diligence is identified, a secondary ID document verification might be called for.
ID document verification
For these cases, the consumer is asked for images of their identity documents. These images can then undergo security checks, including analyzing them for signs of forgery or alteration. For a company that needs extra layers, this process could also require the customer to send a selfie along with the picture of their ID. This selfie enables a liveness check and biometric comparison between that image and the ID photo. Using facial recognition technology, the image comparison is done quickly and with a high degree of accuracy, providing yet another layer of comfort.
If documents are unavailable or an even further due diligence layer is called for, a bank account verification may be requested. Bank verification is a mechanism to confirm that the person entering identity information into a form is authorized to use the identity they have supplied.
As banks have strict regulations around proper KYC and security measures, using banks as a verification layer helps to provide assurance that the prospect has passed other strict ID verification procedures and that the information matches a defined bank account.
As with any verification procedure, there’s always an amount of healthy friction for the consumer when adding security measures. Studies show that consumers appreciate the trade-off, as they understand the need for security and how those measures protect them when they open accounts. Providing the onboarding process prioritizes data privacy, and is not complicated or slow in comparison to the value they receive, consumers will willingly proceed.
Right verification at the right time
With the smart implementation of a digital identity network, an effective, risk-based approach is technologically almost effortless. It goes without saying that compliance teams need to consider various risks and what appropriate measures should be in place to safeguard their operations. Regular adjustments, reviews and manual investigations should always be part of the process.
However, effective identity verification workflows make remote onboarding safe, convenient and seamless – for both operational teams and consumers.
The right level of due diligence is expected by consumers in today’s digital world and will help pave the way for greater customer trust and loyalty.
This post first appeared on Fintech Finance.
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Zac is a versatile leader experienced in managing and scaling high-growth companies. He is a veteran of all facets of startup and tech operations, including strategic planning and execution, corporate management, and building high performance teams. His expertise in risk and compliance software continues to drive innovative and effective solutions for businesses operating worldwide. Zac is passionate about fostering changemakers to make an impact and build groundbreaking solutions that are solving our world’s most pressing problems.