An address is an important identification attribute to verify a person’s identity. Proof of address is often requested when opening a bank account or other government account to confirm residence and help Know Your Customer (KYC) compliance and prevent fraudulent activities.
Proof of address is also used to ensure services are only available to customers within a specific geographical area. Beyond compliance, address verification also helps reduce fraudulent or unwanted activities online. For example, social networks or neighborhood apps may want to restrict users to residents-only to avoid solicitors and advertisers from spamming their communities.
Traditionally, providing proof of address is a manual, cumbersome process that delivers a poor account opening experience. Relying on manual checks to verify residency documentation introduces the potential for human errors and creates unnecessary friction and delays for customers.
Customers have to locate, scan, and send pages of documents in the required format. What should be an instant onboarding experience ends up taking days (or even weeks) due to manual checks and processes. As there are many document types and providers, document review standards can vary widely, creating possible failure points due to forgery or theft. In an era of instant gratification, relying on manual checks of physical documents is inefficient and better processes need to be considered.
What is proof of address?
Proof of address is evidence that a person has an actual physical address that matches their stated address. The real address needs to exist, and there must be supporting evidence that the person currently resides there.
In financial services, some offerings are only available to residents of that jurisdiction or participation is otherwise restricted, based on where the person is. For example, cryptocurrency exchanges in Europe might not want to accept U.S. customers to avoid sanctions by the SEC for dealing in unregistered securities.
Restrictions like these might be the result of legal or regulatory requirements, or they may instead be based on company policies. Vetting location information through proof of address helps these organizations to provide the service online and ensure that any regulation or internal policy/procedural requirements are addressed.
There are several ways to provide location evidence, including a proof of residency letter (Affidavit of Residence). However, the most common way to help prove location is by giving documents that indicate the address, the dates of service, and the person’s name on the account. Each organization has different requirements for acceptable documents, but common examples include:
- Utility bill
- Tax bill
- Bank statement
- Credit card bill
- Tenancy agreement
- Employment letter
Problems with proof of address documents
Proof of address process improvements have been slow, especially compared to all the technological progress of proof of identity. Here are some of the known proof of address issues.
No proof of address template
Consider how many different types of services could offer residency evidence. Multiply that by all the various organizations, and the different styles, formats, and information, and the problem of determining the authenticity and accuracy of a residency document quickly becomes clear. Depending on the use case, there might be thousands of potentially acceptable documents and little to no similarity or guiding principles to base decisions on.
Poor onboarding experience
A new customer wants to sign up and start using the service quickly. They don’t want to start going through files to find a document, send it in, scan it properly and then wait for acceptance. One survey discovered 50% of application drop-offs were due to asking customers to produce identity documentation.
Part of the issue is the lack of standards already discussed, which creates confusion for the customer, as they have numerous options. Beyond that, there’s the problem of dealing with paper-based documents in a digital environment. Organizations require customers to become document scanners and any lighting or placement issue slows down the process and leads to further customer aggravation.
Costs of document handling
Besides the possible significant errors and slow processes, costs to handle manual checks can add up quickly. While processing a few dozen applications per month is doable, processing hundreds or thousands of applications becomes a significant and inefficient task. There are also considerations for record-keeping, rechecks and other document handling costs.
New proof of address processes
Fortunately, new technologies enable proof of address processes that speed up onboarding, automate address verifications and help deliver better compliance and fraud prevention outcomes. As with other successful identity verification processes, it’s not one magic technology, but the combination of different technologies in smart workflows that helps create the most compelling proof of address capabilities.
One standard process in identity verification is the use of address verification. Customers submit their address information, which is then matched against database records of credit bureaus, utility companies, government agencies and various other data sources.
Address validation helps ensure the address information has the correct hierarchical alignment for further analysis. If the customer has resided at that address for a while, address verification can then provide a match or no-match signal.
Note, the success of this type of match relies on up-to-date address information in those databases being queried.
Having an address verification is a substantial step for identity assurance. In cases where identity documents have been forged or manipulated, incorrect address data would produce a no-match signal. On the other hand, an address that matches a known identity connects the person to a real-world location, especially if the person has lived there for a substantial period.
Mobile network operator (MNO) data, available with GlobalGateway MobileID, is considered to have some of the most reliable address information because consumers are more likely to keep their mobile phone billing information accurate than they are other billing sources.
IP address verification
Any web form fill contains numerous unseen metadata points. In particular, the IP address can provide another powerful location data point that can assist in proof of address checks.
An IP address is the unique number of the device that the customer is using to connect to the internet. The physical location of that device can then be determined by looking up the IP address. That location information can then be queried against the address provided to determine if there’s a match.
While an IP address can provide a layer of location data, it’s essential to understand that this information is not necessarily 100% accurate. Users might be on an extensive network, which transfers users to a non-local device, or they may be using a VPN, which masks their actual location.
Another layer of location data is geolocation. If using geolocation information from GPS or MNOs, the data is difficult to forge or alter and offers a proximity indication, which is generally precise to within 125 meters.
Geolocation can offer a strong signal to understand the precise location. Depending on the use case, this opt-in information helps stop potential fraudsters, or out-of-area applicants from ever becoming a customer.
Proof of address best practices
Every organization that requires proof of address needs to examine its legal requirements, risk strategy and operational considerations. Understanding what is best for both your customers and your organization requires determining what technologies are appropriate and how to integrate them into a holistic solution.
Perhaps, due to your regulatory requirements, you do need a document. In that case, collecting the document to satisfy requirements is a given, but the actual address check uses one of the technologies mentioned above. Using this approach would likely meet requirements, speed up the check, and provide additional location analysis and fraud prevention measures.
Or, perhaps you need to include age verification with location data to ensure that your age-restricted products or services meet local destination requirements. In that case, a document verification check to analyze age and identity, along with a geolocation check to determine the exact location, could be the right solution.
Revamp how you verify addresses to increase identity assurance while delivering a better account opening experience for your customers.