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Setting the standard: Advancing ID verification in banking and finance

iStock 1386405715 - Global Banking | Finance

Setting the standard: Advancing ID verification in banking and finance

125 - Global Banking | FinanceBy Nir Stern, VP product management, AU10TIX

In the banking/finance industry, robust ID verification (IDV) has long been important for compliance with KYC and other regulations. However, the new generation of AI-based IDV technologies authenticate identities so rapidly and offer such a positive user experience that they enable new use cases for banks. For example, it is a much more secure and fraud-proof method of strong authentication than traditional second-factor authentication. Also, banks may soon face more liability for P2P fraud, so it is imperative that they make sure the people opening accounts are who they claim to be.

Unfortunately, it can be difficult for organizations to evaluate whether the IDV solution they are using is the best option for their needs. The absence of standardized protocols and benchmarks, compounded by the sheer number of vendors in the space, create considerable complexity and confusion.

Comprehensive collaboration among industry stakeholders is necessary to ensure effective standards that meet the evolving needs of banking and finance. By setting clear benchmarks for ID verification, the sector will be better positioned to combat fraud, bolster compliance efforts, and deliver seamless user experiences.

In the absence of IDV industry standards, I would argue that the following qualities are the most important for financial institutions (FIs) to keep in mind when selecting an IDV solution:

The Right Balance

An IDV solution’s most important job is to find the right balance between accuracy and security. It is critical that the pursuit of high conversion rates doesn’t compromise fraud detection.

Speed and Efficiency

Banking/financial organizations must be able to provide customers with a superior user experience, and speed and efficiency are a priority. If it takes customers several minutes to have their identities verified during the onboarding process, they are likely to give up and try a competitive service. IDV vendors must be able to provide fast, efficient service and handle large volumes of verification requests without sacrificing accuracy or security.


The consequences of non-compliance with financial regulatory requirements can be severe. Financial penalties and the loss of licenses are significant risks faced by institutions that fail to meet the necessary standards. To mitigate these risks, it is essential to work with vendors who possess regulatory expertise and have a track record of compliance with diverse requirements.

In recent years, data privacy has also emerged as a critical concern. Non-compliance with data protection regulations has resulted in substantial penalties for organizations across multiple industries. Partnering with non-compliant vendors exposes institutions to legal and financial consequences. To mitigate risks, FIs must ensure that their chosen ID verification vendors prioritize data privacy and comply with relevant regulations.

Global Experience

FIs that operate globally require IDV solutions that can support a wide range of identification documents and adapt to changing regional regulations. If they are unable to comply with global and local regulatory frameworks, they are opening the door to costly non-compliance fees.


New threats are constantly arising, and IDV vendors must be willing and able to adapt to them. For example, we are now seeing fraudsters using AI-generated deepfakes to trick detection solutions. Some solutions are able to identify them, but many others are not.

Industry-Specific Benchmarks

Although standards are important to all customer-facing businesses, it’s interesting to note that different industry sectors prioritize different aspects of ID verification. For example, e-commerce and digital entertainment sectors often prioritize high conversion rates over maintaining security. In contrast, sectors with strict security requirements, such as finance and government, prioritize fraud detection to protect their customers and assets.

The banking and payments industries place a premium on accurate identification to prevent financial fraud and ensure compliance with AML regulations. Additionally, geographic regulations influence the KYC flows, with different regions requiring specific ID verification methods. For example, some jurisdictions may require video recordings or proof of address as part of the verification process.


Due to the nature of the banking industry, effective and efficient ID verification is crucial for financial fraud prevention, regulatory compliance, and an optimized user experience. The establishment of industry-wide benchmarks is pivotal for success, but in the meantime, banks must develop the strongest IDV toolbox possible. By collaborating with reliable vendors that meet the standards outlined in this piece, institutions can mitigate risks, build trust, and safeguard the integrity of the financial ecosystem.

Nir Stern is VP of product for AU10TIX, the global technology leader in identity verification and ID management automation.

Global Banking & Finance Review


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