Can banks simultaneously stem financial crime and enhance the customer experience? Each of these mandates presents its own major challenge, and together they are equally crucial to the success of any financial institution. Transactions, such as onboarding, must be frictionless.

The negative impact on customer experience inherent to Know Your Customer (KYC) operations or anti-money laundering (AML) processes—those that create hurdles for the customer or feel too invasive at the moment of a transaction—poses a growing challenge to the financial services industry. Where does identity verification come in? To compete and meet customers’ high expectations, compliance professionals must also meet the requirements of anti-fraud initiatives. Today, data-powered banking makes this possible, tapping into a 360-degree view of the customer in real time.

In an instant, bankers can determine whether to accept new customers, detect fraud no matter the channel, and capture standard, verified data that drives data excellence throughout all operations. Integrating identity verification into banking systems Identity fraud comes in a few shapes and can be difficult to detect in a timely manner. In identity theft, an attacker may hijack a victim’s full identity, ultimately harming the individual as well as their financial institution.

Alternatively, the attacker may create a synthetic identity from the ground up or use data elements of a real, stolen identity. In this case, the fraud is most likely perpetrated solely against the financial institution. Because mandates to minimize friction from banks’ customer onboarding experiences can compound fraud, the compliance team must prioritize a balance between the two.

Instead of replacing systems, data-driven identity verification technologies can be paired with existing banking software platforms—an approach that reduces costs and eases deployment. The role of customer data Delivering effective identify verification hinges on data, even as there is no sole source of ID-verifiable data for banks to use globally. At the same time, regulations loom, and KYC/AML compliance is required.

A range of initiatives apply, spanning such rulings as the Customer Identification Program (CIP) within the Bank Secrecy Act (BSA) and the Fair and Accurate Credit Transactions Act’s (FACTA) Identity Theft Prevention program.    As a result, compliance relies on a range of data streams containing billions of global contact records and ideally featuring up-to-date, relevant data from multiple sources. Useful data points are accessed from international watchlist data, as well as data list vendors and services, and entities such as government agencies and credit bureaus.

These sources empower data mining for real-time identity verification and also support long-term success with BSA or AML initiatives. Fraud risks can be identified early and continuously in a banking relationship, helping institutions recognize value from a 360-degree single customer view. This holistic approach also ensures that correct, standardized data powers all banking operations, influencing product development, sales, and marketing based on a clearer understanding of account holder needs.

Most importantly, for the onboarding process, data validation occurs in real-time during the transaction, creating a seamless process for the bank and a smooth initiation for the customer to the bank’s level of service. The technology behind the data Optimized data solutions also consider and avoid ‘false-positive’ results that may be generated from similar names or incorrect data. Are we working with J.

Smith, John Smith, or Jon Smyth? Smarter software algorithms address these matching challenges and can scale to meet the needs of financial institutions of all types and sizes. Integrated biometrics show promise as well, including visual and voice options that accelerate processes and eliminate the necessity of verifying personally identifiable information. ‘Proof of Life’ in biometrics is imperative, as more banking transactions take place online.

For example, is the bank communicating with a real individual, or an image or avatar of someone? And does this captured image match the system’s identification photo? Biometrics can replace time-consuming security questions before each customer interaction. Semantic technology (semtech) also plays a new role. As a form of artificial intelligence (AI), semtech associates words with their meanings and visualizes relationships between and among the data.

Semtech enables compliance officers to utilize greater in-depth intelligence on banking customers by making powerful, real-time connections among the vast array of ID verification data within their countless lists and records. Together these tools support proper validation of identities,but can also help enable unique or institution-specific workflows, such as automated credit-checking and flexible, anti-fraud processes. These tools can also allow bankers to modernize effectively and cost-efficiently—retiring their most costly legacy compliance and KYC systems.

Operational value can be generated by reducing the headcount required for manual review of identity processes and instead empowering trained staff to focus on more strategic efforts such as product development. Ultimately, banks can also rely on these automated systems to avoid risk to their reputations with both regulators and the general public.

By Phil Maitino
Oct 07, 2022 00:00
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