The new era of digitalization has already begun and the world around us is more and more interconnected. The amount of online activities undertaken by both businesses and users is on the rise. This puts the financial industry under pressure to adapt its services to an online form, requiring suitable tools to confirm who is on the other side of the screen. Remote identity verification is the key element in this process. We can certainly say that technology will stimulate the onboarding process and regulation will demand to reshape the financial sector. In this article, we will look at verification trends in online financial services.
We observe the ever-growing need for identity verification in the financial and banking sectors. All services in those industries must meet the rigorous requirements of compliance with KYC (Know Your Customer), AML (Anti-Money Laundering) policies, and so does the online form of them. We need to bear in mind that the Covid-19 era has caused a spike in the number of digital transactions. It is estimated that the growth rate of this market in 2021-2028 will reach 19.4%, achieving a value of 240 billion dollars. Thus, it is extremely essential to protect the market from online fraud. One of the key factors is identity verification which plays a prominent role in the entire global payment system. It is not a revelation that as the sector grows, so does the number of financial frauds related to it. Therefore, we can observe the global race to develop a safe solution for fast and frictionless transactions, enhanced by a convenient verification process for the user.
The fintech industry has been developing dynamically and causes noticeable demand for its services, both from users and investors. In the second half of 2022, we can still expect more amount of neobanks and cryptocurrency investment platforms to arise. However, the development is accompanied by increasing interest from cybercriminals responsible for attacks directed at the industry. This phenomenon is compounded by insufficient security measures. Considering that the programmers’ labor market is still insatiable new startups will look for ready-made verification solutions instead of developing their own methods as a means to fulfill the KYC process. In the coming years, we can expect a new wave of financial technology companies, for which identity verification will be indispensable.
In the banking and fintech industries, we can assume that efforts to improve the user experience will be enhanced and the approach to verification method will evolve. There are two essential factors to acquiring and retaining the customer. The ease to complete the registration procedure and the reduction of the time between submitting the application and its approval. The lack of those elements may cause the loss of customers and be a chance for fast-acting competition. Innovative identity verification through open banking and data-sharing initiatives, based on security and convenience for the user may be fundamental.
Let’s just look at the statistics and imagine the future. According to BusinessWire majority of Canadian users would support the use of safety, consolidated digital ID system because of present privacy concerns. Keeping in mind that the Covid-19 pandemic has transferred people’s willingness to use online services instead of face-to-face interactions, this research also shows that about half of respondents would feel more comfortable using digital transactions. And, here is the main point of our attention – two-thirds of them said that they would like to use a private digital ID to do it safely.
As the digital payment market was valued at 68.61 billion dollars in 2021 and is expected to grow at an annual rate of 20.5% from 2022 to 2030 we can assume that it will still be an enormous opportunity not only for companies and investors but for cybercriminals and money lounders also. That’s why identity verification may play a significant role in the process.
The transformation of online financial services depends on ever-changing and pressing regulations. We have already witnessed the implementation of GDPR, Payment Services Directive2, and AML (Anti-money laundering) policies. In 2020 and 2021 they evolved. EU’s Fifth Anti-Money Laundering Directive came into effect bringing official regulation for cryptocurrencies and cryptocurrency exchanges. Later, the Sixth Directive was issued and an extension of the criminal liability for money laundering offenses was sanctioned. Also, there were changes in FINTRAC and FinCEN acts aiming to strengthen due diligence in the financial services. You can look up the summary of KYC changes here. Moreover, CCPA (California Consumer Privacy Act) will come into action on Jan 1, 2023, and according to research 90% of American companies is not prepared to be in compliance with it. The companies in the spectrum need to be aware that failure to comply with regulations can cause detrimental reputation damage and impose huge fines. The most spectacular case from last year was Credit Suisse and its deficiency to comply with AML and KYC policies. We can expect more regulations to come into action, the ones that determine fines for potential Russian sanctions evasion in particular. Also, the need for clarification of money laundering offenses in each financial branch and removal of legislative loopholes are to be seen.
Fully-Verified offers services that enable comfortable identity verification online, and we are prepared to cooperate with the companies from the finance sector which have begun or are planning to implement solutions facilitating access to services traditionally reserved for face-to-face interactions.
Identity verification takes place during a video call with the help of a specialized operator. Our services incorporate technology, biometrics, artificial intelligence, and the process is supported by human intelligence in the form of two options:
You can find more information about our solutions for financial services here.
Fully-Verified was created as answer to its founders collectively losing over $150 000 to various types of fraud in their eCommerce businesses.