Best Practices in Digital Identity Verification for Financial Institutions and Fintechs

In a digital-first world, opening accounts online has exploded, attracting more fraudsters than ever before with increasingly sophisticated tactics. Validating that every applicant is who they say they are is critical, requiring effective digital identity verification at every stage of the customer journey, from onboarding new customers to re-verifying returning customers and executing high risk transactions.   

When applying Know Your Customer (KYC) and identity fraud prevention software solutions in an onboarding waterfall, issues arise when a new applicant is not obviously identified as “good” or “bad,” particularly with Gen Z and other thin-file consumers who don’t have a deep digital footprint.

Avoiding Friction-laden Digital Identity Verification Methods

In order to validate these “gray” applicants, some organizations may apply additional scrutiny such as knowledge-based authentication (KBA) by asking them questions about prior addresses or credit history. Most organizations simply push the applicant to a manual review. Both of these friction-laden step-up verification methods are cumbersome and expensive.

KBA has a reputation for delivering a lackluster customer experience and poor accuracy. In fact,  KBA no longer meets National Institute of Standards and Technology (NIST) standards due to the ease with which an attacker can find answers to posed questions through breached data available on the internet and, paradoxically, many fintechs have found that achieving a 100% KBA score is a leading indicator of fraud.

If subjected to manual reviews, applicants are left waiting for minutes, hours, or days while a company works through their onboarding queue, where there’s a chance that the delay will cause customers to abandon the application.

A far better approach to solve these challenges is to employ a seamless workflow that delivers enhanced digital identity verification software with accuracy and a great customer experience. At Socure, many of our customers have found a smoother countermeasure to KBA and manual reviews: starting with our KYC, passive third-party and synthetic identity fraud models, indeterminable applicants are routed to our fully-automated ID document verification solution. This scalable and cost-effective combination strikes the balance for optimized user experience, fraud capture, and auto approval of more good customers.

However, not all document verification solutions are equal. For some legacy vendors, document verification has entailed only ensuring the authenticity of a physical ID based on the vendor’s library of document templates. While that may be a good first step, catching fraudulent documents and stolen IDs also needs effective data extraction and forensics to ensure the ID has not been tampered, as well as the ability to compare the headshot on the ID to a selfie of the person in possession of the ID to have confidence that they depict the same individual.

Document verification software that captures and verifies identities, while taking the additional step of accurately matching IDs to the person, has proven to be vital in combating these advanced fraud vectors.

Socure Predictive DocV 3.0: Accurate, Omnichannel, Scalable Document Verification

Socure’s Predictive DocV 3.0 is a fully-automated, omnichannel document verification solution. Highly accurate and scalable, it combines computer vision-driven image capture with patent-pending forensic analysis using machine learning that can quickly verify any identity document in circulation, including thousands of global ID types. The DocV capture app, with state-of-the-art accessibility features, seamlessly guides a user through a quick image capture and verification experience, to minimize friction, errors, and frustration. It results in a less-than-4-second response.

In our experience, we’ve seen three use cases stand out for their efficacy with financial institutions and fintechs when incorporating DocV in their onboarding workflow:

• Step-up verification
• Document first 
• Authentication or re-authentication

Step-up digital identity verification: Approve more good customers

For applicants where there’s a lingering question after the initial KYC or fraud checks, companies can deploy DocV further into the workflow at scale and at a low operational cost as an additional layer of verification. It allows them to reduce the number of rejected good users and gain incremental revenue from higher auto-decisioning amongst applicants who at first appeared risky.

This process is automated, without the need for or cost of manual reviews. By verifying that a government-issued ID is authentic, it becomes an authoritative data source which can serve as a means to remediate certain adverse decisions. As an example, if resolution of an address fails from an input form, Socure can extract address data from a validated government-issued ID to resolve this discrepancy.

Document first: Welcome new-to-country applicants

ID document submission at the beginning of the customer acquisition funnel streamlines the onboarding flow for opening non-resident accounts. This target demographic is nearly impossible to verify through non-documentary means and includes international students and newly-arrived people with work visas. Capturing a photo of their ID and a selfie will not be viewed as added friction, but something they will expect. For traditional financial institutions and neobanks providing this service, it meets compliance guidelines to enable them to increase customer accounts and deposits.

Authentication or re-authentication: Prevent account takeover and enable high value transactions

In the case of an account lockout, suspected account takeover, or to facilitate a high-value transaction, a call center, on-premises branch representative or online system can perform a quick identity document verification request with a customer. The system simply sends a link via an SMS message to the customer’s mobile phone using the organization’s CRM system. The link directs the customer to the web-based image capture experience which walks the customer through a foolproof ID document and selfie capture submission process and then authenticates the ID and matches the selfie to the ID photo. It benefits call center representatives by providing a remote, real-time verification method and prevents on-premises associates from having to be experts in detecting forged or manipulated IDs and photos. 

Balance fraud mitigation with a seamless user experience

At its very core, digital identity verification software should balance the effective mitigation of fraud while supporting a low-friction user experience to quickly verify legitimate customers. With automated DocV, companies avoid high operational costs associated with human review and enable revenue growth.

Learn more about Predictive DocV 3.0 here, or schedule time to speak with our team.