Identity Verification — The Ultimate Solution for Fraud Prevention
Many people commit identity theft as online shopping and banking become the norm. According to the Federal Trade Commission, the number of identity theft cases increased by 73% between 2019 and 2020, and this trend is only expected to continue.
Due to the rising incidence of fraud, all organisations must take preventative measures to safeguard their operations. It is simple to implement a robust customer identity verification process to avoid a devastating cyberattack or other related schemes.
What is Customer Identity Verification?
The term “customer identity verification” describes how businesses check clients’ claims about themselves. The Federal Trade Commission received almost 1.4 million identity theft reports in 2021. Thus, institutions that are useful at this can more easily verify the identities of their customers, protecting them from identity theft and other scams.
Compliance with regulations and determining whether a customer poses a business risk are aided by customer identity authentication processes. Healthcare organisations, banks, and legal entities benefit most from proper authentication because they handle vast amounts of personal information.
Several of the most popular approaches to customer identity verification are detailed below.
- Biometric Analysis
Using a person’s unique biological traits, biometrics systems can reliably verify a user’s identity. Without remembering a password, biometric authentication methods like fingerprint and facial analysis are highly convenient for users. Thus, biometric information also adds an extra layer of protection because it can’t be copied or stolen easily.
- Two-factor Authentication (2FA)
To access a system with Two-factor Authentication (2FA), users must present a combination of two or more verification factors. For example, rather than just letting someone into a system by inputting their password, 2FA will ask users to provide a unique One-Time Password (OTP) for every session. Although email, SMS, and OTPs are the most popular, 2FA can also use verification applications, smartcards, and biometrics. As a result, doubling up on security measures reduces the possibility of a successful cyberattack.
- Document verification
Document verification scans legal documents like bank statements, passports, and driver’s licenses for watermarks, stamps, holograms, etc. Names, ages, and addresses are just some personal information items on these papers. Thus, this data can be cross-referenced with other databases for verification and accuracy.
What are the Benefits of Identity Verification?
The primary advantage of a thorough online ID verification process for customers is preventing fraudulent activity. About $28 billion in losses due to identity fraud scams, victimising 27 million U.S. consumers. In addition to boosting safety, it provides perks like these:
- Improved Client Experience
Many businesses now use digital processes, which reduces the need for paper records. The usability, particularly in identity verification, can facilitate onboarding. Customers’ overall impressions of a business can be improved if they are given more accessible access to the needed services.
- Deters Fraud in all Forms
Getting authentication and access control services is helpful mainly because it reduces the likelihood of being a victim of fraud. Companies in the financial sector should prioritise this because it helps stop criminal activities like money laundering.
- Comply With AML Regulations
It’s also crucial to comply with regulations. There are laws and regulations in effect across many sectors that necessitate companies to take steps to confirm the identities of their customers.
A wide variety of governing bodies worldwide are responsible for enforcing these rules. Some of the essential AML regulatory authorities in the world include:
- Global — FATF
- UK — FCA
- Netherlands — FIU
- US — FinCEN
- Canada — FINTRAC
- China — CBIRC
- Hong Kong — HKMA
- Japan — FSA
- Singapore — MAS
- Australia — AUSTRAC
- South Africa — FICA
- UAE — NAMLCFTC
The following list of enforced identity verification institutions must be more comprehensive to combat money laundering and protect consumers from fraudsters. Sometimes, a country may have more than one regulator responsible for tackling fraud in various industries. However, it is the job of each to reduce fraud and make sure local businesses follow the rules set by the state or federal government.
- Improves Reputation
Every organisation should work to improve its standing in the community. Customers today will only do business with established, trustworthy companies; as a result, a business must gain their trust if they want them to remain loyal customers.
One of the best ways to gain their trust is to ensure that the provided data will be kept confidential. Thus, establishing a reliable identity verification procedure will give them confidence and show that the company values their safety. When firms focus on what customers want, they’ll start recommending their business to others, boosting the brand’s visibility.
- Transaction Monitoring
Customer identity verification has additional benefits beyond just detecting and reporting fraudulent activity. It helps businesses collect additional information, like IP addresses and locations, and verify user input. To verify the legitimacy of a transaction, this data can help affiliated institutions better comprehend an individual’s behaviour.
To Sum It Up
Identity verification is essential for fraud prevention, security, compliance, customer satisfaction, and cost savings. Businesses can reduce the risk of financial loss and reputational harm to themselves and their customers by implementing identity verification processes, increasing their operations’ effectiveness and scalability.
