Automatically verifying someone's ID is the first building block in a digital customer onboarding process. It's a key part of know your customer (KYC) 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 a know your customer (KYC) process. Regulated firms can’t onboard a new customer until anti-money laundering (AML) checks are done and ID documents 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 a passport and driving license in hand are over. This is partly because of the trend towards digitization and partly because the pandemic super-charged transformation.
In-person KYC has become impractical in terms of time and efficiency, both for an organization and its customers. It's not convenient, there are fewer branches or offices open, and so it’s impractical to physically check documents. Many customers expect their KYC compliance experience to be digital now too.
Some customers may feel hesitation about sharing personal documentation online, but most are used to it. Completing ID verification online is unlikely to cause drop-offs in the process, in fact organizations may be at risk of losing applicants if those people applying for products are unable to submit information digitally.
According to an article by SalesCycle.com, 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 by Passfort, a Moody’s analytics company, that “60% of consumers are more likely to buy more products if they have a positive KYC experience.”
In 2021, Cifas reported 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. Moody’s Grid data shows a trend towards an increase in the number of fraud risk alerts on its database. Organizations need an accurate and reliable way to verify customer IDs online.
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. 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. Certain data checks can flag if a mobile phone being used to make an application for a product has been associated with fraudulent activity in the past. By uncovering risk, organizations can make decisions with confidence about who to work with, and who to off-board.
If physically checking ID documents is no longer optimal, and consumers want a fast, convenient KYC compliance experience online, then using the right automated tool for the job is essential. There has been a huge rise in the adoption of automated KYC processes, which includes software for orchestrating a workflow of identity checks, along with other risk-relevant information.
Using a solution that is digitally native to automate KYC checks, like ID verification, creates efficiency for organizations and convenience for their customers.
To minimize friction in a due diligence process, organizations need a KYC platform with three features:
The KYC platform should be ISO certified to ensure all customer data is processed and managed securely.
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 information and keeping it within the same platform makes the experience seamless for both the person doing the checking and the person being checked.
Integrated communication also has the benefit that once a new document is received, the platform can continue its automatic validation process - it doesn't require a manual review process to complete due diligence. This level of automation minimizes friction and enables applications to proceed through an onboarding journey with little to no human intervention, known as straight-through processing (STP).
While automated ID checks and STP can support better customer experiences and drive efficiency in compliance, the aim should not be to do away with human intervention.
Customers often enjoy interacting with “real people”, especially when they have questions or are unsure of something. And, 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.
Many organizations seek to find a balance by using automation to ensure swift onboarding, while reserving highly skilled and experienced compliance analyst to work on cases that present a higher risk.
Moody’s Analytics Know Your Customer (KYC) is transforming risk and compliance, creating a world where risk is understood so decisions can be made with confidence.
We help customers automate onboarding journeys in 197 countries, across 211 jurisdictions: completing +800 million new customer and third-party checks each day on average in 2022, including screening against our database of +17 million risk profiles, +446 million entities, and +34,000 sanctioned entities.
Our configurable solutions empower risk and compliance professionals to deliver compliance efficiency and excellent customer experiences with no compromise. If you would like to discuss automating ID verification or any other part of digital KYC, please get in touch – we would love to hear from you.