As technology advances, it seems more important to verify identification than ever before. For companies and brands, it's largely a matter of trust between them and the consumer. Some institutions, like banks, have a legal obligation to know who their clients are. That means taking additional steps for ID verification, at every stage of the banking journey, including initial onboarding.
Despite its increasing importance, there are some facts about ID authentication that are not widely understood. Here's a primer on what you need to know in order to meet your obligations as a brand and improve the relationship with your customers. New technology makes this process easier, elevating the experience for banks and their new clients.
ID Verification Isn't the Same as ID Authentication
As the shift has gone from offline to online transactions, institutions have adopted new strategies to verify who their customers are. When ID is presented in person, there is a human element that allows the company agent to spot suspicious activity. This could include particular behaviors that raise a red flag that someone may be attempting to perpetrate fraud — even if the individual is presenting identification documents.
With digital transactions, this human element is notably lacking. But there are additional checks to make sure the transaction is on the up-and-up.
Asking a series of personal questions, for example, as part of a two-part authentication process, is a standard way to confirm that legitimate ID is not being used for nefarious purposes.
But it doesn't just stop there. New ID authentication processes may involve biometrics, such as facial recognition and fingerprints, to determine that the entity opening an online account is doing so legally, and for legitimate purposes. Advanced technology means systems can now tell if the human being opening an online account is using forged or stolen documents. Even if those documents are indeed valid, such systems know if they don't match the person claiming them as their own.
Therefore, ID authentication isn't just about seeing valid documents; it’s about matching that information with an individual. These additional steps on top of ID verification, whether they take the form of a savvy customer service agent having an in-person conversation, or a sophisticated online algorithm, protect your business and your clients.
KYC Places Greater Responsibility on Institutions
Beyond just adherence to good business practices, you might ask why rigorous ID verification is so important. In some industries, specifically banking, there is a legal responsibility to know with whom you are doing business. In the U.S., this is typically called KYC ("Know Your Customer"), as part of AML ("Anti Money Laundering") requirements. That responsibility extends past the initial onboarding to the entirety of the bank's relationship with the customer.
No matter how a client opens an account, KYC mandates that the bank verify and authenticate identity. They must also establish a risk profile for that client and understand the purpose of that individual's financial products. Once the client is doing business with the bank, the institution must monitor activity for unusual transactions — anything that raises a red flag. Adherence to these rules is part of the regulatory requirements banks must meet.
Banking Customers Dislike Cumbersome Onboarding
Rigorous identification requirements are mandated by law. They are also typical across the financial services industry. But that doesn't mean the typical banking customer is willing to sit back and endure a long onboarding process — especially if they expect to complete the steps online. This impatience is felt most strongly among younger generations of banking customers. That's those who primarily use technology in their daily lives: Millennials and Generation Z.
Of course, this is no small matter. Despite high spend on marketing, a frustrating onboarding experience can lead new customers to go to competing banks. Clients want the ease of a self-guided online interaction, but they also want help on demand. That's why banks with the highest rated onboarding processes are those who also have agent assistance available in real time.
It's therefore incumbent on banks to modernize their onboarding processes. This allows them to both satisfy their legal obligations and stay competitive with online innovators in the banking space. Customer experience is arguably the single most important element that distinguishes banks from each other in the current market.
New Technology Makes it Easier to Authenticate ID
Thankfully, banks don't have to produce this technology in-house. There are a number of existing tools that help to streamline, modernize and improve the online customer experience — all while enhancing and tightening security protocols. That includes digital ID verification. No longer are bank customers required to go to a branch to present identification. Instead, the system takes care of online ID verification.
It's that simple — AI-powered verification that makes your legal obligations easier to meet and quickly reduces your customer's frustrations. The moment you capture an online banking client through effective marketing, you can sign them up for an account — no additional steps needed. There's therefore little risk that those clients may change their mind or opt to take their banking business elsewhere.
How Lightico is a Powerful Tool
Lightico is a trusted partner for banking institutions who want to improve their customer experience. The platform includes a photo ID verification tool that is powered by AI. The bank communicates with the customer using a text message to their mobile phone. No need to present in person. The client takes a photo of themselves and their identification card. The tool uses advanced AI forensics technology to confirm that there is a match and verify ID.
At the same time, Lightico's platform integrates seamlessly with agent guidance. So at any time, that new customer can get help. If necessary, a live agent can guide the new customer through the AI-powered ID verification process. It is the ultimate integration of high-end tech and old-fashioned customer care.
When banks give customers the best of both worlds, they start the new customer relationship off right. They know who they are dealing with, as the law requires. They also know how to improve their customer experience, which is great for business.
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