Financial regulation requirements become another reason of increasing demand for IDV service

The Bank Secrecy Act introduced in 1970 required all banks to maintain customer data for effective monitoring or money laundering issues. BSA was improvised with Anti-Money laundering (AML) laws in 1980s. In 2002, the Secretary of Treasury finalized regulations that made Know-Your-Customer (KYC) mandatory to banks and all financial institutions. In 2013, Customer Identification program (CIP) became a mandatory requirement wherein financial institutions should verify the identity of individuals intending to perform financial transactions.

However, banks are increasingly facing pressures that did not previously exist and the traditional ways of verifying identity are simply too slow and cumbersome — not to mention costly — to keep up with the demands of the modern world. The costs inherent in verifying the identity of a new customer today can be extremely high. Averages for full KYC are in the $15–20 range and costs are continuing to rise.

Globalization pushes this issue to a further extent. Today’s middle class is no longer confined to a single city or region but is instead a global citizen with an expectation of service regardless of the locale. When citizens transition their locale, it is still incumbent upon financial institutions to take all the necessary steps and decisions to ensure that they are best servicing their customers while still remaining cognizant of the need to protect financial institutions from risk. However,this often means that an individual is forced to wait days and weeks without access to accounts and funds since identity verification rules and regulations vary across regions, countries and nationalities.

When changes are forced from a corporate perspective — company transfers — there is often an available buffer for the move to ensure that the individual is not significantly inconvenienced. Unfortunately, similar options do not exist for private moves and in these cases, the costs can be significant!

This ongoing increase in costs has had a significant impact on the bottom line of many financial institutions worldwide. In fact, many businesses have reported significant savings due to efficiencies and asset growth but a simultaneous decrease in overall profitability due to ever increasing costs of compliance. This decreasing profitability has led to many institutions reducing product offerings as well as the sizes of their customer service teams as they struggle with smaller discretionary budgets.

Today, there is a greater need for an identity verification system that improves the efficiency of KYC services while being cost-effective.