Best Practices to Follow For Merchant Onboarding and Monitoring

Merchant onboarding is the key to growth for any kind of business, regardless of the fact if you’re a merchant acquirer, a payment service provider, or anyone else. As a business, you would want to have as many merchants to support more transactions. But, onboarding more merchants without proper due diligence can cause more losses than benefits. Businesses need to follow the best practices in merchant onboarding and monitoring practices.

As a business, how can you balance trade-offs, ensuring that you can quickly and seamlessly onboard merchants that can be trusted? While good merchants can improve your business operations, bad merchants can put you in heaps of trouble. 

The global payment market is growing rapidly and changing quickly as the sophistication of both technological and fraudulent attacks is advancing. There are numerous ways businesses can utilize to improve the risk assessment, monitoring, management, and onboarding of merchants. 

Before we jump into the methods of merchant onboarding, businesses need to be aware of risk management processes.

Risk Management for Merchants

The risk management approach for merchant onboarding is vital for learning how to onboard merchants:

  • What is the transaction level of the merchant and their network?
  • What is the industry type your business operates in?
  • What is the transaction amount and range?
  • What payment channels are they going to use?
  • What countries do the merchants operate in?
  • What resources are necessary to properly onboard and monitor the merchant?

As not all merchants are the same, the level of risk and the due diligence checks that you need to do are also different.

It’s true that there are different levels of due diligence for each merchant, but there is a standard that must be met across all the due diligence checks. There are some legal compliances that have to be followed, such as KYC & AML. There are some standard rules of the card networks, they demand that there are specific legal contracts with all merchants that control all the relationships. Other rules regarding credit underwriting, as the merchants have to be in effect by offering unsecured loans.

How does Merchant Onboarding work?

Onboarding the right merchant can be tough, but with the right steps you can successfully onboard a merchant:

  • Pre-screening
  • Merchant KYC procedure
  • Merchant history checks
  • Business and operational model analysis
  • Web content analysis
  • Information security compliance
  • Credit risk underwriting

One major factor for creating a more successful onboarding process is blending automation with human effort. Most of the industry runs around manual work such as data entry, which has to be done multiple times. Manual work takes up a lot of time and it has a lot of room for human error. This is why a blend of human error and automation is necessary for detecting and preventing merchant onboarding fraud. Combining human and machine efforts can be considered one of the best practices in merchant onboarding and monitoring.

Automation allows businesses to have a smoother integration between the merchant onboarding steps. With the right technologies, you can make the whole merchant onboarding process automated. Businesses need to understand the importance of best merchant onboarding practices.

What is Merchant Monitoring?

Payment service providers and other businesses shouldn’t stop their risk management after they’ve onboarded merchants. What happens when a merchant changes the nature of their business? A change in the risk criteria requires reevaluating the risk profile of the merchant. When a merchant changes their business model, they can be doing damage, so it’s better to reassess the merchant profile:

Here are some of the best merchant monitoring best practices:

  • Spikes in activities
  • Exceeding thresholds
  • Out of area or cross country transactions
  • Changing website products or links
  • Including people from the sanction lists
  • Adverse media mentions

For monitoring the merchants, automation has seen some efficiency. The industry is getting tougher to survive in. There’s a lot of competition, encouraging growth in high-risk segments and markets. There is a huge rise in CNP fraud, as counterfeit fraud becomes more difficult.

Proof of Address

How to Perfectly Ace Address Verification During KYB & KYC Process?

Customer address verification is vital for opening accounts, signing up for new services, and more, but verifying customer addresses isn’t as easy as it seems. The new automated method offers an up-to-date source for address verification and digital methods for address verification are perfect for businesses to reduce fraud. 

The biggest reason for identity fraud is the use of synthetic identity, where a fraudster uses a combination of fake and real information to create a brand new identity, which is one of the reasons why verifying an address is crucial for businesses to mitigate fraud. 

Also, using proof of address as a form of ID verification means that your business will comply with AMLD5 and protect it from other fraudulent risks.

What’s the Need for Proving Address?

To avoid risks of fraud, proving customers’ addresses is vital for companies like financial institutions, eCommerce platforms, online marketplaces, and gambling sites. Businesses that have to prove customer identities to offer their services need to verify customer addresses. 

High-value eCommerce transactions also need proof of address verification, so that expensive purchases such as cars, technical equipment go to the correct addresses. If a fraudster can use the potential to use stolen card details to buy something and send it to a different address, they will. However, businesses that use robust address verification solutions can mitigate the risks of fraud. 

The Need for Regulations

Businesses, financial institutions, eCommerce marketplaces, and so on have to follow KYC and AML regulations to reduce the risk of fraud. If you follow KYC, KYC, and AML regulations, you reduce the threat and risk of fraud to your company. Using strong ID and document verification software and tools can assist businesses in mitigating fraud, legal complications and establish trust in our customer base. 

Proof of address is a basic requirement for complying with KYC & KYB and AML compliance. But that’s not the case with all countries, Hong Kong doesn’t require proof of address verification to comply with KYC, KYB, and AML compliance. The reason for that is simple, customers often change addresses and their documents can be easily forged.

Top Ways to Verify Addresses

The most commonly used methods of proof of address verification across the globe are:

  1. Driving License

A driving license is the most commonly used document type for proof of address verification. Although, using a driving license is not an efficient solution. Many people had their driving license issued years ago and chances are that they have changed their home since the issuing of the license. Another issue is that a driving license can be easily forged and thousands of fake licenses are used every day.

  1. Passport

Passports usually show addresses, but the data available on passports can also be outdated. With many customers currently living at a different address than what’s shown on their passport that was issued almost 10 years ago, the use of a passport isn’t ideal. Also on some passports, current addresses aren’t printed and a space is left for residents to write their addresses themselves.  

  1. Bank Statement 

Financial institutions, banks, eCommerce platforms, and so on have recently started using bank statements for proof of address verification. A recent bank statement can easily be used as proof of address. However, customers have security concerns regarding offering their bank statements. Financial services in Europe have seen almost 40% of customers abandon the customer onboarding process when they were asked for bank statements for address verification. Customers are hesitant to provide their sensitive data.

  1. Utility Bill

Utility bills have been used for proof of address verification for a long while. Earlier the process was strictly paper-based, but since the pandemic, it has gone digital. This is the strongest form of address verification as the document is recent and hard to mimic. Utility bills provide the most recent address of a consumer, while most people don’t care about changing addresses on driving licenses, they are likely to pay their utility bills every month.

DIRO Online Document Verification Software for Address Verification

Verifying proof of address can help businesses fight fraud. DIRO’s online document verification tool helps businesses in verifying the signs of fraud early on. DIRO’s online document verification service verifies document data directly from the web source thus eliminating the use of fake and forged documents. By using DIRO’s online document verification solution, businesses can verify proof of address documents without having to worry about the use of fake and forged documents.


Improving Identity Verification Process for the Digital Age

As all of our transactions and other banking activities have moved to a digital space, the need for tighter and more secure ID verification increases. Regulatory bodies worldwide keep pushing the financial industry to adhere to AML and KYC laws more strictly. To ensure security, good customer experience, and proper compliance, firms have to expand their customer verification process. The right steps for ID verification require companies to use digital solutions that get the job done with ease. Innovative solutions and vigilance can ensure less fraud and better compliance. Here’s how an innovative global identity verification process can meet up the needs of the digital era.

Improving Customer Trust

The rush to transform traditional systems into digital systems in 2020 was because of the global pandemic. Across various industries, firms acted as quickly as possible to keep their business operations running. For consumers worldwide, this sudden shift to digital platforms came with some concerns. While 40% of consumers globally are concerned about the safety of their personal information, 60% of consumers prefer convenience over security. To successfully adopt digital measures, companies need to assure their customers that their information is safe from outsiders and insiders. Being able to establish trust leads to improved brand loyalty. 

Providing companies with their personal information is usually a huge step for customers as the cases of data breaches are on the rise. However, in this rapidly changing environment, it is vital for customers to share personal information to use a service. With a certain degree of friction to the customer identification process, companies can build a sense of security in the minds of the customers.

There are some steps that firms all over the globe can take to ensure better security. Solutions like multi-factor authentication and cross-referencing of data can improve the customer experience while reducing the risk of fraud.

Global ID Verification

According to a variety of surveys, it was reported that more than 1 billion people across the globe don’t have solid proof of identity. This lack of information can cause friction in almost everything they want to accomplish. Financial freedom, business ownership, and even simple things like opening a new account can be a hindrance. 

Innovative technological solutions like the use of alternative data can help firms bypass this barrier. This also improves the global identity verification process.

Companies that have to comply with ID verification on every application can make their identity verification process more robust with alternative data solutions. Regardless of the industry type and business size, companies can utilize another layer of data to verify customers. 

Different Needs for Different Businesses

The identity verification process is fickle, regulations are always changing. Different technological solutions are suitable for different organizations. There are a number of techniques to verify customer ID and businesses need to figure out which one suits them the most.

Online document verification, biometrics verification, online ID verification are some techniques used during customer onboarding.

Can Alternative Data Support the Global ID Verification Process?

Digitization is something that’s been a point of focus for most industries for years. Small companies, big organizations, and companies spread over multiple countries need a comprehensive ID verification process. 

Using alternative data does provide an extra layer of information during the customer onboarding process. However, solutions like DIRO online document verification API provides instant customer document verification that improves customer experience, reduces fraud and eliminates the use of stolen/fake documents.


Steps to Improve Customer Onboarding Experience During Sign Up

Since the pandemic, our lives have switched online. Online work, online classes, online lectures and seminars and even visiting the doctor online. The way online technology has evolved and changed our lives, there’s no going back to the old and traditional methods. The proper digital onboarding process can improve customer onboarding experience.

In many situations, companies have to verify if the people are who they claim to be. But this has reduced the overall customer onboarding experience. There are other elements that reduce the customer experience are “Two-Factor Authentication, One-Time Passwords, Text Codes, Email Codes, and Time-Sensitive Codes”. None of these elements offer a great customer experience. However, firms need to verify their customers, recognizing customers in the initial step of the business relationship is always a good thing. 

According to a recent report, 57% of users claimed that ‘ease of accessing their accounts’ is more important than “understanding customer interests”.

Customer Experience and Identity Verification

When you verify customer identities, you need to understand that verification is the initial step of the business relationship. Most of the time, proving customer identities isn’t the sole purpose of a customer. Rather, it’s an obligation that they have to follow to finally access the services. Customers can access services like sending money online, book an appointment, or online financial services. 

So instead of creating an extra burden on the customers, you can focus on how you can make the verification process better, for both you and the customers. Firms can follow some steps to keep the security intact all the while improving the customer experience.

Steps to Improve Customer Onboarding Experience

1. Fewer Clicks Doesn’t Mean Better User Experience

Onboarding is an important part of the overall customer experience. The main goal is to keep the people engaged, improve the conversion rate and reduce the drop-off rate. Adding ID verification to the customer onboarding adds a new step and to reduce friction it can be tempting to shorten the process by reducing the number of clicks. 

But identity verification is a huge step, and it’s crucial that people understand why they have to go through the process. To also ensure that process is explained clearly, you need to offer guidance so that people just have to do it once. 

So instead of reducing the number of clicks, your aim should be a focus on being as helpful as possible. Explain to the customers the why and the how of the ID verification. Having a small and to-the-point guide can help you increase the customer onboarding experience. 

2. Get Smart About Waiting Times

It’s vital for businesses to quickly complete the verification process. Having to wait even 5 seconds can feel like hours when you’re in front of a screen. In a world that’s going fully digital, customers hate to wait for long periods. Your customers need to know how much they’ve progressed in the process.

Provide your customers with something to do, so they’re actively waiting, such as allowing customers to explore the app or to do something while the process goes on in the background. And if that’s not possible, let them know how much time it’ll take for the process to get completed. 

3. Get Users at the Right Time

In some specific industries such as financial services, the ID verification process is required by law. Businesses have to fulfill KYC regulations and take important steps to verify customer data. Although, adding identity verification in the framework can make all the difference in the world. 

The ID verification process needs to be in the right part of the whole onboarding process. 

4. Sometimes, Friction Can be Good

While identity verification creates an additional step in your flow, and usually people say that additional steps create friction. But friction sometimes has some benefits. You can add a biometric verification process that does add a new step yet verifies customer data quickly, securely, and efficiently. Businesses just need to use the friction to their advantage.

5. Customer ID Verification Adds Value

This step applies to industries where the user won’t initially expect to do identity verification. Industries like retail, sharing marketplaces, and gaming don’t usually rely on identity verification. But sometimes additional steps increase trust and brand value. Although, you’d have to let your customers know why and how it benefits them. 

Features like “Autofill data” are simple and they improve the customer onboarding experience. For biometric verification, they can just click a photo of themselves. One of the biggest advantages of the customer verification process is that they can use their biometrics to access their accounts if the customers are locked out. 

6. Don’t Forget About Things that Can Go Wrong

Things can go wrong all the time with customers while trying to sign up for new services. What do you think happens to the customers who aren’t able to go through the sign-up process, or those who fail the ID verification check?

Fortunately, this happens to just a small number of customers. However, that often means the experience for these customers is deprioritized. People who are locked out of their accounts and can’t access online services have to:

  • Going to the ATM for getting money withdrawn
  • Withdraw a random amount of money
  • Then deposit the money to the bank
  • Get in touch with the bank by getting through exhausting customer services

This multi-level process is an experienced killer. Businesses only want people to go through our ID verification flow just once. If customers fail to do the customer verification check, businesses need to check why that happens?

7. Common Process for Everyone

Conclusively, every type of customer should have access to the products and services they want. That’s why it is important to make ID verification accessible to every kind of customer. 

The purpose of designing is to improve the usability and usefulness of digital services. Products that are designed with general accessibility in mind are extremely beneficial for everyone. Plus, making sure all kinds of customers can access your services is a great incentive for building the services.


Building a Successful Digital Compliance Program

One of the biggest parts of completing digital transformation is by modernizing the compliance procedure. The digital compliance process should be in response to regulations set in place to prevent fraud, money laundering, terrorist financing, and so on. The customer Identification Program or more commonly known as KYC (Know Your Customer) is a major part of the compliance process.

It is common knowledge that traditional methods of complying with these regulations can be time-consuming, expensive for the institutions, and result in poor customer experience. A complicated and inefficient CIP(Customer Identification Process) leads to an increased rate of customer drop-off and application abandonment during onboarding. Customer trends are changing and with the rise of technology, customers demand fast, efficient, and secure onboarding processes. Every 10 seconds added to the application process is directly responsible for a 5% increased customer drop-off rate. Building digital compliance services can help your businesses in various ways.

That’s where the technological solutions come in. The right solutions like instant document verification technologies can help banks and other institutions streamline the process. It can also increase customer experience while making sure all guidelines are followed. To make the best out of these technologies, banks should follow best practices for digital compliance.

Strategy for Building an Efficient Digital Compliance Program

1. Build Separate Online and In-Branch Experiences

As banks focus on their digital banking compliance, they should also focus on re-defining the in-branch experiences. Customer preferences and customer expectations change based on the channel they are operating on and customers that operate online desire faster services in comparison to traditional banking. 

During a manual account opening process, banks hand out printed documents about the customer application, these disclosures are used in a PDF format by banks. When it comes to online account opening, a new tab opens for downloading the PDF disclosure of the application. This takes away the focus from the application page. Instead of doing this, banks should focus on building solutions that don’t take away customer focus from what they’re trying to achieve. 

While opening the account in the branch, the bank requires physical customer ID & address documents for verification. In a digital environment, most customers see this step as a barrier. Most customers abandon the application process instead of putting in the effort to submit digital documents. Now that the Federal Financial Institutions Examination Council (FFIEC) and other entities have allowed non-document verification, banks should look past documents. However, not using online documents for verifying customer ID can lead to an increased rate of fraud. This is a conundrum banks have to deal with. 

With third-party solutions like DIRO online document verification API, banks can build trust between customers that their personal information is safe. Also, instant document verification reduces the time significantly which in turn leads to a better customer experience. Technologies help in improving the process of digital risk and compliance.

2. Utilize Multiple Data Sources for Identification

To verify customer identity, which meets up compliance requirements, banks should look to leverage multiple data sources across the online account opening process. Usually, when applying for a new account, a user might be asked to provide information like name, date of birth, social security number, address, phone number, and email address. Banks need to utilize digital compliance services that use multiple data sources to cross-reference information.

Importantly, this automatic data comparison has to be behind the scenes without interrupting or slowing the customer user experience. DIRO verifies documents and cross-references customer data from thousands of sources.

3. Use Real-Time Data for Effective Risk Management 

Online banking is what the customers demand at this time. As banks roll out online account opening capabilities, they have to anticipate potential risks in the customer application approval process. Banks have to accurately assess risk to approve or deny applicants. 

To be able to do that, banks have to come across a range of data, including transactional data, social media, and more. This process can be automatic and occur in real-time, which helps both banks and customers. Customers love a fast and efficient process with as few barriers as possible and banks benefit from highly accurate and fast KYC compliance that reduces the possibility of fraud. Real-time data processing, reporting, and monitoring can improve risk management capabilities. Using real-time data for effective risk management is one of the best practice for digital compliance.

4. Encourage Greater Transparency with Digital Record Management

While digital channels may present compliance challenges. An online account opening allows record-keeping as opposed to an in-person account opening. For example, DIRO provides 100% proof of trust for verified customer documents and then places the documents on the blockchain. Documents that are placed on the blockchain are immutable and easy to maintain. Record management is invaluable for compliance purposes, as banks can provide auditors with highly detailed data.

Making Compliance Easier with Automation

Regardless of the numerous advantages of digital banking, financial institutions sometimes hesitate to develop digital channels just because there’s a lot of uncertainty around compliance. By combining the right kind of technology with a compliance strategy, banks can successfully build digital compliance that keeps up with CIP and other regulations.


Fighting Online Fraud with Multi-Factor Authentication Solutions

In a world that’s moving towards complete digitization, how can a business distinguish between fake and real? As a business, the need of identifying a real person from a fake one is vital. Identity authentication solutions help in verifying customer identities. Using multi-factor authentication (MFA), and knowledge-based questions, businesses can reduce the risk of fraud and increase customer-business trust. 

One widely used MFA is using the mobile number for sending a unique 6-8 digit code to the customers. This is a common method of authentication because:

  • Mobile phones are widely available. Over 62% of the world’s population uses a mobile phone. 
  • Easily accessible. Most people carry their phones with them at all times.
  • More convenient than any other method of MFA.

Mobile Number for Verification

Using mobile numbers as a method of verification consists of:

  • A customer/potential customer provides their phone number to the business
  • A text is sent to the phone number, it contains a unique, time-sensitive code
  • The person is authenticated if they enter the right passcode

While the process is simple, it supports one element of customer authentication. Strong customer authentication (SCA) which verifies customers using something a customer has. By entering the unique code, a customer confirms that they have the phone with them. 

Combining this with another method of authentication, mobile number verification passes the bar set by EU requirements for SCA. Not a lot of businesses are obligated to comply with SCA, still, the use of mobile verification offers some benefits. Using multiple channels for customer authentication is extremely helpful for the financial sector as it provides a robust security model. 

Verification and Authentication

Using a mobile number for customer verification only indicates that a person has access to the number. It is easy to activate a mobile number using synthetic identity and can be easily created on internet-based phone and text services without any ID requirement. If a firm relies on mobile checks for verification, it’d have a higher chance of authenticating fraudsters. 

Verifying the legitimacy of a person includes confirming that they exist, which is fundamental to ensure that the authentication process is efficient and effective. Cross-referencing the information provides a solid base for authentication. Having precise identity data with an authenticated mobile number delivers increased assurance.

Identity Two Factor Authentication

There are online document verification methods that help in the process of identity multi-factor authentication. These services make sure that only real mobile numbers can be used for mobile numbers, thus filtering out bad actors who use VOIP services. 

By adding the additional authentication layer, bad actors face extra friction to establish, use or modify any account, while legitimate users can quickly continue with their activities.

Online Document Verification for Customer Verification

Some customers are hesitant to provide their mobile numbers before starting a customer relationship. This is where online document verification for verifying customer identities. Distinguishing between fake and real people is crucial for banks and financial institutions to reduce fraud.

DIRO’s online document verification service verifies online documents from all over the globe. DIRO supports banks, healthcare institutions, financial institutions, and more by providing a new and unique approach towards online document verification.

With DIRO, entities can verify customer documents instantly. DIRO 100% eliminates the use of fake and stolen documents by cross-referencing document data with original sources. 

With over 7000+ types of documents, DIRO is a global platform. Backed by forensic data and 100% proof of trust, DIRO verifies documents such as bank statements, driver’s license, utility bills, tax documents, insurance documents, student records, and more. Implementing organization-wide KYC & AML compliance is also easier with DIRO’s technology.


What is KYB Compliance and How Is It Related to KYC?

Due to the increase in money laundering activities and other forms of financial fraud, countless reforms in regulatory guidelines are being made. More and more businesses understand the need for having strong regulations in place to reduce the risk of fraud and improve the customer onboarding experience. However, most individuals and organizations fail to recognize the key difference between KYC and KYB compliance. To make things clear, KYB (Know Your Business) compliance shares each major requirement of KYC (Know Your Customer) compliance. Both the KYC and KYB compliance shares the same goal which is to follow AML/CTF regulations to make sure all the financial transactions are done safely and are protected.

Both the KYC and KYB compliance are strict and they follow a certain set of rules and guidelines. They do have a key difference, and the difference between both the compliance is the target that is being analyzed. In KYC a certain person is being analyzed, in KYB a business operation is analyzed.

What Is KYB Compliance?

KYB or Know Your Business is compliance that checks to identify the transparency of the business, companies, or organizations apart from due diligence, KYB compliance also requires constant monitoring of financial transactions. These strict checks are made to verify a business’s features, ownership, and other information to make sure a business doesn’t fall prey to any type of financial fraud. KYB compliance is focused on business verification which is done by submitting document data and some types of monitoring that is similar to KYC compliance due diligence checks. The information provided by businesses is checked and verified against public and government databases and other AML databases.

These constant checks and verification of business information help businesses stay safe from financial fraud such as money laundering, money embezzlement, etc. Following with KYB compliance also allows a firm to stay transparent to their customers and also ensures the customer data is secure. 

What is KYC Compliance?

Know Your Customer compliance focuses on individuals who apply to open bank accounts or try to sign up for new services like financial services or cryptocurrency. KYC is important to verify customer financial backgrounds and financial histories to find out any illegal activities in the past, it helps in assessing how big of a risk a customer can pose to an organization. The risk score and risk profiles are vital for banks and financial institutions to assess how big of a risk a customer is.

The compliance and identity verification industries focused on building solutions that helped in KYC compliance, but as the industry patterns changed, the industry also started using KYB as a method of detecting and preventing fraud. The digitization of KYC compliance is much more crucial as almost all the customers are demanding digital methods. As technology improved, KYC with the help of cloud computing turned into eKYC. This ultimately led to fewer compliance costs, fewer chances of human error, and a positive customer experience.

KYC to KYB: How They Came Into Existence?

Before either KYC or KYB compliance came into existence or before they were digitized, the amount of financial fraud reached a certain proportion of actual crime. According to the UN’s office, the global rate of money laundering was 2-5% of all types of crime. There was no perfect way to detect high-risk levels or to control individual and business illegal transactions. 

To regulate and control the rampant crime, the Bank Secrecy Act of 1970 introduced new Anti-Money Laundering guidelines. These guidelines were later incorporated into the 2001 USA Patriot Act. Some changes were made in the guidelines and then they were tuned into KYC in 2003. These guidelines were built to check the financial health and monitor the transactions of the individuals. KYC Compliance required financial institutions and banks to constantly monitor all their customers and follow specific regulations. Soon after, KYC compliance became incredibly useful in reducing and preventing fraud, but it had a major loophole. 

The loophole helped businesses ’ UBOs and corporate owners as banks weren’t required to check and verify the partners and representatives of a business. This left a huge loophole for fraud and illegal financial activities. This made sure that the businesses could partake in illegal financial activities and go unnoticed by banks and other regulatory bodies. Certain large-scale scams under KYC compliance led to the birth of mandatory KYB compliance in 2016.

Both the KYC and KYB compliance follow the same rules and they make sure that financial activities are regulated and help in reducing the risk of financial fraud. The major factor that sets both compliances apart from each other is who they target:

Major Difference between KYC and KYB

  • KYB: The guidelines in almost KYB compliance are followed by all the industries as different types of schemes and frauds have led to huge losses to customers and businesses alike. KYB compliance includes all types of businesses and structures and it is well established throughout most of the industries. The industries that follow KYB compliance most stringently are banks and financial institutions. 

Key Requirements for KYB & KYC

Since KYB and KYC are built to target different client types and different data, the data that is verified is different. To register for verification, the core data for verification remains the same, which are financial documents and identity documents. 

  1. Data for KYB

As KYB specifically targets businesses and organizations, the verification process requires information that includes a character report of the UBO of the business and of business investors that hold a quarter share, each. The necessary verification data includes:

  • Business address
  • Recruitment reports
  • Business license and registration
  • Identification documents of UBOs, and business partners.
  1. Data for KYC

KYC focuses on an individual customer of a bank or a financial institution that needs to verify themselves by providing identity and address proof documents. These records help in verify the financial situation of an individual and help banks assess how risky a certain customer can be. The necessary verification data for KYC includes: 

  • Social security number or PAN Card number.
  • An ID card issued by the government. 
  • Any debit card or credit card issued by a bank.
  • A copy of utility bills such as electricity bills.
  • Driver’s license/Passport with a digital photo.

Virtual Identification for KYC and KYB

One of the major reasons that banks and financial institutions are moving towards digitized KYB and KYC compliance is to provide better efficiency. Traditional KYC methods used to require people to submit the verification data in person, but with the improvement of technology, the same can be done using digital methods. 
The whole process can be done in just 2-3 minutes, depending on how fast the online document verification solution is. DIRO’s online document verification technology can verify documents instantly which means the KYC process can be done in just minutes. 


How Blockchain Can Affect Traditional Banking?

Blockchain has taken the world by a storm and is changing everything, from payment transactions to how the money is raised to security in online banking. The main question here is, can traditional banking embrace the change or will it be replaced by something new? It is undeniable that blockchain affect banking in a number of ways. 

In the last decade itself, blockchain technology has received a lot of attention, and all for the right reasons. Despite the skepticism about the technology, the question “will blockchain revolutionize the banking industry?” remains.

Blockchain and Banking: What Role it Plays in the Financial Industry?

Blockchain technology offers a way for untrusted parties to verify the state of a database without the need for a middleman. A blockchain offers a ledger where the information is available to everyone and the information is immutable. A blockchain could provide specific financial services such as payments without needing a bank operating as a middleman. It can also enhance data security, and bank account verification and customer ID verification process. 

Blockchain technology/decentralized ledger technology has a huge chance of disrupting banking by reducing the need for middlemen. Here’s a proper breakdown of how blockchain affect banking industry while providing new business models using technology.

How Blockchain will Change Traditional Banking Methods?

1. Improves Sending & Receiving Payments

Sending and receiving payments using traditional banking methods is not exactly effective. Let’s say you want to send money from the U.S to the U.K, you’ll have to pay a fee to the middleman for wire transfer. To make matters worse, the person you’re sending money to, may not even register the transaction until a week later. 

Completing payments is highly profitable for banks, providing them with little to no incentive to lower their fee on transactions. In 2019, banks generated $224B in payment revenue from cross-border transactions, payments to letters of credit, and more. 

Bear no misconceptions in mind, cryptocurrencies have to go a long way to replace government-issued currencies. In the last couple of years, the transaction rate of cryptocurrencies has grown exceptionally, one such example is Bitcoin. 

Some companies are using Blockchain technology to improve their B2B payments in growing economies. A company named BitPesa facilitates blockchain-based payments to growing economic countries like Kenya, Nigeria. 

Blockchain technology is also being used worldwide to support micropayments. Online wallet providers offer users with perks to make micropayments using Bitcoin, U.S dollar, or any other payment method allowed by apps. This is the first way on how blockchain affect banking industry.

2. Clearance and Settlements Systems

As mentioned above, an average bank transfer takes up to 3 days to settle, which is because of the lack of proper infrastructure. The antique financial infrastructure makes moving money around a hassle for both consumers and banks. 

Something as simple as a bank transfer has to go through several intermediaries and comply with a series of compliance requirements for payment completion. Blockchain technology works as a decentralized “ledger” of the transactions. Instead of banks utilizing SWIFT to keep track of transactions, interbank blockchain technology can track all the transactions securely. 

Blockchain also supports “atomic” transactions (transactions that are settled as soon as payment is completed). The process is opposite to financial systems globally, which clear and settle the transaction after a couple of days. 

Streamlining blockchain technology can eliminate the high costs of maintaining a global network of banks. According to a report made by Accenture, the use of blockchain can reduce transaction settlement costs by $10B annually. 

3. Enhances Raising Funds Process

If you’ve been in the financial industry all your life then you must be aware of how arduous raising money through venture capital is. Entrepreneurs have to sit through long negotiations just to sell a part of the company for the money required. 

Some companies on the other hand are raising funds using ICO (Initial coin offerings) that are backed by digital assets like Bitcoin and Ethereum. The value of a token is tied to the success of a blockchain company directly. Using ICOs, blockchain companies can raise money by selling coins directly to the public. 

There have been some ICOs that have managed to raise millions upon millions before showing any proof of a viable product. 2018 was the high point for ICOs globally, since then there has been a significant fall in ICO transactions. 

While most of the ICOs had the sole purpose of raising money for blockchain products. Now, we’re seeing a trend change where more and more companies are built around decentralization technology. 

One of the biggest examples is Telegram, a messaging app, raised $1.7B with ICO. The goal behind ICO is to sell tokens to users and set up a payment platform alongside messaging app. Based on regulations, ICO activity should be done with caution. Unregulated ICOs started failing after 2018, thus leading to the fall of ICO transactions. 

4. Ensures Security of Payments and Banking Data

Financial transactions of all kinds come with their fair share of risks. Customers need to know who owns the assets like stocks, commodities that you’re investing into. The largest financial markets globally achieve this transparency with a complicated chain of brokers, online exchanges, custodian banks, and so on. These relationships are built on a slow paper-based method that can be highly inaccurate. 

If someone wants to buy a share of YouTube, they’ll have to place their order through a stock exchange, the exchange then will match them with a seller. 10 years ago, you’d spend cash and get a certificate for your purchase as proof. 

Now that all these transactions have gone digital, the process has become more complicated. To reduce the hassle of managing the assets every day, companies outsource this process to custodian banks. As buyers and sellers don’t always use the same custodian banks, the banks themselves have to use a third-party service provider to manage the paper certificates. 

To streamline the process, blockchain technology creates a decentralized database of digital assets. With a decentralized ledger, it’s possible to transfer the rights to an asset using cryptographic tokens. Huge cryptocurrency providers like Bitcoin and Ethereum have accomplished this using digital assets. Newer blockchain-based companies are still struggling to find ways to convert real-world assets into crypto tokens. 

5. Secure Loans and Credits Offering

Banks and lenders underwrite loans using an old method known as “Credit Reporting”. The utilization of blockchain technology allows P2P loans, complex programmed loans, and a faster, more secure loan process in general. 

Whenever a person applies for a loan, banks have to assess their risk level. Banks/lenders use credit score, credit history, the debt-to-income ratio, and homeownership status. This centralized system can prove hostile for consumers. FTC stated that 1 in every 5 American residents has some kind of error in their credit score that makes it harder for them to acquire loans. As most credit information is distributed between three organizations (Experian, TransUnion, and Equifax), they are usually under attack. The 2017 Equifax data breach led to 150M American’s data loss. 

Using blockchain for lending purposes offers a cheaper and efficient solution. This way more people can acquire a personal loan, all the while reducing poor consumer experience and risk of loan fraud. With a cryptographically secure, decentralized ledger of transaction history, banks can decide to approve loans based on a global credit score. 

6. Simplifies the Trade Finance Process

The only reason trade finance exists is to eliminate fraud risk, extend credit, and make sure exporters and importers can take part in international transactions. Trade finance is a vital cog in the global financial process and still, it relies on an outdated method with manual paperwork. 

Blockchain aims to improve and streamline the complex process of trade finance. Which will end up saving billions of dollars for importers, exporters, and their financiers. Trade finance is one of the few areas where blockchain has a firm foot, however, when it comes to streamlining the bills of lending and credit, it’s still taking the initial steps. 

Just like countless other industries, the trade finance market has suffered at the hand of an antique, inefficient manual documentation process. Physical letters from one bank to another bank are still used to ensure that the payment will be received. 

Blockchain technology with its transparency enables firms to securely prove country of origin, product, and other transaction details. It can provide better visibility into the shipments and a more efficient assurance of delivery. 

7. Customer KYC and Fraud Prevention

Another sector that can be greatly improved with the utilization is customer KYC. Banks/firms/lenders need to verify the identity of their customers using a series of documents before allowing them to use their products or services.

Banks can take up to 3 months to complete their KYC procedures, including photo ID verification, address proof verification, and biometrics verification. A slow KYC process can lead to customers leaving a particular organization and switching to another one. Not just time and effort, banks also have to spend huge amounts for KYC verification. An average of $500 million is spent annually by banks for completing the KYC proceedings. 

Blockchain can reduce the human effort and the cost involved in following up with KYC compliance. Customer information can be stored on a blockchain and the decentralized nature of the platform allows all institutions to access the information and complete KYC compliance. Different types of frauds and cyberattacks are a huge concern for banks globally. Once a hacker gains access to a bank’s system they can access all customer information that’s stored on a centralized ledger. By using a decentralized ledger that is Blockchain, banks can ensure security of data. This is one of the major ways on how blockchain affect banking. 

Companies like DIRO utilize blockchain technology and enhance the KYC process. DIRO verifies 7000+ customer document types for KYC verification and offers proof of authentication with verifiable credentials. Verified customer information is then placed on the blockchain with a digital hash. The result is a court-admissible customer document with forensic data. Banks, lenders, and other organizations can use DIRO for streamlining the KYC process by eliminating manual verification of customer documents like bank statements, utility bills, insurance documents, tax return documents, and so on. Plus the documents placed on the blockchain are immutable and secure from fraud.


Why aren’t KBA Questions The Best Practice in Online Banking?

Knowledge-based authentication or commonly known as KBA has been used since the dawn of financial services. KBA questions have been used as a key data point by almost all organizations during customer identification programs. Basically, knowledge-based authentication questions are used to verify a customer by asking them to answer a series of complicated questions. These questions are based on customers’ personal information and historical data. These are the kinds of questions that an attacker can’t answer just by stealing personal information like your driver’s license and more.

Questions are usually generated from public and private data sources, credit reports, and government databases.

Here’s an example of the questions:

  • What was the make and model of your first car?
  • What street did you live on in 2005?
  • Which state was your social security number issued?

While these questions may sound extremely secure, the efficiency of the KBA questions has been failing over time. The reason for that is the greater public availability of information and KBA’s susceptibility to fraudulent actors. This is why strong implementation of KYC compliance is crucial.

Why Is KBA Failing Slowly?

At its most basic level, KBA can be easily compromised mainly because of the amount of personal information that is available online. This availability of information can come from two locations such as social media platforms and high-profile data breaches. 

According to studies, with enough research cybercriminals can easily get around the KBA questions as almost all the private information is available online. One simple search engine search with the person’s name can provide fraudsters with a plethora of information. 

More sophisticated fraudsters use technologies that make it easier for them to access information that is usually buried deep. Plus the data breaches like the Equifax breach in 2017 make things harder for customers. 

Better Banking Solutions to KBA Questions

A better way to mitigate risks of financial crime is to make use of third-party data solutions instead of knowledge-based authentication questions. A criminal can easily guess, research, or spoof KBA questions, it is much more difficult to create synthetic identities to get around third-party data solutions. 

It is much easier to build an idea of someone’s identity by collecting names, DOB, SSN, address, phone number, and email ID. Fraudsters have the means to gather other information such as browser type, IP address, linked bank account information, etc. By collecting and comparing this information available in public and private sectors, hackers can easily fool KBA questions. 

Unless banks have access to real-time identity and document verification during online account opening, it will be almost impossible for banks to verify all the information during online customer onboarding. By reducing reliance on customers to validate identity through data input, institutions are reducing the weak points that fraudsters can use to exploit. Coupling this strategy with extensive, real-time, third-party cross-referencing is the key to improving compliances and reducing online fraud.

What are the Different Types of Authentication Methods During Onboarding

Verifying customer identity is one of the most crucial parts of the customer onboarding process. KYC and AML regulations are changing the way identity verification methods work. Financial Crimes Enforcement Network (FCEN) is one of many regulatory bodies that are responsible for regulating ID verification in the USA. 

  1. Two-Factor Authentication

Two-factor authentication, also known as multi-factor authentication, is a method where the customer has to provide additional information apart from username and password to access their accounts. The additional information is usually a 6 digit numerical code. This code is sent to users once they click on the login button after entering the username and password. Two-factor authentication is a great option for opening accounts and completing impersonation checks whenever a customer tries to access their accounts. 

  1. Credit Bureau-Based Authentication

Another method of customer identity verification is using credit bureau information about a potential customer. This method of verification relies on gathering information about the onboarding customer from any of the major credit bureaus. This information includes data like name, address, and social security number. It also uses a score-based system to create a perfect match without having to put customers’ personal information harm.

  1. Database Methods

Database ID methods collect data from a wide range of sources to verify any identity. These sources of information are made up of online databases such as social media and offline databases such as government data. 

This method of verifying customers is for assessing the level of risk a user poses. Although this method of verification isn’t exactly secure as it doesn’t ensure that the person providing the information isn’t the one making the transactions, thus this method is susceptible to identity theft.

DIRO’s Document Verification Technology For Secure Verification

One of the best ways to verify a customer during the onboarding process and reduce the risk of future financial crime is by verifying all sorts of documents. Using the latest technological features, document verification can be conducted online on all kinds of documents. 

DIRO’s award-winning document verification service is the industry standard for verifying documents and reducing the risk of financial crime for banks, financial institutions, and other industries. It even helps in diminishing the risk of human error. Institutions just have to log in to DIRO’s secure browser and verify if a document is original or not.

DIRO’s innovative technology does instant document verification and offers 100% proof of authentication. The proof of authentication itself can be used as an original document by users. By utilizing all the technology has to offer, banks, financial institutions, and FinTechs can improve their chances of fighting financial fraud.


6 Things You Should Follow While Verifying Business Documents

A business has to have documents that look official, provide accurate information, and can be scanned for verification. The editing and proofreading part of preparing a document is important. Numerous documents can be deemed labeled business documents and they help you maintain a wide range of communication internally and externally. If you’re trying to do business with a company, then you should have a variety of fraud that can follow. Fraudsters usually try to mimic documents to trick organizations out of their money. Businesses or individuals need to verify business documents and look for red flags. 

How to Verify Business Documents?

A business can follow 2 major methods to verify business documents. With improved technologies, it is easy for fraudsters to forge business documents and verify if a business is not trying to trick people. There two main methods of verifying business documents are manually and automatically. 

  1. Manual Business Document Verification

The manual business document verification process refers to the manual verification of business documents by cross verification of data in the documents. Manual verification is a time-consuming process and a business has to hire a team of document experts. While the manual process leaves a lot of room for error, it is used by thousands of businesses around the globe. With the right technology, it is easy for fraudsters to doctor documents that look almost perfect to the naked eye. 

  1. Automatic Business Document Verification

As the name suggests, automatic business document verification uses automation for the verification of business documents. Several technologies offer automatic verification of documents, technologies like DIRO offers instant verification of documents to verify if a business is a fraud or not. Different technologies offer different levels of security and seamlessness for business document verification.

Things to Look Out For While Verifying Business Documents

1. Company Style

Let’s say that you’ve done business with a particular entity before, it is easy to verify the style or tone of the document with previously acquired documents. Regardless of the tone, verify if the sentences are short and written in an active voice to target the intended audience. Compare the tone and writing styles of the documents to ensure that the company voice is consistent. 

2. Review the Document Format

Fraudsters don’t usually care about if the information provided on the documents is correct or not. Your team should check to see if the documents use headlines, subheadings, bullet points, or something distinct in their documents. A business usually follows the same tone and format of the document. As a business, you should verify the document format to look for tiny inconsistencies. 

3. Grammar and Spelling Errors

A good business will not make common grammatical & spelling mistakes. This is one case where manually going through the documents is a good idea. Go through the sentences and paragraph carefully to find errors. Commonly misspelled or misused documents can be used to verify if the documents are coming from the real business and not some fraudsters trying to trick you. 

4. Verify the Document Layout

Another method of verifying if the document is real or not is by running an eye over the document and looking for red flags in the document format. Incorrect margins, justification, wrong text placement, and illustrations are all red flags as businesses don’t make these mistakes. 

If the document contains graphs or charts, make sure they don’t overwhelm the text. You should also verify if the illustrations are formatted properly. If the documents include company logos, make sure it keeps up with business standards. 

5. Confirm the Accuracy of Data

Checking document facts and data is an essential part of business document verification. You should ask for references if you need to verify business documents. Accurate information provided in business documents is essential to a business’s integrity. Based on the nature of the document and the type of company, you may want a business document and the accuracy of the data.

6. Final Proof

Once you’ve gone through every part of the document, all you have to do is to verify the document all over again. Look closely for red flags and any visible mistakes. Your team should verify documents over and over again for finding out any leftover errors. Even the smallest mistake can prove that it is fraudsters who are trying to trick the business instead of business entities. 

DIRO for Business Document Verification

DIRO’s online document verification software verifies documents instantly and provides 100% proof of authentication. Using DIRO, businesses of all scales can easily verify business documents for eliminating the risk of fraud. The technology can verify over 7000+ documents globally including UBO (Ultimate Beneficial Owner) documents. DIRO provides an online verified document with a digital hash, and the result is a document that is court-admissible.