Why ID Verification Is No Longer a Barrier to Global Growth in Banking

By Barley Laing, UK Managing Director at Melissa

Issues related to effective identity (ID) verification have restricted the global growth of both large banks and smaller challenger fintechs. With its plethora of internationally recognised IDs and verifiable private addresses, the western world is far different from much of the rest of the world, where this type of information does not exist. For example, many people in Africa and Asia lack recognised addresses. This anomaly prevents financial institutions from carrying out vital ID checks as they normally would, meaning they risk missing out on possible expansion into new and often burgeoning markets.

Proliferation of mobile

Smartphone usage is increasing in all corners of the world. Africa is no exception as the continent is  set to see another 300 million new mobile internet subscribers in the next few years. This rise offers an opportunity to financial services organisations based in the west who have been concerned about the ID verification process in countries where ID, as they know it, can be hard to obtain.

While there’s no magic bullet approach to ID verification in these countries, it’s essential to use all the sources of information the mobile device provides to inform the identity of prospective and existing customers. For example, mobile telephone numbers offer a form of digital identity as people rarely change them. These numbers can be used for dual stage verification, such as an SMS sent to the registered user’s mobile number with a unique code to complete the login to a secure website or transfer funds.

Technology is driving secure customer onboarding and ID verification via mobile. Today, prospective customers can use a merchant’s app on their smartphone to scan their identity documents – such as a driver’s licence. The scan can extract the prospect’s data from the Machine Readable Zone (MRZ), saving time while securing the correct data electronically for the financial institution. Checks can then be carried out in real time to verify the document.

The IP address of the mobile device can play a vital role in fraud prevention. It’s possible to match the location of the phone’s IP address with that of the registered owner – where they are known to live or work. If this information matches up, it’s likely the registered user is using the phone. However, suppose the device’s registered owner is based in a country different from the information provided by the phone’s current IP address. In that case, there could be fraudulent activity taking place.

But it’s not just mobile; other new technologies play significant roles in the ID process.

• Biometrics

Biometrics, which are human physical and behavioural characteristics that can be used to digitally identify a person, are becoming a vital part of the ID verification process. Once a customer has passed the ID checks at the onboarding stage, biometrics – which can operate across all devices – may help confirm the customer’s identity with facial comparison technology. However, basic biometric services can be hackable. For example, fraudsters could obtain the photo of a customer that might enable them to gain access to that person’s account. That is why it is crucial for organisations to use a biometric algorithm that checks for eye movement as part of their ID verification process. This ensures they engage with a real live person, not a static image or avatar, to prevent fraud. Just as important is how biometrics quickly and straightforwardly enable customers to access their account or service without responding to time-consuming security questions or remembering various passwords, thereby shaping a positive experience.

• Real-time access powers real-time decision making

When onboarding a new customer anywhere in the world, be sure to source a global dataset of billions of records. For real-time ID verification, fraud prevention, and data accuracy purposes, it should allow you to perform sufficient cross checks of the contact information provided by the prospective customers – their name, telephone number, email address, or home address. This dataset must leverage government agency, credit agency, and utility records, where possible, and access politically exposed person (PEP) watch lists.

• Social media tells a story

Don’t forget that social media such as Facebook and Instagram provide a wealth of knowledge on those who use them. Accessing this data within the parameters of best practice data protection for ID verification purposes helps organisations identify users’ location and transactional behaviour to support the ID verification process and prevent fraud.

Evolving technology – mainly related to mobile – makes fast, accurate, and secure ID verification anywhere in the world a reality. By combining this technology with access to accurate contact data from billions of global consumers in real time, the door is open for forward-thinking financial institutions to move into new global markets and drive strong growth securely.