Categories
ID Verification

A Deeper Insight Into Digital Identity – Transforming the Future of Digital Identity

The world has gone digital. Work, food, education, entertainment, or everything else you can think of has become completely digital. Your digital identity plays a vital role in how your experiences will be online. If you don’t follow the right measures, hackers can get access to your digital identity. Your digital ID can be sold on the dark web for a couple of dollars. So, what can you do to stay safe online? Before we dive deeper into the concept of digital ID, and how it is slowly changing the way we operate online, let’s try to understand Digital identities.

What is a Digital Identity?

A digital identity is online data that’s connected to an individual, a business, or any entity. This information can be anything ranging from social media posts, banking information, usernames, passwords, or more. Hackers work around the clock to get access to this sensitive information.

Traditionally, proof of identity is something all of us provide to prove we are who we claim to be. Proof of identity is required for a number of reasons. However, when it comes to digital identity, the term is used for digital data or digital interactions. 

In both versions of identity, one factor is common. Any version of identity uses credentials and data to identify ourselves, and access products and services. Both traditional identity and digital identity allow users to prove who they are and then access resources. 

At its core, your digital identity is a web of information. Your Digital ID information can include aspects, information, and credentials. Any information that helps you verify your identity, is part of your Digital identity.

For a social media user, their digital identity would include:

  • Personal information (Name, DOB, and more as asked by the platform)
  • Login credentials (usernames, passwords, and biometric data)
  • Any additional information related to user behavior on-site (user permission, subscriptions, connections, settings, etc)

Components of Digital Identity

If you want, you can easily break down digital identities into two primary components:

  • Attributes: Attribute is the information that’s related to your representation in the system. This information includes personally identifiable information (PII) such as ID number, payment details, login credentials, and more
  • Activities: Activities are a record of what you’re doing as a user. All the activities you do become a part of your identity. It can be something as simple as reading comments or posting online. In government environments, these activities include digital signatures, search queries, or legal activities. 

As the world is continuously evolving about digital identity, it makes sense that digital identity data is leveraged to verify identity data.

Challenges and Risk Revolving Around Digital Identity

While there are endless benefits of having a digital identity, they’re also at most risk of getting hacked or stolen. If you’re also concerned about the risk of digital identity verification.

Businesses and other institutions face a lot of challenges while managing digital identities. Here are all the risks of digital identities:

1. Security and Privacy

The biggest question around digital identity data is security. If you have any kind of business, you have to rely on identification and authentication services to protect your systems and the identifying information of your customers and employees. 

2. Regulatory Compliance

Many forms of digital ID also include some type of sensitive data. A user in a healthcare portal will have a corresponding ID that includes protected information under HIPAA. 

3. Ownership and Ethical Handling

Recent data collection processes, especially in the United States, haven’t emphasized user ownership of digital identities. Companies can collect and sell user data as per their preference.

The question of ownership of data and ethical management and use of digital ID is a huge question. Modern compliance frameworks like GDPR and CCPA are attempting to improve the data handling for users. 

4. Fraud

Proving who a user claims to be is crucial for businesses. Without proper measures in place, businesses can end up onboarding fraudsters that look like real users. A hacker can easily use a digital identity for harmful purposes if they want.

Global Impact of the Use of Digital Identities

The above-mentioned challenges are ever-present in the modern digital ID landscape. Digital identities are becoming more crucial for having a proper online experience. Here are some of the recent trends that have come from the use of digital Identity:

  • Modern smartphones have made using digital forms of payment much easier. There is a push in the UK, and the United States to expand the use of this technology. 
  • A major discussion point during the ID2020 summit in New York was for the UN to start considering the potential of blockchain technology. The reliance on digital marketing technology can support universal forms of digital ID verification. 
  • Germany has been circulating E-versions of ID cards for their citizens. While these don’t replace physical IDs, they are used in multiple locations and provide a better online experience. 
  • Canada is also making plans to roll out its digital ID scheme known as the Pan-Canadian Trust Framework to provide national digital IDs and unified logins. 

Conclusion – Understanding Digital Identity

Now that digital identity is about to become an industry standard, verification and authentication of digital identity are becoming crucial. ID management solutions are helping in reducing the challenges in digital ID management. 

Proper adoption of Digital ID can lead to more innovation in several industries. Verifying and authenticating digital Identities is the need of the hour. This can be achieved via online document verification solutions.

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Blockchain ID Verification

Identity Verification Process for Crypto Exchanges

Since the beginning of 2021, cryptocurrency exchanges have been growing at an alarming pace. And there are over 100 million crypto users in January 2022 itself. While the market has slowed down, the crypto industry is still growing, and chances are there will be another huge spike in the number of customers. 

To handle these increases in trading consumers, crypto companies need to have infrastructure and technology. Compared to stock markets, and other exchanges that have had several years to build a proper infrastructure, these companies don’t have the infrastructure to handle customer transactions. Even though there has been a crypto downturn, the market is expected to turn back again.

This is why crypto exchanges need to have an identity verification process. Most of the time, this makes the onboarding process tough for customers. These ID procedures, if not completely automated, slow down the customer onboarding process, which leads to an enhanced customer drop-off rate. 

In this article, we will mention how some of the best crypto exchanges handle the ID verification process. What steps are they using, and how easy it is to sign up for the customers.

Best Crypto Platforms with Identity Verification

1. Coinbase Verification

Coinbase was founded in 2012, and it’s a US-based digital currency and wallet platform. It has over 56 million users and has traded over $335 billion worth of digital currencies in the first quarter of 2021. In late 2021, the company went public, which is the first platform to do so. 

While Coinbase has some account limitations, these limits are determined based on the level of verification that’s added to the account. These include account age, purchase history, payment methods, and other factors. 

The type of verification that Coinbase offers includes phone number, personal details, and photo ID. If you live in the USA, then you’ll also be asked to provide your SSN. 

2. Kraken Verification

Kraken is a US-based crypto exchange platform, and it was founded in 2011 and has over 50 currencies. Kraken claims that they’re one of the largest Bitcoin exchanges in Euro volume. The exchange has four levels of accounts with each one of them offering a different type of verification requirements. The levels are:

  • Starter
  • Express
  • Intermediate
  • Pro

The account levels depend on the level of access your account will have. Each level offers more funding options and higher limits with Pro being the highest level. 

A user must be at least 18 years old to register and use an account. All the accounts need an email address, full name, date of birth, phone number, and physical address for verification purposes. Except for starter accounts, they also need to provide employment information and SSN.

The intermediate and Pro accounts need to provide a valid ID, proof of address, and a face photo. Pro accounts need to fill in the KYC questionnaire. 

3. Binance Verification

Binance is a famous crypto exchange platform that combines digital technology and finance. According to Yahoo Finance, Binance is the world’s biggest crypto exchange when it comes to trading volume. 

Binance has three levels of verification with respective deposit and withdrawal limits:

  • Basic: Requires name, address, date of birth, and nationality, and has a lifetime limit of USD 300.
  • Intermediate: Requires an uploaded picture of ID documentation such as passport, ID card, or driver’s license.
  • Advanced: Requires proof of address documentation such as bank statements and utility bills.

4. Bitfinex Verification

Bitfinex is another crypto exchange that came into existence in 2012. They state that they’re one of the largest exchanges by volume for trading Bitcoin against the US dollar. It offers exchange trading for 38 currencies/tokens and also provides margin trading, margin funding, and an over-the-counter market for large trades. To withdraw or add fiat currencies to an account, ID and document verification are needed. Most of the time, this verification process takes up to 2-3 days. 

Although, a user can easily deposit, trade, and withdraw cryptocurrencies immediately upon account opening with a basic account that only requires a valid email address. Individual account requirements tend to differ on the type of account you’re choosing:

  • Age: you have to be at least 18 years old to have an account
  • Personal Information: A user’s telephone number, email address, and residential address
  • Identification: Two types of government-issued ID with photo, such as passport, national ID card, driver’s license, residency card, employment permit card

5. OKEx Verification

OKEx was founded in 2014, and it’s one of the biggest digital currency exchanges by trading volume. It serves millions of users in over 100 countries and it operates out of Hong Kong. At OKEx, the identity verification process contains a couple of rules and procedures that facilitate a secure trading environment for our users, who need to perform ID verification for the following activities:

  • Buying currencies on OKEx with fiat currencies, for which users may need to perform ID verification
  • Making daily crypto withdrawals of more than 10 BTC

OKEx doesn’t require identity verification for users to deposit or trade crypto on OKEx. For individuals, there are several levels of ID verification:

  • Level 1: In level one, the users are needed to enter their nationality, name, and document identification number
  • Level 2: In level two, users are required to verify themselves with photo identification, and they’re also needed to perform facial verification.
  • Level 3: After completing the first two levels, users have to read the disclaimer on OKEx’s mobile app or web page to complete the third level of ID verification.
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ID Verification

ID Verification and Optical Character Recognition

There’s a major change going on in the industry, DIY online identification, and efforts by companies to combine OCR technology, facial recognition software, and low-cost manual review teams. On its face, using DIY online identity verification makes sense, but it’s vital to understand the major limitations of ID verification solutions. Optical character recognition is a commonly used method for online identity verification. OCR extracts important data from ID documents such as driver’s license or passport. This will generally include a person’s name, address, date of birth, and ID number. The data extraction process is incredibly fast and removes the need for manual data input. 

OCR is a great method to verify customer ID but it does have its fair share of challenges. OCR technology was first intended for reading black text against a white background using a flatbread scanner, not for extracting key data fields from ID documents using small fonts and different colored backgrounds that may include holograms, watermarks, and printing on glossy surfaces.

Common Limitations of OCR

1. Structuring Data Involves More than Just OCR

Whenever users take a picture of their ID document with their smartphone or webcam, several steps are required to extract the information. The first is to recognize the type of ID document that the user is submitting. This allows the technology to properly structure the information to read the OCR, which requires figuring out the first name, last name, DOB, and other important data. Straight OCR without AI or any technology built to specifically recognize ID types will lack the required accuracy you need to fight fraud and deliver a good user experience. 

2. OCR Have to be Combined with Image Rectification

When a user clicks a photo of their ID documents, the image needs to be de-skewed if the image wasn’t aligned properly and reoriented for the OCR technology to properly authenticate the ID data for online ID data. 

3. Colored Background ID Documents Can Be Challenging for OCR

OCR usually takes color/grayscale photos and converts them to plain black and white to reduce blurred texts and better separate black and white texts from their background. 

4. Glare & Blur Leads to Mistake

It’s extremely common for customers to click photos of ID documents with glare and blur. Whenever there’s a glare or blurriness in the ID image, the probability of data extraction and authentication mistakes becomes significantly higher. 

5. Webcams are a Challenge for Traditional OCR 

OCR poses another challenge for businesses operating in the financial industry and trying to offer an Omnichannel experience by allowing customers to click the photo of ID documents using a couple of technologies. While most smartphone cameras right now offer high picture quality, the same can’t be said for webcams built into laptops and tablets. If a business allows customers to click photos for customer onboarding using webcams, then it can impact the picture quality of the document. This can increase the risk of mistakes caused by OCR technologies.

6. OCR May be Challenged by Some ID Subtypes

Optical Character Recognition (OCR) is based on extensive learning of the patterns that characterize a specific ID type, and this can make it challenging for solutions based on numerous ID subtypes. OCR is only usable if the ID data is collected and authenticated correctly as it requires the software to understand all nuances and minor features of different ID types around the globe.

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Fraud ID Verification

Why AI-Based Online Document Verification is the Best Way to Verify Identity and Mitigate Fraud?

Showing any kind of proof of identity is vital to complete any kind of legal formality or verification process. No matter what industry a customer is trying to become a part of, be it banking, insurance, healthcare, technology, travel, education, or any other online service, the customer is asked and obligated to present an Identity proof to verify a customer is who they say they are. Verifying customer identities can reduce the risk of identity theft.

Verifying identities may sound great, but as a business, you’ll have to spend money, time, and HR to put secure document verification solutions in place. Extra tough verification process reduces the overall customer experience. While most customers don’t like the extra tough verification process, not having a verification process reduces the trust in the brand and can cause businesses to lose more customers during the onboarding process. 

To find the balance between these situations, AI-based digital document verification solutions are viable, effective, and hassle-proof. Here’s why digital identity verification solutions are important and how it helps financial institutions prevent risks?

What’s the Need for Verifying Customer Documents?

Before we go deeper into how digital identity verification works, it’s important to understand why businesses need to verify documents at all be it using technology or human methods. Online document verification serves two key purposes, it prevents risks like financial fraud and identity theft, secondly, online document verification helps in industry-wide legal compliance. 

According to studies, the total loss incurred due to identity fraud in 2020 was about $16.9 billion. The damages that result from theft of identities don’t just revolve around money, it also involves sexual, racial, and gender-related comments on social media which can cause a lot of issues. 

The covid-19 global pandemic has increased the overall online transactions and digital banking, it also improves the number of digital fraud and identity theft cases which will eventually cause more damage than benefit. To reduce this type of fraud, banks and financial institutions are spending a lot of money on AI-based identity verification technologies.

Difference Between Modern and Traditional Document Verification

Traditional methods of document verification were hectic, and inefficient and it makes a lot of challenges for customers. Before the digital revolution in the banking sector, customers used to visit the brick and mortar branches to get the documents verified for account opening and loan applications. Traditional document verification used to take weeks at the same time. Plus, the results used to be extremely inefficient. Fraudsters make counterfeit documents that are indistinguishable from real documents.

However, conventional ways of authenticating ID documents fail to deliver results that are 100% efficient. There is always a probability of having mistakes in their results. That is why conventional document verification isn’t the best idea while fighting fraud. 

To combat the problems in the manual document verification process, online document verification needs to be used by banks all over the globe. Online document verification technologies that rely on Machine Learning and Artificial Intelligence algorithms can be helpful in combating document fraud. Online document verification technologies improve the odds of verifying customer documents and minimizing the approval of fake documents. And, online document verification can boost the customer experience. 

Regulations and Compliances Necessary to Fight ID Fraud

Businesses and industries can’t work without document verification because it is required by law to follow all the compliances. Countries all over the globe have to follow legal compliances such as KYC (Know Your Customer) and Anti Money Laundering (AML) guidelines that are required by law to be followed by businesses. According to the rules set up by the Federal Trade Commission (FTC), verification of documents can be useful to potential identity theft. Complying with KYC and AML guidelines is not just a legal requirement, it is also an effective and appropriate measure that will help businesses fight all kinds of identity frauds.

Types of Document Fraud

There are several types of document fraud that banks and financial institutions have to face. To perform document fraud, fraudsters use counterfeit documents and they also steal documents. Customers demand instant verification and with so many types of document fraud, it’s challenging to verify documents. Here are all types of document fraud:

  1. Modified Documents

Modified documents are original documents that have been altered, and these documents often come in two different types:

  • Forged Documents: Fraudsters change vital information on documents to conduct ID fraud. They often end up changing variable information, adding real pages from other documents, removing specific pages, applying fake stamps or watermarks. 
  • Blank Stolen Documents: All documents start out as blank pages, when fraudsters get access to these documents they can use them to trick banks. 
  1. Illegal Documents

Forged documents are original documents once, but illegal documents are fake altogether. Illegal documents are of different types:

  • Counterfeit Documents: As the name suggests, counterfeit documents are reproductions of originals. Usually, a fraudster will get their hand on an official blank document and they use the blank document to add in information.
  • Camouflage Documents: There are some things that you shouldn’t have on a document. A camouflage or fantasy document often contains information that shouldn’t be there. This is the easiest type of fraud to detect.

How Does Digital Certificate Authentication Work?

The online document verification process verifies the documents using tools and software all using Artificial intelligence. Just as a human officer examines an ID card/ Identity document confirms customers by matching their face against the document provided. AI-powered document verification tools also verify the identities using a different set of documents. 

So how does the online document verification software work? The process is quite simple and usually involves several simple steps:

  • The digital document verification software is usually integrated with your business’s website and other automation systems. 
  • When a customer logs onto your website for the first time, he or she will be asked to upload a government-issued identity proof in an image format. Most software often provides a live image capture feature for comparison.
  • Once the customer has uploaded the images, the software scans the documents using optical character recognition.
  • The extracted information from the image is then analyzed and verified against the government and private databases. Simultaneously, the document is also checked for forgery and signs of tampering. Usually, the verification of documents takes a few seconds. 
  • If the documents uploaded by the customer are genuine and not tampered with, then the user can sign up with your business. Documents that aren’t authentic are rejected and the customer can’t use the services. 

All the AI-powered document verification services verify documents issued by the government only. These documents include passports, driving licenses, photo ID cards, voter’s identification documents.

What are the Fraud Detection Techniques Used by Software?

Most of the major document verification solutions use three types of analytics to determine if a document is real or not. These analytics are data integrity, visual authenticity, and facial biometrics data. 

  1. Integrity of Data: As you may already know, documents issued by the government come with a set of features. Features such as integrated algorithms, data fields available in multiple locations. AI-powered document verification tools check all data features to make sure that they match.
  2. Document Authentication: The software also checks for any kind of anomalies or signs of tampering in the document. These signs of forged documents include pixel quality, holograms, and incorrect logos, barcodes, and micro prints. 
  3. Facial Biometrics: It isn’t enough to verify just the data available on the document and checking the authentication of the document, software also needs to make sure that the person who has uploaded the document is the actual owner.

All these technologies make the solutions more efficient and accurate in verifying the documents in comparison to manual verification. 

Benefits of Using an AI-Based Document Verification

During customer onboarding, consumers are asked to submit a series of ID documents such as government-issued ID cards, driving licenses, passports. It’s not easy to verify documents manually. That’s why online document verification allows clients to submit a selfie and upload online documents for verification. 

After submitting documents, online document verification software verifies documents online and verifies if the document is authentic or not. DIRO online document verification software fetches document data from the issuing source to verify if the document is legitimate or not. 

Online document verification offers a wide range of advantages including faster turn-around time. It can manage to verify several documents easily from all over the globe, each document with different fraud detection rules and elements. 

Moreover, when businesses use AI-powered document verifications solutions, errors reduce by a drastic number. AI-based solutions are known for detecting frauds and red-flag patterns that humans usually miss out on.

Final Take: Importance of AI-Based Document Verification Solutions

Digital transformation of businesses has been going on for a long time, the global pandemic has pushed the digital transformation into overdrive. To reduce the threats of identity theft and financial fraud, businesses often comply with regulations that end up with complex processes that often push customers away.

As we’ve mentioned above, verifying documents offline can be tough, ineffective and they aren’t sustainable. Moreover, they’re expensive and take up a lot of time. To solve the issues banks face with offline document verification, banks rely on online document verification software. 

AI algorithms and machine learning solutions can help banks, credit unions, financial institutions to identify suspicious money laundering activities. Thus online document verification can be crucial in mitigating fraud, and using AI-based online document verification it is possible to reduce the flow of fraud. 

It is imperative to verify documents without having to reduce customer satisfaction. To successfully do that, AI-Based digital document verification solutions are the best choice. To protect your business against identity fraud eliminates the need for maintaining huge teams. AI-Based digital document verification solutions are the future.

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ID Verification

5 Biggest Challenges of Digital ID Verification

Now that everything is going digital, businesses need to verify more and more consumers who they say they are. Digital ID verification is the process of verifying a customer’s identity electronically. This includes authenticating the attributes of a person and then verifying that these attributes belong to a real person. This allows the company to create a digital credential for a person, thus allowing them access to anything from banking apps to borrowing institutions, and more.

ID verification has three different types:

  • Biographical information: User’s name or age
  • A trusted ID document: a user’s passport or driver’s license
  • Biometric data: User’s fingerprint or facial image

Online ID verification services use a combination of these services to build a legit user profile for a person. The number of people who want and are currently using digital services is increasing rapidly. So, it makes sense that businesses need to invest in online ID verification technologies. 

Challenges Faced in Digital ID Verification

1. Variety of Documents

On average, there are over 6,000 types of documents globally that can be used for ID verification. Each document type has its own unique protection against fraud, but some documents are easier to forge than other documents. 

To verify an ID document and authenticate a user’s identity, an image of the ID, the visible data on the ID, and any additional information stored within the document. Once the data is extracted, it is analyzed for authenticity.

Even if you limit the type of ID documents a student can use to verify themselves, complex algorithms are required to identify which document type the ID is. 

2. Evolving Biometric Forgery

Once the ID document has been verified, the next step is to confirm the validity of the applicant, but are the customers who they say they are. This is done by comparing the facial image with the photo on the ID document. Some companies can even choose to ask for face liveness detection.

This step of ID validation also has its issues. It is more than common for a legit user to fail a facial matching exercise due to bad lighting conditions. Additionally, instances of biometric data forging are becoming common. 

3. Building for Everyone

According to some reports, over 1.1 billion people globally don’t have any sort of official ID document. It is impossible for a business to verify a person with ID documents if they don’t have any documents, to begin with. When developing a digital identity verification service for the public, it is important to think about the potential users who:

  • Are not digitally literate
  • Don’t have clear migration status
  • Cannot provide biometrics due to physical appearances or features
  • Have opposing religious or personal beliefs to the capture of biometrics.

4. Finding Balance between Compliance and User Experience

Financial institutions, banks, and other firms have to follow through on strict regulations. These regulations differ company by company. For these businesses, they need to have a strong online ID verification process. Additionally, they need to focus on seamless customer experience. Most customers care more about a smooth experience while onboarding instead of a strict, and secure process. 

When developing ID verification services, businesses need to carefully plan acceptable thresholds for rejection, which balances out the risk of potentially accepting fraudulent identities.

5. Privacy, Data Security & Trust

Privacy controls are essential for services that rely completely on personal, biographic, or biometric data. Legally, users need to stay informed about how their data is being managed, stored, and maintained. Banks and financial institutions should also provide a certain degree of control over the consumer’s data. 

The introduction of the European GDPR has helped in protecting the data of the consumers, but governments and businesses need to build their frameworks for data management. This can include providing control over data. 

Reducing the risk of security breaches and improving how a business handles the data is crucial for all kinds of business. 

Final Take: Challenges for Digital ID Verification

It doesn’t matter how big or small the business is, every step in digitization needs some challenges to be addressed. The key to building a successful digital ID verification is finding the perfect mid-point between the user’s experience and security. Companies should also focus on handling all the privacy and security needs. Maintaining all this, and still keeping a high customer onboarding rate is the perfect strategy for fraud deterring.

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Fraud ID Verification

How Digital ID Verification Can Mitigate Crypto Fraud

Cryptocurrencies have seen incredible growth in the last decade and they are emerging as a mainstream market and a viable investment choice. Digital currency has become more famous since the Covid-19 pandemic. While the pandemic has ruined the growth of many industries, it has advanced and expanded the use of online banking and digital payment services, and digital assets like cryptocurrencies. 

While the growth is good news, the bad news is that cybercriminals love the use of digital money. The use of digital currency is like a magnet for criminals because of two primary reasons. 

  1. Global online access to money
  2. Complex and confusing systems make money laundering easier

With an unregulated market, cryptocurrencies are loved by fraudsters all over the world. Identity verification solutions assist in making cryptocurrencies safe for users. As the cryptocurrency markets are growing, the need for robust ID verification solutions is needed even more.

Exchanges Need to Enhance their Rules & Regulations

One of the major reasons why money laundering and other cybercrimes are growing in the cryptocurrency market is that not all exchanges have weak ID verification methods in place. According to a study, 56% of the cryptocurrency exchanges have weak or nonexistent KYC policies that do no good to prevent money laundering

To make things worse, some exchanges intentionally hide their country of origin to avoid complying with any type of KYC guidelines. This only plays a helping hand in the global money-laundering problem.

Compare this with banks and financial institutions, which are using groundbreaking ID verification technology using AI, Machine Learning & massive data sets to manage increasingly strict regulations. 

Some major cryptocurrency players keep up with the demand for improved AML/KYC compliance. Using third-party solutions is a more effective solution to onboard the customers.

Banks and Regulatory Bodies Want Crypto Verified

Tons of banks still consider crypto as a volatile currency and full of risk. A reputation that is upheld by constant cases of fraud and poor crypto exchanges. These behaviors don’t foster the atmosphere of trust that is vital for the future of cryptocurrencies. 

It is vital for digital currencies to create trust among the users and make them a part of mainstream financial services. Better monitoring and analysis capabilities will help mitigate the opportunities for bad actors to hide illicit financial activities among legal transactions. Also, the compliance regulations must not hinder the user experience. 

One way for crypto exchanges to smoothen the frictions associated with AML/KYC compliances is by using Machine learning technology. 

A survey showed that 80% of compliance professionals believe that machine learning could potentially improve the reduced compliance risk. Machine learning solutions are already in place at multiple banks, with a majority of $1 million annually for building strong ID verification solutions.

DIRO Online Document Verification for Secure Crypto Transactions

Cryptocurrency exchange needs to employ strong robust KYC/AML procedures to reduce the risk of increased fraud. DIRO’s online document verification solution verifies documents like bank statements, utility bills, and driver’s licenses, and so on. Verifying documents is one of the primary methods of eliminating fraudsters using cryptocurrency for money laundering.

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ID Verification

Identity Verification in The Financial Services Industry

Identity verification is becoming more and more essential in the growing digital financial landscape. It has two different benefits, helps in preventing fraud and prevents fines for non-compliance with KYC and AML regulations. The new and improved financial industry that we experience today has taken so much time and effort to happen. While the concept of finance existed since ancient times, the use of the term “financial services” became widely popular in the late 1990s. Today, we have a completely different financial industry compared to a decade ago. Customer demands and technological advancements have changed the financial industry into a seamless experience. 

Though things are more comfortable for consumers now, the risk of digital financial fraud has gone through the roof. Regulatory bodies, authorities, banks, and businesses need to take strict steps in order to maintain the integrity of the financial workflow. Technological solutions such as online document verification software, online KYC verification software can improve financial technologies.

Problems in The Financial Services Industry

The financial industry includes banks, credit unions, insurance firms, credit card providers, and others. Digitization is helping businesses improve their overall customer experience and productivity. Fraudsters are also leveraging technologies to break into the internal systems of the financial institution. 

1. Cybercrime

In 2019, 62% of all data breaches came from the financial services industry. Hacking and malware attacks for the primary source for data breaches. As of right now, the fraudsters are focusing all their attention on the online financial service platform. 

2. Regulations

Online investment and financial platforms such as crypto exchange, online banking, and other platforms are being used for money laundering and tax evasion. That’s why, regulatory bodies keep evolving and amending the KYC, KYB, and AML regulations. Unfortunately, most businesses fail to comply with these regulations by using ineffective technologies.

3. ID Theft

Identity theft is one of the biggest challenges faced by the financial industry. Fraudsters use various methods to steal or create a fake ID to trick banks and financial institutions. One of the most common types of ID theft is fraudsters stealing credit card information and buying things without user consent. There are instances where fraudsters steal “personally identifiable information (PII)” to open new accounts, apply for credit cards and loans. 

Need for ID Verification in the Financial Industry

ID verification plays a huge role in reducing the risk of financial fraud. Proper ID verification software can assist in preventing ID theft, money laundering, account takeover fraud, and other types of financial fraud. Combine ID verification with online document verification software and banks have a completely digital onboarding solution. 

The ID verification solutions make sure that a customer’s ID matches with the physical person. ID verification is part of the KYC verification process during customer onboarding. As KYC has become obligatory for financial institutions, the need for ID verification in the financial industry has soared. 

Here are some stats to signify the importance of ID verification solutions:

  • According to the FTC, around 9 million Americans report ID theft annually. 
  • Credit cards, loans and leases, and phone frauds are the three top types of ID theft fraud. 
  • The UK, Denmark, and Ireland had the highest rate of ID theft in 2018 and 2019.
  • In 2018 and 2019, more than 55% of Europeans have experienced at least one type of ID fraud. 

How ID Verification Solutions Can Enhance the Financial Industry?

1. AML & KYC Compliance

Banks, credit unions, credit card providers, and other businesses operating in the financial industry are obligated to comply with KYC & AML regulations. To comply with ever-changing KYC and AML directives, firms have to know who they are doing business with. Robust ID verification procedures reduce the risks of businesses running into fraud, avoid huge fines and improve their brand reputation. 

2. Reduce Fraud

Needless to say, the biggest use of having an ID verification procedure for your business is protection against fraud. During onboarding, banks can verify if a customer is who he/she claims to be. Moreover, ID verification improves user experience as users feels safer using your platform.

3. Minimizing Operational Costs

Manually verifying documents and cross verifying customers with ID documents take too much time, effort, and resources. The worst part about all is that it is highly inefficient, most fraudsters tend to make documents that are too perfect to be determined as fake documents. Using online document verification software can enhance online ID verification and digital customer onboarding.

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ID Verification

Understanding Artificial Intelligence & Identity Fraud Solutions

In December 2020, 4iQ discovered a single file with personal data of over 1.4 billion people which is the largest database found to date on the dark web. What was even scarier was that none of the passwords were encrypted and the passwords that were tested turned out to be authentic. This is a major issue for all of us. A recent report published by a cyber-security firm stated that almost 80-90% of the people that log in to a retailer’s e-commerce site are hackers stealing PII (personally identifiable information). Unsurprisingly, cybercriminals use techniques that have the least resistance and they simply buy the stolen credentials from data breaches from the dark web to create fake accounts and access internal systems. And obviously, passwords alone aren’t enough. 

Unfortunately, traditional methods of verification such as knowledge-based authentication (KBA) and two-factor authentication/ multi-factor authentication, aren’t enough to keep fraudsters aware of internal systems. Fortunately, the latest AI-based technologies tend to be efficient when it comes to online identity verification.

AI and Online Identity: A New Era

How is it possible for modern companies to evolve beyond usernames and passwords? When verifying identity matters the most (home rental, creating new bank accounts, funds transfer), companies have to add a layer of real-world ID/identity verification to ensure that the person using the username and password is the same person to whom the account belongs to. This is where artificial intelligence comes into play.

Machine learning solutions and deep learning algorithms are slowly changing the industry trends where ID verification delivers a smooth experience that doesn’t compromise a positive customer experience for security. These technologies are being utilized for online ID verification to protect your consumers and businesses against fraud and account takeover.

Artificial intelligence, machine learning, and deep learning solutions are extremely efficient in distinguishing between real and fake documents used by fraudsters. With the growth of technology, it is easy for fraudsters to build fraudulent documents including driver’s license, proof of address documents, passports, and so on. These documents are scanned to onboard customers during account opening. AI and Machine Learning solutions can detect even the smallest of discrepancies in the documents, including the presence of genuine microprint text and other features, these solutions can even link the individual to an ID document.

Machine learning creates a more efficient and accurate process compared to relying on an untrained eye to examine and verify an ID document. Over the last four years, there have been hundreds of ID solutions popping out that help in simplifying the overall customer onboarding and verification process.

As customer IDs are physical documents, they tend to face wear and tear and they may even contain manufacturing defects. Plus, the way those documents (driver’s licenses, passports, and ID cards) are captured also possess a challenge while verifying customers. In most cases, the cameras in smartphones and laptops fail to provide the ideal quality for AI-based solutions to read the details on ID documents. In other cases, the user takes blurry photos or clicks a photo in insufficient light. In these cases, which happens more than often, the best machine learning solutions are tried and tested.

Solutions Apart from AI-Based Solutions

AI, Machine learning, or deep learning-based solutions are only as good as the algorithms and the data that is fed to them. In case the data is bad, the solutions won’t be able to find out the errors in the documents.

Other solutions help in simplifying the document verification process for KYC and AML compliance. DIRO online document verification software can help in instantly verifying documents by cross-referencing them with private and government sources. DIRO online document verification software can help banks, financial institutions, crypto, and other businesses to easily comply with regulations. The technology helps in eliminating screen scraping, and other tedious tasks from customer onboarding.

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ID Verification

eID Verification Process and Client Onboarding for Financial Institutions

eID verification offers endless benefits for financial institutions, but the biggest thing it helps with is eliminating the risk of financial fraud. To streamline the transactions, customer verification, and client onboarding, eIDAS is vital.

It is almost impossible for individuals or business owners to get time out of their schedule to go to banks and financial institutions to open a new bank account or conduct any other kind of banking activity. The hours that banks operate under are not convenient for most and it is tough to go to the bank every other day to sign new documents for mortgage, vehicle loans or to finance important capital purchases for their businesses.

While limited banking hours can be frustrating, it can also be frustrating for banks as it can disrupt the efficiency of the workflow of financial institutions. Various work processes are delayed while waiting for documentation to be completed.

Having to wait can be extremely costly for banks and financial institutions that are there to make money. This situation has gotten particularly worse since the pandemic, that’s why having a fully digital system can be beneficial for banks and other financial institutions. Financial institutions that deal in cross-border transactions especially need to have digital solutions. It is vital that FIs also use electronic ID verification solutions that can help them verify who their customers claim to be. This is where the need for eIDAS becomes more than crucial.

What Is Required for eIDAS?

All the members of the EU are required to follow the guidelines of regulations regarding cross-border transactions. This regulation outlines the legal requirements and standards for procedures used to assure online identification by using several techniques. Section 2.1.2 of eIDAS states all the requirements for “Identity Proofing and Verification (natural person)” as it is applied to three levels of assurance.

  • Assurance level low
  • Assurance level substantial
  • Assurance level high

Bridging the Gap Between eIDAS and AML-Directives

Apart from complying with eIDAS to confirm the identity of their customers, FIs also have to comply with European Commission’s regulations to tackle threats of money laundering and terror funding. Since the 4th Anti-Money laundering directive, electronic documents qualify as valid documents for customer authentication and verification. With online document verification software, banks can comply with KYC and AML regulations much faster. This helps save time for both organizations and the customers during the onboarding process. Before the standardization of online documents for customer verification, manual verification and onboarding used to take up to 2 weeks. 

eIDAS allows for cross-border validity e-identification, thus allowing banks and financial institutions to sell their products and services across nations within the EU.

A Simple Onboarding Workflow

The process of onboarding a new customer and verifying their identity is simple and can be accomplished by using any device capable of internet connectivity. 

  • First, the customer initiates the enrollment procedure using the bank’s website.
  • Then the customer sends information that contains minimal data, including Current first and last name, DOB, and unique identifier.
  • To reduce the risk of fraud, customers may be required to provide additional data including first and family name, place of birth, current address, and gender.
  • To complete due diligence checks, banks and financial institutions may require additional data according to CDD/KYC rules.
  • If the information is verified during eIDAS, the customer is enrolled, if it isn’t verified banks may consider the person to be illegal and additional actions may be taken by the financial institutions. 

How DIRO Can Assist in eID Verification?

DIRO’s online document verification software helps banks and financial institutions distinguish between fake, stolen, and authentic documents during the onboarding process. DIRO can help authenticate proof of address documents, online bank account verification and so much more. 

DIRO’s technology can verify over 7,000 document types from all over the globe and provides stronger proof of authentication backed by verifiable credentials. With DIRO, banks and finance can enhance the customer onboarding and eID verification process. 

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ID Verification

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.