Identity Verification in the Banking Sector

Verifying the Identity of Your Customers Can Be a Challenge

Identity verification is a complex issue for banks – but the room for error is zero. The ability to verify customers in real-time whilst still complying with a myriad of regulations – including Know Your Customer (KYC), Anti-Money Laundering (AML), and EBA PSD2 Strong Customer Authentication (SCA) on Regulatory Technical Standards (EBA RTS) – is now paramount, and the cost of failure high.

According to recent research from Open Identity Exchange (OIX) published in 2018, a typical UK bank wastes £10 million annually on inefficient KYC checks. In addition, the report found that banks’ AML compliance costs increased 50% over the preceding three years, with the trend projected to continue. Serious breaches of regulations can incur fines as great as 10% of annual turnover, with OIX concluding that if the current trend of rising AML and financial crime compliance costs continues, the UK banking industry will be subjected to additional costs of £2.5 billion per year by the end of 2020 – a 50% increase.

Across the pond, the figures increase tenfold. AML compliance costs US financial services firms $25.3 billion per year, according to LexisNexis Risk Solutions. Smaller firms are hit the hardest, with costs reaching up to 0.83% of their total assets, compared to 0.08% of the total assets of larger firms. Daniel Wager, Vice President of Global Financial Crime Compliance at LexisNexis Risk Solutions, comments on the findings. “As compliance costs rise, mid- to large-sized firms are using a wider array of newer technologies and data sources to prevent financial crime. While these firms report higher average compliance spend per year ($18.9M), they are actually lowering the cost of compliance. The overarching goal is to achieve compliance with greater efficiency and with less human capital.”


Efficient Identity Verification – A Customer Loyalty Issue

Inefficient identity verification processes are also costing banks customers. According to a BI Intelligence report last year, the way incumbent banks conduct onboarding and ID verification online is inconvenient and insecure, resulting in security breaches, lower customer satisfaction and reduced loyalty.

“It’s a lose-lose situation, as consumers become disgruntled and banks lose business,” say the report’s authors. “The problem stems from the very strict verification standards and high non-compliance fines that banks are subject to, which have led them to prioritize stringency over user experience in verification.”

However, banks can no longer afford to prioritize stringent identity verification at the expense of user experience – both must be achieved in equal measure. The challenge is to streamline identity verification for customers without compromising on accuracy and security – and this is precisely what biometric verification technologies are designed to deliver.


Biometric Verification

Biometric authentication puts an end to an over-reliance on outdated and insecure PINs, passwords and coordinate cards that can be easily compromised. Enabling increased customer convenience while adding additional levels of security, biometric verification is increasingly becoming the go-to authentication solution in the banking sector.

Figures from GlobalData’s 2018 Consumer Payments Insight Survey reveal that 16% of global consumers have been victims of payment fraud over the past four years, costing the banking industry billions. Of those consumers who were subject to fraud, 9% closed their accounts and switched to another provider. “Industry experts agree that the application of biometrics has the potential to tackle fraud more effectively than ever before,” said Heike van den Hoevel, Senior Wealth Management Analyst at GlobalData, commenting on the figures.

The good news is that consumers are becoming more and more comfortable with biometric authentication, particularly when it comes to banking services. Last year, IBM Security released its global Future of Identity Study, in which it was found that 67% of consumers are already comfortable using biometric authentication today, while 87% say that they’ll be comfortable with these technologies in the future.

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TOC ID Verification for the Banking Sector

Together, rising compliance costs, steepening penalties for non-compliance, and the pressing need to streamline customer experiences are spurring the rapid adoption of biometric identification technology in the financial sector. Set to drive profound changes in AML efforts, biometric authentication provides a convenient yet comprehensive solution to financial institutions as they endeavour to reduce fraud and financial crime risks through better customer identification.

TOC ID Verification is leading the fight against money laundering and identity theft in the banking sector. Today, modern consumers are demanding a complete banking experience online. Reluctant to go into physical branches for service, they are looking to do all of their banking on desktops, tablets, and mobile phones. This means that banks need to be able to accurately authenticate both their existing and future customers remotely. However, with traditional verification solutions, it is only possible to link a given device with the corresponding customer account, meaning that banks can only verify that it is the correct device – rather than the correct person – conducting a transaction.

TOC ID Verification has solved this problem by moving the authentication process away from the user’s device and onto the cloud. Our powerful biometric ID verification service captures customers’ unique biometric data – including Facial Recognition and Fingerprint Identification – to create unique digital templates for genuine customers which are then stored securely in the cloud as a mathematical construct. This enables banks to authenticate the actual users of their online and mobile services, as opposed to just the devices being used to access them.

With our Biometric Identification and Remote Authentication technology, we can help you create safe, secure and simple customer journeys that will delight both potential and existing customers, while adhering to stringent identity verification regulations that all banks must contend with. Banks around the world are already reaping the benefits of our solutions. For example, the BBVA Bank has adopted our ID verification system in order to reduce identity theft, as well as our Fraud Shield tool which allows the bank to detect cloned or altered ID documents.

With over eight years’ experience, more than 48 million identity verification and digital signature transactions per year, and an accuracy rate above 99%, TOC ID Verification is a leading provider of biometric authentication solutions for the banking sector. Ensure compliance, improve efficiency, reduce spending on regulatory fines, and streamline your customer journeys with TOC ID Verification. Get in touch today.