Automating identity verification for customer onboarding

Automatically verifying someone's ID is the first building block in a digital customer onboarding process. It's a key part of KYC and AML due diligence. So, what do you need in the process and what should you look for in an automation tool?

Verifying someone is who they say they are is square one in the Know Your Customer (KYC) process. Regulated firms can’t and shouldn’t get a new customer onboarded with a product or service until the ID documents are in and verified.

Going through a process of physically reviewing identity documents for customer onboarding is old hat though. The days of applying for a new credit card with your passport and driving licence in hand are over. This is partly because the market was headed towards digitisation anyway, and partly because the pandemic super-charged change.

In-person KYC is impractical in terms of time and efficiency, both for the financial institution and the customer. It's not convenient, there are fewer branches or offices open, and so it’s next to impossible to physically check documents. But frankly, customers expect their KYC compliance experience to be digital now anyway.

Sure, some people may feel a little hesitation when it comes to sharing personal documentation online, but everyone is pretty used to it now. Completing ID verification online is not likely to cause drop-offs in the process with genuine applicants. In fact, it could be said the opposite is true. Financial institutions may be at risk of losing applicants if those people applying for products are unable to submit information digitally when they want to. 

According to an article by, one of the key reasons people gave for abandoning applications for financial products was that they were asked to provide personal information by post or in branch. We also know from research carried out recently that poor digital KYC processes with too many steps can lead to poor perceptions of a banking brand.

What's being verified during customer onboarding?

Financial institutions need a good, reliable way to verify a new customer’s ID online. Getting the basics right is so important because of the risk of fraud, money laundering, and other financial crime.

Cifas reported last year that there were “just under 190,000 cases of identity fraud” in the UK alone. Much of this ID theft was related to applications for plastic cards. Trends show that instances of fraud are only set to increase with the ongoing transition to digital financial services, online applications, and automated onboarding pushing this ever forward.

Electronically verifying an official document can cover some of the basics of automated onboarding and risk management. This includes, for example, checking and verifying names and addresses. 

Other more sophisticated checks can look for signs of forgery on an ID document, or even instances of fraud associated with a particular device used to make an application. Regulatory technology (regtech) can flag if a mobile phone being used to make an application for a new product has been associated with fraudulent activity in the past.

The aim is to swiftly and confidently get a result for these first, fundamental KYC checks and to confirm IDs. Then there is a clear pass or fail for the person applying for a product and the KYC or AML process can continue to complete onboarding.

The right regtech for the job

If physically checking ID documents is no longer possible, and consumers want a fast, secure compliance experience online, then using the right KYC tool for the job is essential. There has been a huge rise in the adoption of regtech solutions to automate KYC processes, which includes software for automatically checking identity documents digitally.

Using a regtech solution that is digitally native to automate your KYC checks, like ID verification, creates efficiency for financial services businesses and convenience for customers.

To minimise friction in this part of the due diligence process, you need to use a KYC platform that can do three things:

1.     Capture an individual’s ID document, such as a passport or driving licence

2.     Access data to automatically check or match the ID document

3.     Confirm whether the check has passed or failed

The best platforms will also be ISO certified to ensure all customer data is processed and managed securely.

Communicating with customers

Another fundamental to look for in the technology used to automate ID verification is the ability to communicate directly with customers through the platform. It's often necessary to request additional documentation and keeping it within the same process makes the experience seamless for the person checking and the person being checked.

This integration of communication also has the benefit that once the new document is received the platform can continue the automatic validation process of the new customer’s ID - it doesn't need a manual review process to complete due diligence.

This level of automation minimises friction and enables applications to proceed through an onboarding journey with little to no human intervention, known as straight-through processing (STP). But it also means trusted relationships with customers are initiated from the beginning of the relationship.

Customers get a better onboarding experience, but they also know that you are taking time and care to manage your relationship with them, and control risk. While customers want convenience and efficiency, they also want to know their banking provider - Neobank, challenger or established institution - is taking risk seriously and protecting them.

The obvious aim is to maximise the number of applications that can be completed using STP, while bringing compliance professionals into the process when they add value for decision making and judgement calls. This approach delivers efficiency, better customer experiences, and reduces drop offs. As we know, the number of customers who do abandon applications is impacted by the smooth running - or otherwise - of a KYC process.

The human touch

While automated ID checks and STP are great for customer experience and drive efficiency in financial institutions, the aim should never be to completely do away with human intervention. 

Firstly, people still enjoy interacting with other people, especially when they have questions or are unsure of something. Secondly, when it comes to ID checks, the “sniff test”, i.e. an expert KYC analyst reviewing a case that doesn't feel right, can add immeasurable value.

The aim should be to use automation in the majority of instances, ensuring a swift onboarding journey in most cases, while reserving the highly skilled and experienced compliance analysts’ time to work on cases that present a higher risk. This should create the right balance within the overall due diligence effort.

Get in touch

PassFort facilitates more than 4.5 million customer onboarding journeys for financial institutions each year in 197 countries worldwide. 

If you would like to talk to us about automating your ID checks or digital transformation of your KYC and AML processes, we would love to hear from you. Please get in touch anytime.