Remote Customer Identification in Banking

The banking process has been evolving, and the pandemic has forced the banking industry towards digital transformation. While the integration of technology has made some things easier, some banks and financial institutions take things one step beyond. Instead of using normal yet effective identity verification solutions, banks overcomplicate the process with biometrics and other not-needed technologies.

Banks can easily verify the identity of their clients’ using the banking app which comes with an integrated recognition process. While biometrics verification helps prevent the use of fake and forged identities, it sometimes creates too much friction for customers during the onboarding process. The latest technological improvements are improving the banking process and assisting in detecting and preventing fraud early on, but the same technological advancements are also being used by fraudsters. Let’s dive deeper into how technology can streamline the verification process and enhance remote customer identification in banking.

The Role of Technology in the Banking Sector

In banking, not only a person’s data but the security of financial data is also important. The security depends on the type of technological solution the bank is using for remote customer verification. With the rise of countless technologies, the efficacy and accuracy of such solutions are becoming a growing concern.

When the world suddenly went digital due to the Covid-19 pandemic, biometrics and facial recognition seemed like the perfect solution to remote customer onboarding. However, that’s not the case, while it is a fast method, it isn’t the safest one. Banks need to look out for questionable recognition technologies with low precision. Ineffective solutions can increase the false-positive reports that can lead to an increased rate of fraud.

Biometric verification is ineffective, especially at the time of the pandemic. Before using biometrics as a method of identification, the client has to first provide the banks with their biometrics data samples. While this method is reliable, it increases friction during the onboarding process. Biometric verification is more likely to be used in forensic science and terrorism monitoring. 

In Europe, banks have started to consider other methods for remote customer ID verification other than biometrics verification. Apart from using biometric data like access to financial services, banking operations have to be accompanied by additional security checks to ensure bad actors don’t get access to financial systems. Most banks rely on multi-factor authentication or two-step verification. 

To fully shift banking towards digital methods banks and governments need to invest lots of funds as the infrastructure is expensive and includes the installation of equipment for data collection. This is one of the biggest reasons why the use of biometric data was met with huge support as it doesn’t require huge investments. 

As technologies are evolving, banks are trying their best to remove the intermediary from the client/bank interactions. Human interactions are only used to provide customer service, where clients receive personalized support for any problem the bank has. 

Remote customer identification is a vital step for all customer and bank interactions. Even just before the Covid-19 pandemic, banks had physical copies of customer addresses and identity data, and banks needed to make new copies of these documents each time they make a transaction, withdraw money or conduct any transaction. This protected the banks in case the client raised any claims. With the centralization of technology, all this has changed to electronic document management.

Remote Customer Identification in the Banking Sector

The banking sector is undergoing a complete digital transformation, and banks need to use ideal technologies to enhance the remote onboarding process and eliminate fraud.

1. Online ID Verification Solutions

To reduce fraud, banks need to eliminate the use of fake identity data used by bad actors to cause huge levels of financial loss. With online ID verification technologies, banks can verify customer identities with ease. There is no limit to online ID verification tools, but the banks have to choose efficacious tools that can provide genuine results most of the time. 

2. Blockchain Technology

The blockchain serves multiple purposes, including ID and document verification. Blockchain is a decentralized online ledger and information on the blockchain can’t be changed without access. With blockchain technology, banks can verify and manage the ID data of customers. The whole idea of blockchain is to ensure that the data is secure. Customers can authenticate them at government services, banks, airports, and other services with only one identity using blockchain technology. 

3. Online Document Verification

Online document verification technologies can help banks eliminate the use of fake and forged documents. DIRO’s online document verification software can help banks and financial institutions instantly verify documents like proof of address documents, bank accounts, tax return documents, student records, and so on. DIRO can verify 7000+ types of online documents from countries all over the world. The online document verification tool verifies document data from the original web source, thus eliminating any chances of fake documents to use by bad actors.

General Verification

What is Signature Verification?

The widespread use of digital signatures has raised tons of questions. Most of these questions are related to user security. Numerous individuals and businesses see the benefit of transitioning from the traditional method of signing documents. The traditional method requires printing, scanning, hand-signing, and re-scanning of the documents and they are a huge security threat. Overall, they’re unsure how the digital signature verification process works.

The solution is to remove the mystery regarding the digital signature verification process.

How do Digital Signatures Work?

The terms digital signature and electronic signature are often used interchangeably, but they are very different from each other. The first point is understanding the difference between electronic and digital signatures. Digital signatures are a type of highly secure electronic signature, and they have a robust verification process. 

eSignature or Electronic signature on the other hand refers to any virtual mark (Like an image file) that is included in a document to signify approval. Digital signatures work by leveraging an encrypted system that is based on a standard technological framework called Public Key Infrastructure (PKI). Certified authorities provide individuals with a digital certificate, which is stored by them mostly on a USB stick. 

Whenever the individual wants to sign a new document, they’ll have to attach their digital signature to the document using special software. An encrypted “hash” that is specific to that document is then created. The individual that’s sending the document then has to match the digital hash with a public digital certificate, in turn verifying the signature. 

Most digital signature providers use a mathematical algorithm to generate digital signature keys. 

  • Public key
  • Private key

Whenever a signer digitally signs a document, a new cryptographic hash is created for the document. This is done to verify the authenticity and integrity of the document. The recipient of the digital document can decrypt the encrypted hash by using the sender’s public key certificate. Once that is done, a new cryptographic hash is created from the receiver’s end.

While verifying digital signatures, both the cryptographic hash are compared to check their authenticity. If the hashes match, the document is original and it hasn’t been tampered with.

The Role of Digital Signatures

Over time, digital signatures have become a norm for all businesses. In many regions, including parts of North America, the European Union, and APAC, digital signatures are considered legally binding and they hold the same value as traditional document signatures.

In addition to digital document signing, they’re also used for financial transactions, email service providers, and software distribution. Digital signatures are crucial in specific industries where authenticity and integrity of digital identity are important. 

Industry-standard technology known as public key infrastructure makes sure to authenticate a digital signature is valid.

Why Should You Use PKI or PGP with Digital Signatures?

Using digital signatures that are supported by PKI or PGP improves their strength and significantly reduces the possibility of security threats. You can reduce security issues that often come along with transmitting public keys, by simply verifying that the key belongs to the sender, and verifying the identity of the sender. Verifying the identity of the sender is crucial when you’re dealing with a digital signature.

The level of security of the digital signature is completely dependent on how secure the private key is. Without PGP or PKI, proving someone’s identity or revoking a compromised key is next to impossible. If the private key is not well protected, it could allow malicious actors to assume the identity of someone else and go through the process without proper verification. 

By relying on third-party verification services, businesses and individuals can verify digital signatures. This can ensure that the digital signatures are not being used by someone who doesn’t have the authority. 

As paperless, and online transactions are growing day by day, the use of digital signatures can help you protect and secure the integrity of your data. By understanding and using digital signatures, you can protect yourself, the information you share, confidential documents, and transactions. 

How are Electronic Signature Verified?

And how are electronic signatures verified? Numerous legislation like the ESIGN (The Electronic Signature in Global and National Commerce Act), UETA (The Uniform Electronic Transactions Act), and eIDAS (Electronic Identification, Authentication and trust Services) offer the validity of electronic signatures. 

The process for verifying electronic signatures is a lot similar to traditional methods that are used to verify physical pen and ink signatures. Verification is essentially about proving an electronic signature was made by the intended signee by verifying the data, location, and time of the signature. This helps in ensuring that the document wasn’t tampered with. 


Steps to Streamline KYB Process

To ensure the success of a business and the elimination of fraud, effective KYB measures need to be established throughout the organization. The Know Your Business (KYB) process begins with the onboarding of corporate clients and since the pandemic, the integration of digital solutions has become a vital step for KYB compliance.

Regardless of the usefulness of digital services in keeping up with regulations, businesses operating in the financial industry are reluctant to rely on technologies. Countless studies point toward the fact that focusing on a solely paper-based process for onboarding clients hurts businesses in the long run. Regulatory bodies all over the globe are encouraging businesses to take the first step toward digital transformation.

While digital transformation isn’t easy to achieve, with the integration of DIRO’s online document verification software, the process can become faster, efficient, and seamless. With DIRO, it can be easy to comply with regulations, perform due diligence checks and reduce friction from the customer onboarding.

What is Know Your Business Regulation?

KYB is the pass or fails point of a new relationship with a corporate client. KYB compliance came into existence because of some loopholes in the older KYC (Know Your Customer) compliance. With KYB, businesses can verify the clientele and figure out the risk factors in the initial stages of a relationship. The KYB regulation covers all the legal and regulatory processes when onboarding a new client. 

Usually, there are 4 main steps of KYB verification:

  • Document collection and verification
  • Data assessment
  • Continuous monitoring
  • Reporting and intelligence

Companies need to do their due diligence to figure out any criminal activity like money laundering and terrorist funding. It is vital to understand that KYB is not a one-time audit but an ongoing process that requires continuous monitoring to verify that everything is squeaky clean.

3 Ways Traditional KYB Hurts Your Business

  • Traditional KYB methods require tons of resources, financial institutions need to have a dedicated team who are slowed down by outdated processes. In most cases, corporate clients can take months to successfully onboard. 
  • Human error is part of business operations and when handling huge amounts of data and information, mistakes happen, exposing businesses to major risks. 
  • The biggest challenge of the KYB process is keeping up with the ever-changing regulatory landscape, especially when numerous countries are involved. The rules and regulations of the KYB process are complicated and ever-changing. Top banks can also have some blunders, which can lead to reputational damages.

How to Streamline the KYB Process During Corporate Onboarding?

Technology is ever-evolving and with the help of the right technologies, you can help future-proof your business. The need for KYB regulation is growing, not just because of the regulatory requirement, but because the ability to onboard clients is essential.

The traditional KYB processes can be improved through numerous automated verifications, AI, and data assessment. All of it can be done faster than a person ever could. Automations allow companies to react quickly and work in accordance to enforce compliance procedures without having to spend more on their teams. 

This, in turn, helps in delivering an experience to the onboarding that is more secure, convenient, and sustainable. According to a recent report, companies that achieved successful KYB compliance save an average of $1.45 million per year in compliance costs. 

Building an in-house KYB digital onboarding system from nothing is super expensive, time-consuming and there’s a lot of room for error. With the integration of DIRO online document verification software, businesses can effectively comply with KYB regulations and mitigate the risk of financial fraud.


Tips to Protect your Business from Scammers

Businesses of all kinds face various internal and external attacks that can harm the businesses financially and in other ways. False invoices, money laundering, and phishing attempts are some of the most common examples of fraud. With the whole world forced to shift toward digital transformation, online scams aimed at businesses are getting more sophisticated. 

According to industry experts, every second an online merchant becomes a victim of some kind of fraud. What’s even worse is that most businesses take months to notice the fraud. Unfortunately, most businesses don’t know about the best practices they can use to enhance security and keep their businesses protected from fraudsters.

Practices to Prevent Fraud for Businesses

1. Know Your Customer

The COVID-19 pandemic was the primary cause of the surge in the rate of unemployment. Identity fraud costs reached up to $43 bn in 2020 out of the total fraud losses of $56 bn. 

Know Your Customer compliance program is a vital part of running an online business. Businesses are legally obligated to perform customer due diligence (CDD) checks to verify the identity of the customers to future-proof themselves from financial fraud. 

By building successful and efficient digital compliance programs, businesses can mitigate the risk of fraud all the while improving the customer experience during onboarding. The exact type of risk management solutions depends on the business type, but generally, they’re needed to identify and assess the threat a customer can pose to their business. According to industry experts, businesses should have automated checks in place for customers to eliminate the risk of fraud from the early stages.

2. Chargeback Fraud

Another common type of fraud that businesses have had to face since the rise of digital business operations is chargeback fraud. It happens when a consumer makes a purchase online using their card and then disputes the charge with the bank, and requests a chargeback from the bank even after getting the product or services they ordered.

Businesses operating in the industries like eCommerce, online dating, online gaming, and other purely online businesses tend to suffer from chargebacks and transaction fees whenever they onboard new customers. Although, businesses can reduce the risk of fraud by identifying the common patterns. 

3. Utilize Multiple Solutions

As there are so many areas where a company can be susceptible to attacks, it is vital to use a combination of digital defensive solutions, including:

  • Online ID verification
  • Online document verification
  • Continuous customer monitoring
  • Real-time transaction monitoring

One simple solution isn’t enough to keep the sophisticated types of fraud at bay, businesses need a combination of solutions for fraud detection and prevention.

4. Machine Learning Solutions

Machine learning solutions can be utilized by businesses regardless of the industry and business type. Firms that don’t have the resources to manage huge teams for customer verification can use machine learning solutions for customer verification and fraud detection. 

Machine learning can learn from huge data sources and detect normal payment patterns and detect suspicious transactions right away. Best algorithms can also identify fraudulent transactions on more than 50 different parameters.

DIRO for Fraud Detection & Prevention

Businesses often face fraud that revolves around fake and forged documents and identities. DIRO’s online business verification software helps businesses in detecting and prevent fraud in the early stages. DIRO can verify documents instantly and provide stronger proof of verification backed by verifiable credentials. By integrating DIRO into their solutions, businesses can easily improve fraud detection and prevention techniques.


Open Banking in 2022: What To Expect?

2021 has been kind of a relief for people all over the world trying to tackle the wave of the COVID-19 pandemic. Now that most parts of our day-to-day are becoming normal, will banks revert back to their old selves or keep on pushing with digital transformation and innovation? All the evidence suggests that banks and other businesses operating in the financial industry are aware of the benefits of digital transformation and open banking. Technologies like open banking APIs can successfully enhance the overall workflow for businesses while ensuring a seamless experience for customers. Open Banking or Open finance is growing at a steady rate in the financial industry and here’s everything that is expected of Open Banking in 2022.

Leveraging Account Data to Develop Broader Products

Financial products and services are on the verge of changing dramatically. All of this is possible because of information and payment methods made possible by open banking. By the end of 2022, the financial industry is expected to see greater adoption of technologies for mainstream activities and innovation for tougher tasks. Customers can expect to access a broader range of products and services, only if they consent to third parties accessing their financial data, for building custom products and offerings. 

With the widespread adoption of open banking and with leveraging data, the lending and creditworthiness assessment process will change significantly. With banks and third parties accessing customers’ financial data, they’ll be able to offer a wide range of personalized products and services including better lending options with lesser risks for banks. Loans that are tailored to a specific person’s financial data or transactional habits will result in a better variation in interest rates and levels of credit.

As open banking evolves with time, it’ll lead towards Open Finance, simply meaning enhanced availability of credit cards, savings, and mortgage data will allow lenders to make better decisions regarding lending and offering credit cards. This data can also be utilized to tackle financial fraud like account opening fraud, account takeover fraud, and ID fraud. Open Banking APIs like online document verification API can help in detecting fraud during the initial steps of a customer-business relationship, thus reducing the risk of potential fraud significantly.

Open Banking Payment Solutions Will Become Mainstream

Open banking payments are already leaving their mark by eliminating the unnecessary fees and poor customer experience that customers face during card payments. Businesses like investment platforms are currently allowing customers to use Open Banking to create new accounts. 

Due to this change, eCommerce businesses will experience the biggest benefit in the near future, with an enhanced checkout process and reverse payments. Open banking-powered payment methods aren’t as widely known or used in the industry, but as more and more customers rely on online payment solutions, their need for better methods increases. Reducing transaction fees and improving the overall customer experience will be the key factor in the transformation and adoption of open banking payment.

Not only the purchase, but the refund process will also become easier with reverse payments. This will provide businesses with more control over their decisions, this will ultimately mean that customers won’t have to wait for days or weeks to get their money back from the business.


EU Money Laundering Action Plan

The European Union launched an ambitious and multi-featured action plan for tackling money laundering. This plan sets out concrete measures for banks, financial institutions, credit unions, and other businesses operating in the financial industry. These set of rules and regulations are built to ensure better enforcement, supervision, and coordination of the European Union’s rules on anti-money and fighting terrorism financing. Let’s dive deeper into the EU’s Money laundering action plan.

Timeline of EU’s Money Laundering Action Plan

On May 7th, 2020, the European Commission (EC) published its action plan to further streamline the EU’s fight against money laundering fraud and terrorist financing. The legislative plans to roll out this action plan were timelined around July 2021. The action plan targets six main problem areas, each of which is aimed at shutting down and eliminating loopholes and weak links in the already existing rulebook against ML/FT. One of these pillars is streamlining and strengthening the already existing rulebook. 

The current EU legal framework already offers comprehensive regulatory guidelines to all the EU Member states. These regulations outline how to tackle money laundering and financial terrorism. The current approach is diversifying regulation implementation across all EU member states. This fragmented legislative anti-money laundering environment leads to additional costs, burdens, and regulatory mistakes for businesses that provided services globally. The aim of a singular rulebook is to simplify the process for all entities involved, not increase costs and burden. 

Based on this, the EBA published a new report that highlights how the EU’s framework should be fixed and changed to tackle vulnerabilities and loopholes in the existing system.

Minimum Harmonization and Open Standards

To limit the fragmentation in the interpretation and application of rules, the EU considers it essential to convert specific parts of AMLD into applicable guidelines for all banks and members. Opting for regulation instead of a directive will ensure a consistent approach to AML/CFT compliance and enforcement. A regulation should outline rules and guidelines related to:

  • List of obligated entities
  • Tasks of FIUs
  • Structure and tasks of supervision
  • Customer due diligence
  • Electronic identification and verification
  • Record keeping
  • Internal controls
  • Reporting requirements
  • Beneficial ownership verification
  • Central bank account mechanisms
  • Limit large cash payments
  • Freezing powers for FUIs
  • Sanction lists

Adoption of New Rules and Regulations

According to the EC, harmonization can also be achieved by utilizing empowerment to adopt detailed rules and regulations through delegated or implemented acts to keep up with the changing environment. 

A similar approach was introduced in 2001 to improve the regulatory procedures and implementations in the financial services industry. The process has a 4-step approach, with committees of national experts working on different parts of new legislation.

The four levels are:

  • The European Parliament and the Council adopt the framework suggested by the EC in form of a directive or regulation.
  • These directives or regulations contain guidelines for level 2. This includes the adoption of a regulation by delegated acts or implementing acts. During the second stage of the approach, the EC is backed by consulting bodies that include several EU countries’ reps. 
  • At level 3, committees of national supervisors are responsible for advising the EC on the adoption of levels 1 and 2 and for issuing guidelines and recommendations for implementing the rules. This is how the uniform and consistent application of new legislation within EU Member states is completed. 
  • At level 4, the EC is required to monitor the implementation of compliance by the member states, and for warning about differences in impact between the countries. In case there are major differences in implementation, the EC can issue amendments to regulations. 

Six Pillars of Money Laundering Action Plan

The EU is committed to building a better and stronger framework for fighting and preventing ML/TF. To enhance the current rulebook, the EU devised a methodology for identifying weak points and loopholes. 

1. Ensuring Proper Implementation of Existing Framework

For winning a fight against money laundering and terrorism financing, the European Commission expects the member states to follow the rules. The EC will be monitoring the compliance closely to find those who don’t comply with guidelines. Since the implementation of the plan, 3 member states have been reported to the Court of Justice of the EU and they’ve paid hefty fines for non-compliance. 

2. Establishing a Single Rulebook for AML/CTF

The EC has developed a single set of rules that all member states must follow to prevent ML/TF. Some of the biggest rules include digital customer identification, due diligence, and provision on beneficial ownership registers and central bank account mechanisms.

3. Constant Supervision by the EU

One major plan in the EC’s plan is to make sure that all member states are monitored by them. Monitoring the application and implementation of rules at a national level isn’t enough. The EC will now provide help and support and relevant information to member states to improve implementation.

4. Building a Support and Cooperation Structure for FIUs

The fourth pillar of this new action plan includes offering more support to the financial intelligence units (FIUs) under the new plan. The primary goal of the commission is to improve cross-border information sharing, investigation of potential fraud, streamline the process, and much more. The EC will also take over the management of the tool to improve user-friendliness.

5. Enforcing EU-Level Criminal Law Provisions

This pillar aims to make cross-border criminal investigation easier and more efficient. It encourages sharing of information between FIUs, law enforcement, and the private sector, and enhances public-private partnerships. Further support will be provided when information sharing raises data protection and privacy concerns. 

6. EU’s Global Role

While the new action plan aims to improve the workings of member states, they also aim to be more serious about their global responsibilities. It works closely with the Financial Action Task Force (FATF), and they’ll be guaranteeing that each member state follows the regulations as strongly as possible. 

Final Take: EU’s Money Laundering Action Plan

With these 6 pillars, the EU plans to enhance its overall process of improving safeguards against money laundering and terrorism financing. The commission is also launching several other tools to make the changes and implementation as easy as possible. The EU Commission aims to implement all the changes by the end of 2022.

Proof of Address

Water Bill Verification for Proof of Address

There are times when you need to verify your residency, and an ID document isn’t enough. You may need to provide multiple documents to authenticate your address. The proof of address verification process is a crucial part of maintaining security in businesses. Businesses want to verify a customer’s proof of address to make sure they are who they claim to be.

If you want to open a new bank account, register at DMV, apply for a mortgage, or do any other important task, you need two documents:

  • Government-issued ID document 
  • Proof of address verification document 

Government-issued ID is to verify who you are, and the address document is to verify where you live.

The most common type of document that you can use for proof of address verification is utility bills. Any utility bill including water bill, electricity bill, and telephone bill can be used to verify your residency.

In this guide, we’ve outlined what is water bill verification and how it can be used to verify proof of address.

What Counts as Proof of Address?

A proof of address document tells the bank, individual, or the government where you live. Most of the time, a proof of address document is from a reputable government service. Banks and other entities ask for proof of address documents to add another layer of security in customer onboarding. 

These documents help banks and other organizations confirm who you are and if you’re telling the truth about where you live. Some companies don’t offer services oversea, or they don’t offer services to particular countries. Proof of residency documents can help them confirm if you’re a USA resident or not. 

Most companies will require you to show both ID proof and proof of address documents. You need to have two different documents on hand. Most organizations have their own list of documents that they accept as proof of address documents:

  • Utility bills – water bill verification, electricity bills verification, etc.
  • Credit card bill or statement
  • Bank statement 
  • One-off bank letter
  • Social insurance statement
  • Paycheck
  • A letter from a public authority
  • Insurance policy for your car or home
  • A rental or mortgage contract
  • Your car’s registration
  • The official change of address form
  • DD214 official documentation stating you’ve left the military
  • An official letter from your employer or college where your address is confirmed
  • Confirmation of voter registration

These are the most common documents accepted by banks and other organizations, but every organization has its own set of documents they accept. Before you submit a document, you should be aware of the rules surrounding the documents. Some organizations won’t accept water bills and other utility bills that don’t include mobile phone bills. And most companies don’t accept insurance documents that are older than 3 months (90 days).

Water Bill Verification: Uses in Address and Identity Verification

People who’ve moved to a new country or have just started living on their own don’t have access to the right set of documents. This is where water bill verification comes in. Individuals living in rural areas don’t have access to financial institutions, or other online financial tech platforms. So, individuals that have limited access to documents and online financial institutions can use water bills for proof of address verification. 

While applying for loans, or opening a new bank account, water bill verification can help in proving residency. Regulatory bodies have been pushing the use of utility bills for verifying proof of address of customers. Accurate proof of verification process with utility bills can prevent fraud in the financial industry.

Using water bills for proof of address verification can even help banks in understanding the spending history of the individual, especially if they’re applying for a loan. 

Banks and other entities should be careful while verifying water bills and other utility bills. Fraudsters are becoming smarter and smarter every day, and they can edit utility bills to trick financial institutions.

Fraudsters can easily steal someone else’s identity and try to conduct several financial activities. It’s next to impossible to distinguish between a fake/stolen or a real document with naked eyes. This is why financial and non-financial institutions need to adopt technologies.

Online Water Bill Verification

Even the best onboarding processes can be broken if a bank fails to accurately verify documents provided by the customers. Water bill verification can help customers in opening a new account. Similarly, fraudsters can use fake utility bills to open an account to launder money. 

DIRO utility bill verification solution can instantly verify utility bill data with automated user consent and impersonation checks at 9,000 utility companies in 195 countries. DIRO verifies utility bill data directly from the issuing source, thus eliminating the use of fake and stolen documents by 100%. 

The verification output is a machine-readable JSON file that can be used as an original document for compliance. DIRO utility bill verification API can be integrated with existing digital frameworks to streamline and enhance the customer onboarding process with real-time verification.


Simplifying the KYB Process for Faster Client Onboarding

As fraud continues to rise, the regulations around the world keep evolving to keep up with the constant threat. Several of these regulatory changes require companies, financial institutions, and others to verify businesses and Ultimate Beneficial Owners (UBOs) that they interact with on a daily basis. The process of verifying business identities and UBOs is known as Know Your Business (KYB). 

KYB verification requirements create additional pressures for financial institutions and other regulated businesses such as:

  • Have to comply with AML laws and regulations, including the “Corporate Transparency Act” in the U.S or AMLD5 in the EU.
  • Spending additional monetary resources to protect customer data and privacy.
  • Controlling additional expenditure for regulation compliance. 
  • Trying to make the process smooth and friction-proof to increase positive customer experience. 

Entities that have to verify businesses and UBOs require enhanced due diligence (EDD). To perform EDD, an organization has to collect additional information about a business client. This additional data can consist of:

  • Nature of business relationship
  • Identifying the source of incoming funds
  • Enhanced monitoring of transactions
  • Monitoring and reporting suspicious activities

Enhanced Due Diligence helps businesses figure out if their client is real or not and it also helps in identifying stakeholders and UBOs that aren’t possible with KYC verification. To ensure complete compliance and avoid future fraud risks, KYC and watchlist checks have to be done on UBOs to verify their identities. It is always a good idea to identify the people who control a business, this can help in building an accurate customer risk profile.

Ineffective KYB: What Does it Cost?

Before the COVID-19 pandemic, almost all the banks performed due diligence on businesses using a paper-based process. Team members conducted individual searches on numerous lists and then analyze the data collected about an entity. Analyzing small businesses and merchants is an even tougher task as their history is almost non-existent. Manual KYC/KYB/CDD processes are onerous, ineffective, and expensive and also leave a lot of room for human errors. Thus, conducting accurate CDD is almost impossible and fraudsters can easily slip by.

A study conducted by Thomson Reuters showed that out of 430 AML compliance leaders of Financial Institutions, 58% claimed that the inability to access UBO data was the biggest challenge. According to the same study, the average annual global cost for conducting CDD and KYB is almost $48 million ranging all the way to $70 million. 

Not only that, but the cost of onboarding clients is also increasing due to ever-changing compliance rules. On the other hand, corporates have claimed that FIs have made inconsistent requests, access to data that was a security concern, and so on. These barriers result in poor customer experience and an increased customer drop-off rate. 

On average, it takes 3-4 months to onboard a corporate banking customer. The huge time window leads to application abandonment and the increased friction caused the global commercial and business banking market to lose $3.3 trillion.

Integrating Technologies in KYB Process

Needless to say, that future will bring a series of brand new challenges for entities trying to comply with regulations. The only solution is to leverage automation and technological solutions to cut back on costs, enhance the process and detect and prevent fraud. Our solution, “DIRO online document verification software” can assist businesses and FIs to keep up with KYC/AML and CDD requirements.

DIRO eliminates the need for manual document verification by instantly verifying online documents required for KYC/KYB/AML compliance. Banks and Financial institutions can integrate DIRO’s online document verification software into their workflow and significantly reduce the 3-4 month onboarding time frame. 

Businesses have to adapt to today’s environment and customer requirements. Customers need instant access to products and services without having to stand in lines for hours. With DIRO’s online document verification API, companies can onboard customers quickly, and efficiently, while ensuring the standard of security is maintained. 

DIRO can verify over 7000 document types from all over the globe and also provides stronger proof of verification for verified documents. It 100% eliminates the use of fake and stolen documents, thus eliminating the chances of fraud during the customer onboarding process. 

With the integration of technologies like DIRO’s online document verification tool in the KYB process, organizations can leave the outdated processes in the past. Organizations can easily provide a smoother customer onboarding process while 100% complying with the regulations.


Use of Biometrics for Improved Onboarding Experience

The pandemic has changed a lot of ways we do basic activities. The retail space, banking, education, hospitality, and several other industries took the brunt of the pandemic. Fortunately, the reliance on technology improved how we used to do basic activities. These technologies have specifically increased the efficiency of customer onboarding and employee onboarding. So, instead of using physical documents and in-person verification, digital onboarding methods are being used.

Many banks are now generating lower levels of revenue, with some banks reporting a decline as low as 70% from the year before the pandemic. Many banks had to lay off employees and permanently close some of their branches. Banks that have stayed open have adopted new technologies and shifted their day-to-day operations around the technologies available to them. Customer onboarding, ID verification, customer authentication, and other processes all became digital.

While the digital transformation was already underway in the banking sector, the pandemic pushed the transformation into overdrive. Evolving customer expectations, growing FinTechs, and changing regulations around technologies are also helping in speeding up the digital transformation process. By implementing digital ID and document verification solutions, banks can improve the onboarding experience while managing fraud.

Utilizing Biometrics Technologies in Banking

Every person in the world has a unique set of fingerprints and unique hand geometry. Biometric identity verification systems examine these and other biometrics identifiers to identify individuals. The utilization of these systems improves security, speeds up the verification process, and prevents cybercriminals.

In this socially-distanced economy that we’re currently living in, cyber attacks are becoming more prevalent and sophisticated. Fake identities and synthetic identities are on the rise which makes it harder for banks to detect fraud. Almost half of U.S. consumers have experienced some kind of ID theft in the last two years, more than 37% of people have experienced application fraud, and almost 40% of consumers have experienced account takeover fraud.

But it’s not always easy to implement these new methods, and banks have to follow strict compliance standards they have to follow during customer onboarding, which can make it difficult to find a one-stop solution for all kinds of consumers. They need solutions that comply with digital privacy guidelines and updated financial regulations. They also have to make sure that the onboarding experience isn’t too difficult or time-consuming for consumers. Luckily, consumer opinion regarding new technology is changing, which means the adoption of these technologies can be easy.

Use of Biometrics for Customer Onboarding

Biometrics is the most reliable way of authenticating identities and it’s a great method of preventing ID theft and spoofing. Banks know that the use of biometric verification can be helpful as they were the first industry to use them. Banks are now also relying on facial biometrics as multi-factor authentication. This is because facial recognition does not require customers to be physically present at the branch, because of fingerprint scanners, palm scanners, and iris scanners.

Banks all over the world are using layers and layers of biometrics technologies in their daily operations. Banks are now discovering that they can use facial biometric verification since the beginning of customer relationships. This reduces complications for a customer, alleviating the pressure to remember a confusing PIN or token. Using biometrics across banking makes transactions more secure and overall increases security. Moreover, it boosts operational efficiency, all the while making the experience easier for the customers.

Use of Biometrics for Employee Onboarding

As more and more employees are working remotely because of the pandemic, that’s why securing the employee onboarding process is as important as customer onboarding. Employee security breaches are a big concern for all large organizations that deal in sensitive data of any kind. Having a biometric in the employee onboarding process is quite similar to customer onboarding.

Employee-owned smartphones are loaded with a mobile app that initiates their enrollment into your business. Or companies can build a custom employee onboarding program by combining online document verification services and biometric verification.

Digital Transformation Across Industries

Before the Covid-19 pandemic changed the world, retail banks and credit unions completely relied on manual onboarding processes. This clumsy process was time-consuming, inefficient, and insecure. Collecting identity information can be laborious and waiting for the information to be verified can take even longer, thus making the process inefficient.

Online onboarding technologies verify customer identities by comparing customer photos and IDs. And verify online documents such as utility documents, bank statements, and other documents. This improves the user experience and reduces abandonment rates. Plus it can be done remotely, without customers needing to stand in big lines and it also reduces the document handling costs for banks and other businesses.


US Digital Banking Revolution: Importance of Digital Identity

While most of the banking landscape across the country was on track toward a successful digital banking revolution, the Covid-19 pandemic fast-tracked the process. Regardless, some parts of the US financial industry are still operating in the dark. As the United States is often at the forefront of many things, it doesn’t make sense that the US falls behind other countries in an area as important as banking. The US digital banking revolution has been a slow process, but the situation is turning around.

Most of the time, when a customer decides to open a new bank account or send money overseas, they have to visit a physical branch. Even after so much growth in the technological department, customers still have to stand in line to get their tasks accomplished. Most customers find that the manual process takes too long and it doesn’t meet their needs. Pre-pandemic, more than 160 million people relied on online businesses, and over 56% of customers stated that the primary way they accessed bank accounts was through a mobile app.

As the digital world is growing, customers demand more convenience, time efficiency, and instant access to their finances. This isn’t possible without all banks taking part in the digital banking revolution. And, digital identity plays an important part in this.

Challenges in Fraud Management, Privacy, and Customer Experience

Most banks skip out on digital transformation because it’s a time and money-exhausting process. Going digital comes with tons of challenges for both customers and businesses. Some of the biggest challenges include online fraud, user privacy, and friction in the customer experiences. 

For example, fraudsters can easily set up fake bank accounts using leaked SSNs and fake ID documents. In 2020, the estimated amount of global fraud losses was $32.39 billion, which is triple the amount it was in 2011. Preventing fraud isn’t the only major challenge that banks have to face. Providing consumers with a seamless and secure onboarding process is also essential. Over 44% of all US customers abandon the application process during onboarding if the process is too complicated or invasive. 

Protecting consumers against fraud while providing them with a smooth onboarding experience is the most important part of digital banking.

Importance of Identity

By focusing on the identity part of digital banking, banks can build strategies that put customers at the center. This starts with a robust digital ID verification process that verifies who the user is and authenticates their ID to provide them access to digital solutions. 

In Europe, and the UK, digital ID verification allows banks to provide their customers with digital solutions almost instantaneously. By focusing on digital customer identity, banks can speed up the onboarding process, prevent fraud and scale their business as per their needs.

Importance of Getting Identity Right

There’s a lot US banks can learn from banks in the EU. They build their digital banking strategies by keeping customers at the center. They know who their customers are and they can verify their customers in a digital-first banking environment. 

A modern approach to digital ID verification is combining a government-issued photo ID document (passport or driver’s license) with biometrics data (selfie, face scan, or fingerprints) to make a secure and seamless customer authentication process.

A recent study found that almost 60% of customers prefer to use biometrics data instead of using passwords that are a hassle to remember. By the end of 2025, 85% of all banks will be using biometrics data to verify and authenticate their customers instead of using passwords and OTPs.

How US Banks Can Move Forward In the Digital Banking Revolution?

Currently, the UK is the world leader when it comes to providing a secure and seamless digital banking experience. The United Kingdom also has a lower number of physical bank branches than the US, which forces them to build their digital banking landscape even better. To be successful in the digital banking revolution, banks shouldn’t compromise between security and seamless customer experience. With the ideal online ID verification and online document verification technology, banks don’t have to cut corners.