By Bala Kumar, CPO of Jumio

One of the reasons why the financial services industry is so heavily regulated is to ensure organizations aren’t onboarding customers involved in money laundering and other financial crimes. Client onboarding has always been an essential requirement for financial organizations to collect critical client information and perform customer due diligence to ensure there are no risks associated with the individual. But with the digitization of onboarding, customers no longer need to be physically present at brick-and-mortar branches and stores — everything can be done online. This means financial institutions need to be more diligent in verifying people’s identities. It’s harder to know if the person opening an account behind their screen is who they claim to be.

There is absolutely no room for error when it comes to financial enterprises verifying their users’ identities during onboarding and authenticating them during every subsequent online visit. However, it can be tricky to confirm customer identity through manual identity checks and legacy authentication methods. Fortunately, digital identity verification is one technology that can help transform financial services security as we know it. By leveraging the power of biometrics and AI, digital identity verification compares a physical document (such as a passport) to a selfie taken during the onboarding and login process to confirm a user’s true identity. This technology can then be used during every subsequent login to confirm the user is truly who they claim to be. Here’s how that protects and serves organizations and their customers:

Warding off Fraudsters

It’s becoming increasingly difficult to defend against fraudsters, while the stakes for falling victim to their schemes are higher than ever before in terms of cost and disruption to business continuity. Eighty-three percent of organizations suffered from more than one data breach in the past year, with the average cost of each amounting to $4.35 million. This doesn’t even include the vast number of organizations that were infected with malware or were forced to shut down their systems due to other cyber incidents.

Furthermore, threat actors are using more innovative techniques to bypass tools already built to be more secure than passwords, such as multi-factor authentication (MFA). Back in March, the Cybersecurity and Infrastructure Security Agency (CISA) and the FBI warned enterprises that Russian state-sponsored threat actors had obtained network access by exploiting default MFA protocols and a known vulnerability. These instances are becoming far more common, yet enterprises are still relying on these tools, thinking they keep their networks safe. Digital identity verification serves as a more secure alternative, as it can help organizations identify sophisticated methods fraudsters may deploy, including deepfakes and other forms of synthetic media. In addition to detecting threat actors, this form of identity verification can help financial enterprises stay compliant with increasing regulations.

Meeting Compliance Mandates

Due to the stringent policies and requirements surrounding the financial services industry, banks, fintech companies and other financial institutions must monitor all customers, examine their transactions and report any suspicious activity to the authorities. Conducting these processes manually not only takes considerable time, effort and resources, but is also highly prone to errors. Unfortunately, financial enterprises can face severe consequences for conducting business with criminals who have previously engaged in fraud and money laundering. For example, they may face large penalties and fines, lose customers and tarnish their reputation. Digital identity verification technology can help take the burden off of compliance teams and minimize errors by automating many Anti-Money Laundering (AML) and Know Your Customer (KYC) procedures during onboarding and beyond. It also provides customers with a simplified, positive digital onboarding experience.

Creating a Frictionless User Experience

End-users are increasingly opening up new accounts from the comfort of their home, whether it be a new credit card, insurance policy or bank account. Customers expect onboarding processes to be as safe, secure, quick and friction-free as possible, or else they may move on to the next financial institution that can provide them with a smoother experience. For instance, passwords, knowledge-based authentication (KBA) and MFA may all make the authentication process far more complex and time-consuming than it needs to be, causing frustration and fatigue among end-users. Digital identity verification technology removes any barriers that cause friction, enabling a seamless onboarding process. In turn, this will lead to a positive user experience and an increase in online client conversions for the institution.

Customers now have higher expectations than ever before, while fraud and other cybercrimes are escalating at an exponential rate. Automated tools, such as digital identity verification, can help organizations stay ahead of threat actors, maintain compliance with KYC and AML regulations and enable a friction-free digital experience. This technology will not only be critical in the financial services industry, but other sectors including e-commerce, online gaming and more.