Customers Onboarding Under KYC & AML Requirements

Financial institutions have to comply with various AML, CFT, and KYC regulations while onboarding customers. Businesses operating in the financial industry have to provide a risk assessment to their new customers. The reason why these compliances are vital is to enable companies to identify the level of risk a customer poses to the business. They can then apply appropriate fraud prevention methods to mitigate the level of risk each customer possesses.

The AML regulation is made up of a variety of factors to fight against money laundering and terrorist financing in banking. Banks spend millions upon millions to develop measures that can help in fraud detection and prevention during the initial stages of customer onboarding. Financial institutions and banks that fail to comply with these regulations have to face huge fines imposed by regulatory bodies. One of the biggest examples of this is the $5 billion fine faced by Facebook for not having measures that protect customers against data breaches.

Relationship between Customer Onboarding and AML

AML (Anti-Money Laundering) regulation is set in place to ensure stability in the financial system and prevent financial crimes including money laundering, terrorist financing, and so on. The losses due to money laundering are equal to 2-5% of global GDP. Every year, a global bribe of almost $1 trillion is given. The money that is laundered helps the growth of illegal businesses such as drugs, human trafficking, and so on. Therefore, regulatory bodies ensure that AML compliance is followed strictly by companies during the onboarding process to prevent financial crimes.

Most financial crimes happen because of the financial institution’s inability to detect fraudsters in the early stages of onboarding. When financial institutions fail to prevent fraud, the financial stability of an economy is impacted. 

Regulatory bodies do their best to prevent financial crimes by setting down a strict set of rules and instructions. Companies are legally obligated to perform customer due diligence checks and KYC checks to assess the risk level. Companies that perform robust due diligence checks comply with KYC requirements.

KYC & AML Requirement for Customer Onboarding

Companies have the authority of building their own unique verification process for complying with KYC and AML regulations as long as it yields results. Businesses need to hire compliance officers to fulfill and conduct the liabilities of the companies during compliance. Identifying and verifying customer ID is the most critical part of the KYC process. If a company fails to build a proper customer and ID verification process during onboarding, it could lead to huge fines imposed by the regulatory bodies.

The next step involves the company investigating the customer’s history. Based on the previous transaction history, any previous suspicious transaction is investigated and a risk profile is created. Based on the profile created by financial institutions, businesses choose a transaction monitoring pattern for the customer. Having too many high-risk customers can be risky for a business as monitoring can take up a lot of time.

The risk assessment part of the compliance contains Customer Due Diligence procedures including checking sanction lists, PEP lists, and adverse media screenings. These lists are created by regulatory bodies and they contain high-risk customer profiles for companies. Companies should determine customer risks during customer onboarding and proceed accordingly. Some things that FIs should consider while determining the risk level are:

  • Whether the documents submitted are real or not?
  • Industry in which the customer works?
  • Sanction and Politically Exposed Person List Screening
  • Financial Transactions History

If the customer is identified as a high-risk customer, enhanced due diligence (EDD) methods are applied. If there aren’t any suspicious activities during this period, the customer’s account is opened. To ensure that no illegal activities happen, continuous monitoring is required. To comply with regulations, companies need to control the financial transactions of the customer and analyze them.

How Can Companies Improve their Customer Onboarding Process?

Banks, financial institutions, payment providers, and others that provide financial services have to comply with KYC and AML regulations. The guidelines that they have to follow are seemingly endless. Financial service providers, such as banks, should ensure that they uphold a good customer experience while performing strict checks. Using manual methods of verification to combat financial fraud is outdated and ineffective. With the rise of the latest FinTechs, companies can comply with regulations all the while providing the best possible customer experience.

DIRO’s online document verification software can assist businesses in verifying customer documents like proof of address documents, bank statements, Income tax return documents, and so on. Document verification is instantaneous with DIRO, and it also provides a stronger proof of authentication with each verified document.


Customer Onboarding Costs: Simple Steps to Reduce Expenses and Enhance the Process

Onboarding new customers have always been a challenge, be it a manual process or digital customer onboarding. Up until a few years ago, customer onboarding included standing in lines, slow manual document verification, and a waiting period ranging up to a few weeks. Fortunately, the pandemic took the standing in lines out of the equation. If not done properly, customer onboarding costs can go through the roof, and still, the customer experience won’t improve.

Signing up new customers should be a simple, fast and seamless process. However, most banks, financial institutions, and other businesses fail to provide a good customer experience. Every additional 5 minutes in a customer onboarding process increases the abandonment rate, thus increasing the customer acquisition costs.

By offering a seamless and positive customer experience, you’re showing your users that they’ve picked a brand that cares. However, creating a seamless, friction-proof customer onboarding process isn’t easy, here are the 5 ways you can avoid the increasing customer onboarding costs:

Steps to Reduce Customer Onboarding Costs

1. Speed up the Process

The primary reason for the increased rate of customer drop-off rate is the speed of the abandonment process. If your process takes days or weeks to confirm if a customer will be approved or rejected then you need to change the process. Most customers won’t wait that long and move towards a competitor that can provide a better experience. 

Businesses need to stay on top of the changes in industry regulations and perform the needed KYC and Due Diligence Checks while customer onboarding. However, relying on human resources to conduct KYC/AML and other checks while providing fast and accurate results are impossible. That’s where the integration of technology comes in.

2. Reduce the Number of False Positives & Negatives

Since industries of all kinds are forced towards digital transformation, fraud detection and prevention have become tougher. Fraudsters can easily create fake documents and identities that can pass as real persons. Too many false negatives mean that fraudsters are easily slipping past your defense mechanism and too many false positives mean that genuine customers are getting flagged as fraudsters and potential risk elements. The inability of reducing the number of false positives and negatives results in business loss.

Organizations need to find the fine line between fraud and friction. They need to pick fraud detection and prevention solutions that can effectively separate legit users and bad actors. According to a report, the eCommerce industry will experience false-positive losses of $443 Billion by the year 2022.

3. Update the ID Verification Methods

Traditional checks still hold some value, but outdated methods like checking credit history often result in good customers abandoning the process of being rejected by businesses. The majority of millennials don’t have CRA data and that’s one of the reasons why they are rejected. In countries where this type of data isn’t available or available with difficulty, an automated process of verification can make a lot of difference. 

By utilizing and analyzing other data sources, businesses can easily enhance their ID verification process while still providing a secure and fast onboarding experience.

4. Automation is Necessary

Technology has penetrated every aspect of our lives, and excluding it from basic business operations will only increase customer onboarding costs. Relying on manual processes is costly, ineffective, onerous, and prone to human error. Customers are unable to track their application status and there are thousands of other things that can go wrong with manual processes. 

Banks that have automated their manual processes have achieved a 32% reduction in lost documents, and have reduced the processing time by almost 60%. Automation also helped banks in reducing their storage, handling, and transportation costs by more than 35%. 

Needless to say, automated customer onboarding is faster, more accurate, and more efficient.

5. Mobile Friendliness For Better Experience

Allowing onboarding through mobile devices makes the process more accurate, and fast. The mobile onboarding process also comes with its own set of challenges, the inability of conquering these barriers can also lead to an increased drop-out rate.

 According to several studies, more than 50% of Millennials will abandon the application process if they are unable to complete it on their smartphones. That’s the reason why mobile-friendly services have a more competitive edge across industries.

How does DIRO Help?

To reduce and avoid the increased customer onboarding costs, banks and financial institutions need the help of a tool that makes their process smooth. 

With DIRO’s online document verification software, onboarding customers is easier than ever. Document verification is instantaneous with DIRO with a stronger proof of verification. DIRO’s online document verification tool can verify over 7000 document types from all over the globe by cross-referencing document data from original web sources. This results in 100% elimination of the use of forged and stolen documents during the onboarding process. By integrating DIRO’s online document verification technology in the customer onboarding workflow, firms can cut down on both time and costs while providing a secure and good customer experience.


Customer Due Diligence

Security should be the first and foremost priority of financial institutions and banks. You wouldn’t want to provide access to financial systems to fraudsters of any kind? It makes sense for banks and financial services institutions to vet their customers and potential customers thoroughly. Verifying customers before giving them access to financial services is crucial. This is needed to prevent money laundering, embezzlement, account takeover fraud, and all types of fraud. And this is why customer due diligence is an important part of onboarding new customers. 

In this guide, we’ll walk you through what is customer due diligence and what it means for banks and other financial institutions.

What Is Customer Due Diligence?

Customer Due Diligence (CDD) is the process of identifying your customers and checking if they are who they claim to be. Organizations need to properly risk-assess customers and give them a risk profile before onboarding them. To achieve CDD, businesses need to obtain a customer’s details and cross-reference them with those of an official document that confirms their identity. 

CDD is a regulatory requirement for banks, financial institutions, and other businesses starting a relationship with a new customer. The purpose of this is to prevent financial crime and prevent potential crimes that can happen by doing business with highly risky customers. 

In the customer due diligence, FIs have to analyze customer information from several sources, including the customer sanction lists as well as public and private data sources. The amount of information you collect depends on the risk profile of your customers. Basic customer due diligence requires the following:

  • Information about the identity of your customers, including their name, address, and a photograph of an official ID document.
  • An overview of your customer’s activities and the markets they do business in
  • Basic understanding of other entities that your customers do business with

Customer Due Diligence is at the foundation of Anti-Money Laundering (AML) and Know Your Customer (KYC) compliance. CDD is aimed to help financial institutions verify their customers, confirm they’re not on any sanctioned lists, and assess the risk factors.

Customer Due Diligence Practice for Banks

Financial institutions have to build and follow a risk-based strategy to comply with customer due diligence as part of KYC and other regulations. This helps in making sure that the organizations remain compliant with basic regulatory laws and regulations of the markets that they operate in. 

The level of CDD in banking depends on the type of business-customer relationship and the customer’s risk profile. In a broader sense, banks need to take the necessary steps to make sure that a customer is who they claim to be. This can help in preventing fraudulent activities such as identity fraud or impersonation.

What does a Customer Due Diligence Process Look Like?

An effective customer due diligence process includes collecting a series of detailed customer information before initiating a customer-business relationship. But that’s not all, a customer due diligence process is operational long after the customer is part of a business. Here are the requirements for a robust customer due diligence process.

  • Customer Information: To make sure that customers are who they claim to be, businesses need to collect customers’ basic information. This basic information is the full name, photo identification, address, phone number, email address, occupation, tax identification, and more. 
  • Business Information: CDD processes should have additional information regarding a customer’s business model, source of funds, and UBO.
  • Customer Risk Profile: Another crucial part of customer due diligence is building a risk profile for every customer. This risk profile is made by collecting information such as location, business type, and customer identity. Based on this information, a risk profile is built (low, medium, high), which is to show the level of money laundering risk they pose. A customer’s risk profile determines how much due diligence is needed for a customer. High-risk customers need more detailed diligence compared to low and medium-risk customers. 
  • Continuous Monitoring: The customer due diligence process doesn’t stop after customer onboarding by a bank/financial services industry. An ideal CDD measure should include some kind of ongoing monitoring system and keep an eye on high-risk clients, suspicious transactions, sudden changes to customer profiles, and so on. 

Your customer due diligence process should answer all the fundamental questions:

  • Is the applicant the person claiming online?
  • Does the risk profile of the applicant raise any red flags?

Low-risk customers can be fast-tracked through the approval process. All because of the online customer verification software and online bank account verification software. Because of the automation, customer verification has become 40% more streamlined. This means that the customer onboarding process for low-risk customers should be cut down to under 2 hours. 

However, the decision time for higher-risk individuals may still take longer. Most of the time it takes around 48-72 hours to onboard high-risk customers. Assuming that 90% of the customers will be low to medium-risk customers, the cost and efficiency gains of automated ID verification and AML screening can reduce the costs dramatically and improve user experience.

Streamlining Customer Due Diligence Process

Complying with KYC and AML requirements has made the account opening process complex and time-consuming for most businesses. Different banks take different amounts of time for onboarding new customers. But, on average a bank takes 24 days to complete the customer onboarding process. And with a growing number of regulations, it’s only going to get worse. 

Moreover, increased onboarding time and friction will cause higher abandonment rates by customers. These costs can exceed the costs of any type of fraud considering the lifetime value of lost customers. 

This is why it’s high time businesses need to streamline the CDD process to save money and get new customers.

1. Identity Verification

While there are a series of other ID verification methods, more and more businesses are now relying on automated identity verification to smooth out the onboarding process. Automated ID verification relies on AI, machine learning, and biometric verification to authenticate identity documents. In some cases, banks may even ask customers to perform a liveness check to ensure that the applicant is physically present instead of customers using a pre-recorded video.

2. Ongoing Monitoring & Screening

Not just ID verification, AI and machine learning software can easily provide financial institutions with a more effective transaction monitoring system. This reduces the risk of false positives for suspicious activity.

Same as building risk profiles, individual transactions can also be scored and combined with advanced algorithms that track expected vs actual transaction behavior and update customer risk ratings in real-time. 

Better ID verification, AML screening, and transaction monitoring solutions are enabling financial institutions to keep up with the changes made by regulatory bodies. These technological solutions can help financial services institutions to spot patterns and suspicious transactions by monitoring current transaction data and comparing them with historical transaction data.

Importance of CDD

When you consider the amount of harm fraudulent activities can do, it makes sense the amount financial institutions spend on complying with KYC and AML compliance. These countermeasures are designed to prevent money laundering and other financial frauds. 

Here are the main reasons why banks need to take CDD seriously:

  • Big compliance fines: The enforcement of AML regulations is on the rise, since 2009, regulators have levied over $32 billion in AML non-compliance fines. In 2020 itself, FinCEN fined banks in the United States for over $11.11 billion.
  • Sophisticated Cyber Crimes: Criminal are using more sophisticated methods to remain undetected, including globally coordinated tech, insider information, the dark web, and e-commerce.
  • Reputational Risk: AML non-compliance puts financial institutions’ reputations on the line. The average value of the top 10 banks is $45 billion. 
  • Rising Costs: Most AML compliance activities require a huge manual effort, making them inefficient and difficult to scale.

Enlightened Approach to CDD

A growing number of banks and FinTechs are discovering how to automate their CDD process and if needed the enhanced due diligence process. By using the latest tools and technologies such as online document verification and online KYC verification software, businesses can improve the customer due diligence process.

When is CDD Necessary in Banking?

  • Starting a Business Relationship: Before starting a new customer-business relationship, banks have to perform due diligence checks, verify who the customers and ensure if they aren’t using a fake identity. 
  • Occasional Transactions: Certain transactions may require you to follow CDD strategies. For example, transactions over a certain monetary amount (over USD 10,000) or if the customer is transacting with high-risk persons or regions.
  • Suspicious Activity: Banks have to implement CDD checks if the customers have a suspicious history and a shady activity related to money laundering or financing terrorism.

Unreliable Identification: If the information offered by your customer is unreliable, suspicious, or doesn’t meet requirements, banks should implement additional CDD measures. 

Reducing Customer Due Diligence Time: How to Go From Weeks to Minutes?

The regulations made for saving customers and businesses from fraud are diverse and institutions have to keep pace with developing strategies to remain compliant. As such, creating a smooth onboarding process that is robust and efficient isn’t a mean feat. The biggest challenge in staying compliant is for businesses to keep evolving requirements while reducing friction and delays. A process full of friction and delays lead to increased poor customer frustration and drop-offs. 

When onboarding new customers, financial institutions need to know who they are dealing with before getting into a full-fledged business relationship. To verify customer identities, due diligence is important.

Customer due diligence is an important part of your businesses’ risk management. Different customers have different levels of risks, so CDD is conducted based on risk level. You should assess the potential risk level of each customer, and adjust your due diligence strategy. For the majority of clientele, standard due diligence practices that just require the authentication of customer identities will suffice. 

In certain lower-risk scenarios, simplified due diligence is enough. When carrying out simplified due diligence, you just need to identify your customers instead of identifying and verifying them.

On other hand, there might be instances where standard due diligence isn’t enough, in this case, you’d need to adopt an enhanced due diligence process. 

Let’s break down 3 different levels of customer due diligence:

  1. Simplified Due Diligence (SDD): Simplified Due Diligence is used in situations where the risk of money laundering or terrorist funding is minimal and CDD isn’t important. SDD happens in accounts that have low transactional value, the risk of illegal activities is minimal at best.
  1. Customer Due Diligence (CDD): This type of diligence happens when information is obtained on customers to verify their identity and assess the risk profile of customers. These types of diligence checks are done on customers when opening a financial account in some form. 
  1. Enhanced Due Diligence (EDD): EDD is done for customers to assess the identities of high-risk customers and monitor their transactional history to mitigate the chances of future risks. Most jurisdictions need politically exposed people lists (PEPs) to go through the EDD process. Other factors that require EDD for a customer are high transaction/value accounts, or accounts that deal with high-risk countries, or accounts that deal with high-risk activities. 

Due diligence is vital for mitigating fraud, not only to comply with regulations and avoid hefty fines, but it is also a smart business strategy. Not knowing your customer identity is a risk factor for most businesses. 

International standards require a risk-based approach to be added to the customer due diligence. Companies have to assess the money laundering risks each customer poses and adjust their due diligence checks. 

Customer Due Diligence Checklist

1. Conduct Basic Customer Due Diligence

The first step is to conduct a simple investigation, such as identifying and verifying a customer’s identity. Businesses are needed to verify the identity of the customers they’re dealing with. These requirements apply to all new customers as part of Know Your Customer regulations. 

There are multiple methods businesses can verify customer identities. The first step is online document verification, which involves assessing the legitimacy of a customer’s identity document.

In addition to online ID verification, businesses should also look forward to verifying customers’ financial information and their business activities. 

2. Take Help from Third Parties

Most of the time, businesses will opt to work with third-party solution providers while conducting customer due diligence. Third-party solution providers can be auditors and providers of CDD solutions such as online document verification. Businesses need to make sure that any third parties they work with are reliable and are trusted enough to share confidential data.

3. Figure Out if EDD is Needed

If the customer is considered as high risk, the businesses may need to go beyond ordinary customer due diligence. Enhanced due diligence is necessary if you’re entering into a business relationship with a politically exposed person (PEP), and if the transaction involves a person from a high-risk country. 

4. Keep a Thorough Record

A bank/financial institution is forced by law to keep a record of all the financial transactions for at least 5 years. This includes any information collected through CDD measures, account files, and any related analysis.

Businesses also have to securely document and store all the information, as this information contains sensitive information, it would be challenging if the information was lost.

5. Keep Up-to-Date Records

It’s vital for businesses to keep records of their customers. If any changes happen regarding your customers, you’ll need to redo their risk assessment and carry out further due diligence if it’s required.

Speeding Up the Process

Regulated businesses have to apply risk-based customer due diligence measures to prevent their businesses from getting threatened by money laundering or terrorist financiers. To avoid these financial frauds, KYC & AML checks have to be completed. With proper due diligence checks, businesses can reduce the financial, reputational, regulatory, and strategic risks from other entities. 

Traditionally, businesses perform due diligence checks using manual paper-based processes. Manual work requires a human, and it takes up a lot of time, the process is full of errors and offers no visibility to the customers. The manual process usually is frustrating, and time-consuming. That’s why integrating new technologies into the CDD process is always a good idea. 

How does DIRO Help?

DIRO’s online document verification software offers instantaneous document verification that can easily strengthen the KYC & AML process. DIRO offers stronger proof of authentication with verifiable credentials. With DIRO being able to verify over 7000 document types from all over the globe, it can strengthen the AML and KYC verification process. 


Importance of Client Onboarding: 5 Reasons for a Smooth and Seamless Onboarding

The client onboarding process is the first step in a customer-business relationship, so businesses need to make sure that the first impression is the best one. The moment a prospect becomes a client, a smooth and seamless customer onboarding process is crucial.

Unfortunately, complying with KYC and AML regulations has made this customer onboarding process incredibly tough and challenging for businesses. Since their first introduction in the 1970s, the total amount of laws and directives has increased significantly with annual updates. The regulatory bodies have been raising the bar for compliance, thus making the client onboarding process incredibly tough.

Under these circumstances, it’s more than important to onboard clients simply and seamlessly. Current onboarding practices, however, are often cumbersome, time-consuming, tedious, and frustrating. That’s why the importance of customer onboarding is growing which enhances customer experience.

In this article, we’ve mapped out why a business needs a simple and smooth client onboarding process and its benefits.

What Is a Good Client Onboarding Process?

One client onboarding survey found that banks themselves consider their onboarding process inefficient for the customers. Some banks and financial institutions even stated that they still rely on a paper-based customer onboarding process.

As customers are becoming technology-friendly, this process needs to be changed. Therefore, businesses need to understand the basic attributes that make for a “good” client onboarding process. 

There are a couple of things that make for a good client onboarding process.

  • Simple Process
  • Smooth Process
  • Seamless Process

A user-friendly process should be a priority while building a customer onboarding process. The ideal customer verification process sets the tone for a robust and long-lasting client relationship.

The client onboarding process should also comply with all the KYC and AML regulations. These regulations are also used to support risk assessment, it includes a long list such as Anti-Money Laundering (AML) practices, and Know Your Customer requirements. In an ideal customer onboarding process, compliance shouldn’t slow down the customer onboarding process. 

A good customer onboarding process should be fast and with a quick response time. An average customer onboarding process often takes 2-3 weeks. This needs to be changed, and the client onboarding process needs to be replaced with the online customer onboarding process. This can be achieved by leveraging technologies such as online KYC verification software, online AML verification software, or online customer document verification process.

What’s The Importance of a Good Customer Onboarding Process?

There are 5 biggest reasons why businesses should have a seamless client onboarding process:

1. Demonstrate Own Value

First of all, the implementation of a smooth and simple client onboarding process allows for a company to build healthy and loyal customer relationships early on. A good customer onboarding experience goes a long way and it stays with the customers during their relationship. First impressions of these onboarding processes count, and missed opportunities to demonstrate your company’s value.

2. Exceed Client Expectations

This is a huge reason for building great customer onboarding experiences. The customer experience can be significantly improved by implementing a simple, smooth, and seamless client onboarding. Companies can make this happen by introducing a user-friendly process for onboarding. Customers are accustomed to tiresome and tedious processes and they can be pleasantly surprised when they experience a smooth operation.

3. Increase Efficiency & Revenue

This is another reason for banks and financial institutions to build an ideal customer onboarding process. Financial services companies should focus on enhancing their process as much as possible and make that visible for the client onboarding process. The drive for efficiency should enhance the customer experience. 

4. Customer Satisfaction

If a business fails to build an impressive customer onboarding process, it’ll end up losing customers to businesses that offer better processes. There’s no business that wants to lose customers instead of acquiring them. A good customer onboarding process will bind your clients to your company. 

5. Improve Regulatory Compliance

The final reason for building a smooth customer onboarding process should make sure that all parties comply with all the rules and regulations. This part isn’t actually easy. However, a smooth and simple client onboarding process with proper AML and KYC compliance can happen by leveraging technologies.

Benefits of Client Onboarding Process

The benefits of a good client onboarding process include a variety of considerations, such as:

1. Increase Efficiency

  • Boost customer onboarding time by eliminating unnecessary touchpoints.
  • Always stay compliant with the right set of requirements.
  • Reduce costs by increasing efficiency

2. Enhance Business Potential

  • Increase the scalability of business by understanding requirements across major jurisdictions.
  • Minimize risks and misconduct by understanding the regulations.

3. Try to Boost Client Satisfaction

  • A simple, smooth, and fast customer onboarding process is equivalent to limited interactions, which leads to increased customer satisfaction.
  • Increases the reputation of the business by adding real value based on great customer experiences.

Best Practices for Keeping Millennials Hooked to Account Onboarding

Banking has gone digital, and when was the last time you went to a physical bank? Traditional brick-and-mortar banking is slowly becoming obsolete, over the last six months, 40% of Americans haven’t stepped foot in a traditional bank. Most generations are in the favor of digital banking as it saves time and offers all the features of traditional banking. Millennials are taking the lead when it comes to using online banking, 47% of all millennials are relying on digital banking instead of traditional banking services. Millennials are more apt to adopt mobile banking, but they’re also the most likely ones to walk away if they don’t like the services. Almost 93% of all millennials abandon the customer onboarding process whenever they run into any trouble. 

Financial institutions have a huge opportunity to win all millennial customers by offering seamless mobile account opening, or digital account onboarding. Customers aren’t willing to sit through the cumbersome digital customer onboarding process. 

Identity verification is a vital process in the customer onboarding process and more than often the step where countless potential customers abandon the process because of the time and effort it requires. ID verification is important because that’s the step that will help banks determine which online customers are legit and which ones are fraudsters. By enhancing the number of fraudulent checks, banks can increase the chances of reducing the risk of fraud, this additional due diligence steps can also increase the level of friction during customer onboarding leading to an increased rate of abandonment. 

According to a report by IBM, more than 75% of all millennials have no problem in leveraging biometric authentication for digital onboarding. This signifies that traditional ID verification methods like Knowledge-Based questions and Multi-Factor Authentication will no longer be relevant. Millennials are more than comfortable with mobile-based ID verification methods that are needed to prevent fraud. 

So how is it possible for financial institutions to find a balance between tackling fraud and ensuring that new customers have a seamless experience while opening a new account? By working with a perfect online ID verification solution, you can make the customer onboarding process as smooth as possible.

Best Practices to Provide a Seamless Customer Onboarding Experience

1. Speed Up the Process

The biggest reason behind abandoned customer onboarding applications for banks is because the processes take way too long. Traditional customer onboarding methods are used to take up to 3-5 weeks. Millennials don’t have the time or the attention span to wait this long. For banks to keep millennials engaged in the onboarding process, it’s essential to quickly and correctly verify users within the mobile experience in minutes.

2. Better User Experience

User experience is a major part of customer experience and is mindful of the number of screens in use. Banks can utilize on-device data extraction to pre-populate forms during the ID verification process, thus reducing the amount of information a customer has to add manually. Create a custom journey for users by providing different colors and themes to the screens and sections. Make sure that you take care of the needs of every customer by adding multiple functionalities. 

3. Provide Clear Instructions

Not every user is tech-savvy, so banks should focus on making the process as clear as possible. There should be clear language on each screen so that every step is explained easily to the user. Provide clear instructions in simple English. It’s vital to clearly explain why banks require a picture of the ID document and the selfie and what they’re willing to do with the information. 

4. Instant Feedback is the Key

Users want to know their application status in real-time. If there are any issues with the ID document or photo submitted, then users would want to get that feedback in real-time too. Providing instant feedback allows users to understand how long it’ll take for their application to be completed. 

5. Omnichannel Support

For companies that want to capture as many users as possible, it makes sense to ensure that you provide Omnichannel support for potential customers. For example, a variety of ID verification solutions support smartphone image capture and exclude other channels such as desktop webcams. By doing so, banks are leaving out customers that are more comfortable on their desktops and laptops. 

Bank Onboarding

Future of Digital Onboarding, Security and Open Banking

Open banking is perfect for changing the environment of the API economy. For the finance and banking industries, as well as payments, insurance, and marketing, open banking offers a whole new scenario in the digital economy. Open banking can offer innovation, disrupt the traditional banking market and greater efficiency inspires optimism, but still, there are some challenges. Educating customers about new opportunities created by open banking will soon become a priority.

Open banking has all the capabilities of the future, but FinTech companies and their partners have to work hard to see open banking become a mainstream service. Customer onboarding, data privacy, and security of services are the three primary elements that’ll allow open banking to continue changing the world.

Current Situation of Open Banking 

Open banking means that banks have to allow FinTech companies access to individual customer accounts and transaction details when the customer requests it. With this, it is easy to reduce friction, increase customer choice, and improve competition. 

Various use cases are ranging from easier small business lending to new payment options like cryptocurrency to better savings accounts. In the UK, the payment service directive, or PSD2 has jump-started the success of the sector. Similar businesses are working around the world, with countries like Japan, Singapore, and Australia focusing heavily on Open Banking initiatives.

Given that the service is relatively new, countries like the U.S are hesitant in passing the laws that make the service mainstream. The biggest innovation in the space of Open Banking hasn’t happened yet. Open Banking hosts several features but it is new and the lack of education around it makes it suspicious in the eye of customers and businesses. 

The suspicion around open banking is deserved. If you’re giving them access to your bank account to a third party, it is imperative that you trust the entity completely. How is it possible to guarantee security all the while ensuring open banking remains untouched by a regulatory body?

Winning Consumer Trust in Open Banking?

FinTech companies in an open banking environment have to ensure security to potential customers. Open Banking companies will also have to show an original and innovative side while demonstrating that they offer secure data management. For a majority of companies, winning consumer trust will be the biggest challenge. 

But how can FinTech combine innovation with security? In simple words, open banking businesses should follow the lead of traditional banking businesses. Over time, traditional banking has built a huge amount of customer trust by focusing on security and privacy by performing rigorous due diligence. 

Customers must be aware of what steps their financial service providers are taking to keep their data and funds safe. Privacy and security aren’t about following Know Your Customer (KYC) and Anti-Money Laundering regulations. Banks and financial services have to be able to provide the best security and privacy to the people they are offering their services.

Centralization of Identity

Verifying customer identities has always been the core of financial services. It is almost impossible to open a bank account without getting their identity verified. Unfortunately, a majority of the world keeps operating with analog tools in an evolving digital environment. Driver’s licenses or passports were mainly intended to be used for in-person verification and not online verification. So proving the identities of people during the account opening process remains a huge challenge. Another big challenge is that more than 1 billion people globally don’t even have an identification document. These people can’t travel, take part in commerce and receive medical care or government benefits at all without identity documents. 

Things that were industry standard yesterday aren’t the industry standard today. Things are always evolving, banks and financial institutions constantly need new tools to verify customer identity. In some cases, simple verification is more than enough. Other situations require robust identity authentication checks. Numerous circumstances have different circumstances, but the need for digital ID verification will only grow as time passes. 

Future of Digital ID Verification

New technologies and services can enhance the identity verification process and remove friction from the customer onboarding process. The benefits of technologies and services are extraordinary for both customers and firms. 

The customer has to go through a frictionless process, the business on the other hand enhances the ID verification process and reduces the risk of fraud. While opening a brand new account, each customer has to go through a series of steps that takes care of risk and user experience.

The Decade of Open Banking

According to industry experts, the 2020s will be the decade of open banking. Open banking gives birth to new ideas, provides consumers greater and more control of their financial lives, and it also creates new opportunities for small and medium-sized businesses.

However, there are a variety of challenges to overcome to make open banking a mainstream service. They will have to work a lot to enter the market while educating the public about how they maintain the security of the data.


Best Practices to Follow For Merchant Onboarding and Monitoring

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

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

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

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

Risk Management for Merchants

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

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

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

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

How does Merchant Onboarding work?

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

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

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

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

What is Merchant Monitoring?

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

Here are some of the best merchant monitoring best practices:

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

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


Steps to Improve Customer Onboarding Experience During Sign Up

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

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

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

Customer Experience and Identity Verification

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

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

Steps to Improve Customer Onboarding Experience

  1. Fewer Clicks Doesn’t Mean Better User Experience

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

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

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

  1. Get Smart About Waiting Times

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

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

  1. Get Users at the Right Time

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

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

  1. Sometimes, Friction Can be Good

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

  1. Customer ID Verification Adds Value

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

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

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

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

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

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

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

  1. Common Process for Everyone

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

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


International Client Verification: Verifying Customer Identity Online

The growth of digital banking platforms and online solutions is the key for businesses to grow by onboarding international customers. Remote international client onboarding costs businesses the most time and causes the most problems. Banks that extend their services outside of their domestic region, tend to lack the resources for verifying customer data. Complicated KYC and due diligence processes with tough technological solutions lead to an increased customer drop-off rate. 

Even if a customer wants to sign up with an international bank, financial institution, or any other industry, a complicated onboarding process is never worth their time. To complete the process, organizations need to employ seamless online ID and document verification solutions. There’s no way to manually verify international customer data, online document verification is the key to online document verification.

Accurate international addresses and document verification helps in reducing the cost of manual verification of data. Being able to verify international data means lower costs and an improved rate of customer onboarding. Using technological solutions like DIRO, banks, financial institutions and other industries can verify customer data in an instant while reducing friction.

Why Is International Customer Verification Needed?

A business can easily expand its business reach by building strong KYC techniques and strategies. Employing efficient online customer verification solutions can improve the international customer onboarding experience.

According to surveys and reports, 1 out of every 10 customers drops out of the onboarding process because of an overly complex process, distrust in the process, or just poor customer experience. Some businesses don’t even try to venture into unidentified markets because of their lack of ideal solutions. 

To broaden the customer base and improve the brand reputation, it is vital for brands to onboard customers internationally. It is not possible to do so without the use of a proper online identity verification solution.

Benefits of Online Document Verification

  1. Lower Friction

DIRO’s online document verification solution can be integrated with your website, the user can be asked for ID Information right there. It can provide an instant result for verified documents. This means, no friction, no hold-up time, and little to no burden for the users. 

  1. Reduce Administrative Overhead

Having your team manually request and process ID documents is a time-consuming process. This manual process can be bypassed if documents can be verified in an instant using the business website. Manual document verification, however, requires too much friction and can lead to errors as some documents may be too sophisticated to distinguish by the human eye. 

  1. Improve Security of Customer Onboarding

Using physical documents or online copies of a document can open your business to the risk of fraud. Most documents that are used for verification are unencrypted and can be seen by others. DIRO’s document verification technology is backed by multi-factor authentication and strong impersonation checks that can reduce fraud. 

How does DIRO Enhance International Customer Onboarding Experience?

Even after the best technological solutions, verifying international customers during onboarding is incredibly tricky. There are a variety of factors that can cause friction during international customer onboarding.

By employing DIRO’s customer onboarding technology, businesses can verify online documents in an instant. DIRO can verify 5000+ types of documents from all over the globe. The technology provides 100% proof of authentication on verified documents. The proof of authentication can be used as a court-admissible document with forensic data.

Fraud Onboarding

How Ideal Digital Customer Onboarding Can Lend a Helping Hand In Reducing Fraud?

In the last year itself, the FTC (Federal Trade Commission) received over 2 million fraud reports, which led to losses of over $3.3 Billion. Fraudsters can run a scam to trick the onboarding process and by exploiting the identity verification program. Businesses, banks, and FIs need to employ the best risk management program to detect and eliminate fraud early on. 

An essential part of any risk management program of any organization is a perfect onboarding program that verifies the identities of people from the first step. Verifying identities using strong online document verification solutions is something organizations need to have.

Preventing Fraud Risk with ID & Business Verification

Identity theft is currently one of the most common types of fraud and growing technologies may keep assisting the growth of ID theft. The sudden increase in ID theft cases is because of sudden data breaches in recent years. These data breaches have provided the fraudsters with enough access to data that they can use to assume the identities of someone else. 

Using online document verification solutions like DIRO and employing organization-wide KYC compliance that can help prevent fraudsters from entering the inner operations of your system. The ID verification process usually helps in identifying the red flags in the early stages of customer-business relationships. 

Verification methods that can verify customer documents instantly and distinguish between authentic and doctored documents can reduce the pace of fraud. Countless methods can be used and data can be cross-referenced to verify customer identity.

Types of Online Fraud

As a business, you need to understand the techniques used by fraudsters that will help you protect your business. Some of the most common types of online fraud you need to consider to build your anti-fraud management program are:

  1. Synthetic Identity Fraud

Synthetic Identity Fraud is one of the most common types of ID fraud, where real information is stolen from someone else and fake information is blended to create a synthetic identity. Usually, all the real information used to create a synthetic identity is stolen. Synthetic identity fraud makes up 80% of all identity fraud. Being able to spot fake identities is the best way to defend your business against fraud. You need to reduce fraud all the while making sure the customer experience stays intact. 

SIF is designed to go around conventional methods of ID verification. The increased number of data breaches over time has made things worse for both organizations and customers. 

  1. Account Origination and Takeover Fraud

Account origination fraud and account takeover fraud are other two types of identity theft that happen whenever a person gains access to an individual’s account. They can use this access to make fraudulent transactions or use their personal information to create fake accounts at different places. 

ATO is much more complicated to identify as fraudsters are using legit credentials to access the accounts. Companies can lose millions of dollars by not prioritizing a solution for reducing fraud or identifying ATO in the initial steps.

  1. Card-not-present and Chargeback Fraud

Card-not-Present or CNP fraud is a general term for fraudulent transactions where a cardholder doesn’t present a card in person at the time of purchase. CNP usually occurs through mobile payments or online, which makes it tougher to prevent and detect fraud. 

Chargebacks are a type of CNP fraud that happens when someone orders products or services and requests a chargeback from the bank instead of the merchant. To reduce this type of fraud, implementing an enterprise-wide strategic program is the best bet. 

What is a Fraud Risk Management Program?

A fraud risk management program gives your business a foundation for identifying, analyzing, preventing and mitigating fraudulent activities. Preventing fraud is a lot bigger than protecting revenues, it also minimizes the harm fraud does to a brand’s reputation. 

One of the main reasons for fraud risk management offers a positive impact on decreasing the pace of fraud and losses incurred on fraud. Conducting risk analysis offers a greater understanding of the weaknesses of the businesses which can lead to an improved risk management program. 

Digital Customer Onboarding with Ideal Technology

Online customer onboarding methods are one of the preferred target areas of fraudsters. Weak customer onboarding methods tend to cause a lot of harm for customers as their information can be used for a variety of fraudulent activities.

Organizations need to build fraud risk management programs that can support online customer onboarding methods. Technological solutions that provide online verification of Identity and documents are needed to mitigate fraud. 

DIRO’s Online Document Verification Solution for Fraud Management

None of the strategies a business can build will help in reducing fraud if there’s no technology to support your business’s needs. Customer onboarding can be made secure and faster with DIRO’s online document verification API.

DIRO can offer instant document verification for customer ID verification which reduces fraud and improves fraud detection and prevention. DIRO’s technology can capture data right from the original web source. It prevents the use of flake and stolen documents, with 100% verification of original data.