Identity verification is more relevant than ever in the financial services industry. Not only its ideal solution to keep the identity-related frauds at bay but also prevent the fines for non-compliance with KYC/AML. Read this post until the end if you want to know more about the financial services industry, it’s problems (related to cybercrimes), and how identity verification solutions can help businesses cope with those problems.
The reformed form of the financial services industry that we see today took years to become what it is today. If you explore the history, you will find that the birth of finance happened in Babylonia (300 B.C.) It was an ancient city in central-southern Mesopotamia (present-day in Syria and Iraq). At that time, temples and palaces were used to store valuables.
While the concept of finance existed since ancient times, the term financial services became widespread in the late 1990s, after the Gramm-Leach-Bliley Act was passed in 1999. The law allowed different types of firms operating in the United States financial services industry to amalgamate.
Japan had started modernizing its financial system during the 19th century. For that, the Japanese government established the central bank in 1882 and customized its banking system as per the Japanese conditions. Similarly, in the late ’90s, most European countries had started reforming their financial sectors.
Today, we see the new frame of the financial industry. Over the last three decades, it has evolved dramatically to fulfill the ever-changing landscapes, whether its customer demands or technological changes.
Though things are more comfortable for consumers nowadays, cybercrimes such as identity fraud, credit card fraud, etc. have become widespread. While the journey to modernization in finance has been impressive, businesses and responsible authorities need to take more strict steps to prevent it from cyber and other possible threats.
In this post, we will take a look at some significant challenges for the financial services industry in the current scenario and how identity verification service can help individuals and businesses cope with them.
Problems in The Financial Services Industry
The financial services industry incorporates banks, credit unions, insurance firms, credit-card companies, accounting businesses, and more. Digitalization is helping all these institutions to improve their customer experience, efficiency, and productivity. Unfortunately, cybercriminals have also started leveraging technology to find loopholes in financial services and commit financial frauds.
In 2019, around 62% of breached data came from financial services only. Hacking and Malware attacks were majorly responsible for data breaches in the industry. Today, the leakage of confidential information and financial loss are the most significant risks for customers using any online financial service platform.
Online investment and financial platforms such as crypto exchange, online banking, and more have been excessively used for money laundering and tax evasion. Therefore, law authorities have made it compulsory for financial services firms to comply with KYC (Know Your Customers) AML (Anti Money Laundering) directives. Unfortunately, most businesses don’t use the right technology to comply with these directives, increasing online frauds.
In 2019, 12 of the world’s top 50 banks were fined for non-compliance with KYC and AML. The Swiss bank had received a fine of $5.1 billion for AML breaches by the French Criminal Court.
Identity theft is a big concern for businesses in the financial services industry. Online fraudsters use various tricks to access personal information of users and fraudulent financial gain. One widespread example of financial identity fraud is, fraudsters stealing your credit information to buy things without your consent. In some cases, cybercriminals also misuse your personal information to apply for new credit cards and loans.
Identity Verification for the Financial Services Industry
Identity verification plays a significant role in information security. It is quite helpful in preventing identity theft, money laundering, and other cybercrimes. Real-time digital identity verification solutions are capable of verifying any identity document and analyzing users’ previous records from the databases.
The identity verification ensures that a user or customer’s identity matches perfectly the one that is supposed to be. In most countries, identity verification, also known as the KYC process, has become obligatory for businesses associated with the financial services industry. Perhaps, this is the reason; identity verification market value has increased considerably. According to Statista, identity verification market revenue is expected to reach 18.12 billion U.S. dollars by 2027.
The following identity theft stats clearly show how vital identity verification is in the modern scenario.
- According to FTC (Federal Trade Commission), around 9 million Americans report identity theft every year.
- Credit cards, loan & lease, and phone frauds are the three most common types of identity theft.
- The United Kingdom, Denmark, and Ireland had the highest rate of identity theft in 2018 and 2019.
- As per the report of Finance.se, 56% of Europeans had experienced at least one type of identity fraud in 2018 and 2019.
How Financial Services Industry Can Benefit From Identity Verification
Comply with KYC and AML
Businesses associated with the financial services industry are required by law to comply with KYC and AML directives, and identity verification is an integral part of the KYC process. Not only identity verification helps businesses prevent hefty fines, but it also improves their market reputation. It’s advisable to have a robust identity verification solution in place to verify customers’ identities.
Protect Business against Criminal Activities
Identity verification helps you ensure that all transactions are legit and your users are not involved in any illegal activity. Moreover, identity verification improves user experience as users feels safer using your platform.
Minimizes Operational Cost
The modern AI-enabled identity verification solution helps you automate the entire verification process that saves time and money. Additionally, it reduces the chance of human errors.
No matter what business you’re in, if you’re looking for an advanced AI-enabled ID verification solution, iDenfy can help you out. Our identity verification service combines I.D. verification, face recognition, and liveness detection in one solution. Our automatic I.D. document detection solution can recognize and verify more than 1300 types of I.D. documents from more than 200 countries. Powered by machine learning and A.I., it can automatically recognize facial biometrics and check that it’s an I.D. photo. At iDenfy, we also help businesses comply with KYC and AML regulations. To know more about us and our services, you may contact us.