Customer identity and verification (ID&V) processes are a critical part of compliance for regulated businesses. These checks are designed not only to meet regulatory requirements but also to protect businesses from fraud, secure customer information, and improve the overall user experience.
Yet, many ID&V processes are falling short. Data shows that as much as a quarter of customers abandon onboarding when faced with cumbersome verification steps, leading to significant revenue losses.
Meanwhile, fraud attempts are on the rise – synthetic identity fraud alone has more than doubled in recent years, costing businesses billions annually. These ineffective processes increase operational costs, frustrate users, and expose organisations to compliance risks.
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To address these challenges, businesses need to rethink their ID&V strategies, adopting streamlined, secure systems that balance compliance with customer satisfaction. This approach not only reduces fraud risks but also helps retain customers, ultimately protecting both reputation and revenue.
Why customer ID verification is broken
Customer ID verification is failing because many onboarding processes remain outdated and disconnected, relying on manual processes or fragmented digital tools that can’t keep pace with modern demands.
These systems often lack the sophistication needed to identify and combat evolving fraud tactics, such as synthetic identities. They also introduce unnecessary complexity for customers, who face confusing, slow, or repetitive processes during onboarding.
As a result, genuine customers encounter friction and delays, while bad actors find ways to exploit weaknesses. This combination of inefficiency and vulnerability undermines the goals of ID verification and exposes businesses to reputational and financial risks.
How poor ID&V affects regulated businesses
ID&V isn’t just a regulatory requirement. For financial institutions, fintech companies, and other regulated sectors, it’s a frontline defence against financial crime, synthetic identities, and fraud.
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Bad actors can exploit manual ID&V processes by bypassing security measures to gain unauthorised access to regulated products and services, launder money, or commit fraud.
One common method is through the use of synthetic identities, where fraudsters combine real and fabricated information to create seemingly legitimate profiles. These synthetic identities can pass through weak verification processes, allowing fraudsters to open accounts, access financial services, and engage in illicit activities undetected.
But poorly executed ID&V processes don’t just open doors to bad actors; they create unnecessary friction for genuine customers going through the onboarding process. Outdated processes, such as requiring physical copies of documents or excessive delays, frustrate users. This can lead to high abandonment rates, with customers seeking more seamless experiences elsewhere.
The costs of manual ID&V processes
Manual ID verification might seem a simple task, but its hidden costs quickly become evident. Labour-intensive processes demand significant time to review documents, cross-check data, and validate identities. These tasks are not only costly but also prone to human error, leading to compliance breaches, financial losses, and reputational damage.
Manual systems also fail to scale effectively. As businesses grow, the demand for ID verification increases, putting pressure on teams or requiring expensive new hires. This approach isn’t sustainable. For customers, delays caused by manual checks can be frustrating. Long onboarding times or repeated requests for documents create bottlenecks and drive potential customers toward competitors with faster processes.
Record-keeping is another challenge. Manual processes often rely on fragmented or outdated filing systems, making audits or investigations cumbersome. Missing or poorly maintained records can lead to non-compliance and damage trust. For today’s customer, manual ID verification is an inefficient and costly liability.
Outdated or slow systems turn what should be a straightforward process into an ordeal. Lengthy waits, unclear instructions, and repeated document requests drive customers away.
These inefficiencies also make manual systems expensive. From staffing costs and increased risk to missed instances of suspicious activity and financial crime; the adverse impact on a business can be significant, harming customer satisfaction and directly impacting your bottom line.
The shift to digital ID digital verification
In the past, verifying someone’s identity required physical documents like passports or utility bills. While this worked in smaller-scale setups, it doesn’t align with today’s digital-first expectations. Customers now expect speed, simplicity, and accuracy.
Technological advancements and changing customer needs have driven the shift to remote verification. Modern digital solutions that incorporate document scanning, biometric checks, and database cross-referencing are transforming the process. Automated systems can verify identities in seconds, reducing delays and improving accuracy. Remote verification tools excel at detecting fraudulent documents and synthetic identities, helping businesses scale efficiently and safely.
The benefits of digital ID verification tools
Despite these advancements, many businesses are stuck with outdated systems, missing out on the benefits of digital verification.
Digital ID verification platforms address the shortcomings of manual processes, delivering a streamlined experience for businesses and customers alike. These tools can verify liveness, vet identity documents, spot inconsistencies, cross-check data with global databases, and apply biometric checks to confirm authenticity.
For customers, the process is seamless. Intuitive platforms guide users through straightforward steps, with real-time feedback keeping them informed. Whether using a smartphone, tablet, or desktop, verification becomes simple and efficient, building trust and loyalty.
For regulated firms, digital tools simplify compliance during the onboarding process. Automated record-keeping ensures accurate, accessible audit trails, while global and local standards are met without the risks associated with manual errors. By reducing friction, businesses can balance regulatory demands with a customer-centric approach.
