Last updated: 23 January 2017
With the rise of digital banking and cloud based solutions, 2016 saw a hacking high in North America with 35 breaches occurring every second. Sixty four percent of these attacks were attempts – and successes – to gain personal identity information such as social security number, banking information, date of birth or even medical records.
Identity fraud is making headlines with significant financial loss and brand damage to institutions around the world. Modern day Bonnie and Clyde – Alberto Companioni and Patricia Perez-Gonzalez – were busted last year after running a credit card and identity theft scheme across the United States, resulting in about $2 million in fraud. And in April 2016, forty-eight people were indicted for “setting up fraudulent bank accounts and withdrawing more than half a million dollars in stolen cash at Atlantic City casinos.”
If these two articles are any indication, we’ve become pretty used to hearing “identity fraud” thrown around as a casual term, an ever-present threat that most people ignore until it happens to them. But the numbers are rising and new technological advances have enabled fraudsters to steal more easily and on a larger scale than ever before. And in order to protect their customers as well as themselves, banks and financial institutions have to respond.
Advising your customers to take steps to protect their own identity is useful, but not enough. By the time the customer catches on to the issue – by receiving a phony phone call or noticing unusual activity – it is too late. The fraud had already occurred. Then they are forced to go through the frustrating and time consuming process of reporting, and frustrated customers lead to less transactions more cancellations.
Why manual ID Verification checks are not good enough
In order to effectively fight fraud, the problem needs to be stopped by the financial institution itself. Banks often rely on employees to verify an ID document, and then proceed to conduct background checks, credit score checks, etc.
This first step of manual ID verification could prove the weakest link in a bank’s KYC process, because it subject to human error.
Manual ID verification processes are flawed in 6 main ways:
- Error-prone: Hundreds of state and government IDs are already in circulation, each with its unique security features. Furthermore, new laws and regulations have lots of states are reissuing their IDs in 2017. Bank employees could not possibly master all these details and manually identify a fake ID.
- Inconvenient: While banks are working hard to bring more and more services to digital channels, manual ID verification today can still only take place at the branch. Hence, operations like new account enrollment still cannot go fully digital.
- Vulnerable to fraud: With branch employees directly obtaining personal identifiable information from their customers during manual ID checks, there have been several cases where branch employees have exploited this data in their own fraud schemes. Manhattan’s top attorney says he prosecutes one case per month involving tellers.
- Time consuming: The current method of manual data entry leaves customers tapping their toes, checking their watches, and wishing they hadn’t bothered. Waiting while the branch employee verifies the ID and starts manually filling out forms detracts from the customer’s experience.
- Inconsistent: It’s difficult to enforce a manual ID verification process consistently across branches and employees. The overhead of documenting the process and filing the paperwork is taxing, and when audit time comes, it’s hard to always find what you need.
- Outdated: Digital driver’s licenses are the hot new thing on the ID scene, with companion IDs issued to drivers’ mobile phones. But current manual ID verification methods aren’t ready to handle this type of technology.
Issuers are paying the price for inadequate ID verification including irreversible loss of reputation in addition to the financial ramifications from fraud, lawsuits, and fines.
And with new compliances measures in place by the REAL ID Act, AAMVA and FINTRAC, manual ID verification is only going to get harder.
What’s good for governments is good for banks
New on the scene are solutions that perform automated ID Verification for banks. Utilizing the same award-winning ID verification technology used in twenty government programs worldwide, banks and financial institutions can now easily, efficiently, and cost-effectively protect both themselves and their customers from fraud while enjoying the perks and benefits of new technological advancement.
Automated ID Verification for banks addresses the six flaws in existing manual verification processes with some highly efficient features:
- Automated document forensics with accurate results
- Real-time analysis with results within seconds
- ID verification on any connected device (mobile, tablet, kiosk, PC)
- Facial recognition to match the photo on the ID with the person presenting the card
- Faster enrollment using automatic form fill-out using ID data
- Integration with back office for audit optimization