The financial services landscape is rapidly evolving. Fraudsters are getting more and more sophisticated1, compliance regulations are getting more stringent, and customers are demanding faster and more secure ways to transact online in an increasingly competitive and crowded marketplace2. In many cases, financial institutions are spending exorbitant amounts on operational costs3 in an attempt to keep up, and still not finding success.
There is a better way. In this blog, we’ll explore how financial institutions can successfully mitigate fraudulent activities, safeguard customers, and deliver seamless online experiences that comply with KYC and FINTRAC regulations through layered verification – staying one step ahead of the competition and fostering trust with their customer base.
Understanding the Landscape
Financial institutions face many challenges when it comes to customer identity verification and authentication, including:
- Cyber Threats and Vulnerabilities
- Regulatory Requirements
- Marketplace Competition
Let’s explore each in more detail.
Cyber Threats and Vulnerabilities
As technology advances, so do the tactics of fraudsters. Deep fake fraud, phishing, blockchain exploitation, insider threats, and AI-powered fraud are just a few of the escalating risks4.
In fact, traditional authentication methods like usernames and passwords have become one of the most common targets for brute force attacks, credential stuffing, social engineering threats5, and data breaches6. Yet 80% of financial institutions aren’t prepared to offer alternatives7.
Regulatory Requirements8
Financial institutions in North America rank KYC (Know Your Client) as their number one challenge for account onboarding9. It’s no wonder: FINTRAC (Financial Transactions and Reports Analysis Centre of Canada) requires that all financial institutions follow one of the following four KYC identity verification methods:
| Method | Description | Challenge |
|
Government-Issued Photo ID |
Verifying a customer’s identity using a government-issued photo ID (e.g. driver’s license or passport) checked in-person or through scanning technology along with a selfie. |
In-person verification is time-consuming and cumbersome for clients; scanning technology can create friction-filled customer experiences. |
|
Credit Bureau |
A credit bureau is used to verify customer information. While effective. |
Limiting for new customers or those without a credit history. |
|
Dual-Process Verification |
Verifying two forms of identity from trusted sources. |
Manually-intensive and extremely time-consuming. |
|
Regulated Entity Information Collaboration |
Collaboration between institutions or with other regulated entities that adhere to FINTRAC’s regulations. |
Data privacy concerns and a lack of standards make information sharing difficult. |
Marketplace Competition
Gone are the days where customers had very little choice of which financial institution they would use. Today’s crowded and competitive marketplace counts over 274 fintech companies competing for customer share (up from just 25 in 2017)10.
As organizations attempt to implement new identity verification and authentication workflows, a smooth user experience is often the first thing that’s compromised. But today’s customer is increasingly digital-savvy and will no longer tolerate a sub-par experience or just wait for things to get better. With so many options at-hand, customers will go where the speed, safety, and security are up to their standards. Financial institutions who fail to meet or exceed these expectations will be left behind11.
Where Layered Verification Comes In
Based on all of these complexities, it’s no surprise that financial institutions are looking for a solution to enhance their safety and security practices, simplify compliance, and remain competitive in the marketplace. That’s where layered verification comes in.
Layered verification, also known as step-up verification, involves adding multiple layers to customer identity verification and authentication workflows. Institutions can combine methods such as document liveness and facial and voice biometrics to provide a multifaceted and adaptive approach to customer identification, helping to mitigate fraud and prevent account takeovers while streamlining compliance and ensuring a smooth customer experience.
The Oliu Difference
In order for financial institutions to successfully add this additional layer of complexity and security into their existing applications, they are seeking robust and technologically advanced solutions. And that’s where Oliu comes in.
Oliu recognizes the importance of customer identity verification and authentication to mitigate fraud and reduce account takeovers, and how crucial it is that this security does not come at the expense of exceptional customer experiences12. Our robust solution compliments CIAM frameworks (Customer Identity and Access Management) and is completely compliant with FINTRAC’s requirements using government-issued identity verification.
Here’s how it works:
| 1. Customer selects their ID verification method and Oliu verifies their chosen form of ID. | 2. Customer receives a verifiable credential based on their verified ID. | |||||
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| 3. Customer stores the verifiable credential in their digital wallet. |
4. Verifiable credentials streamline authentication and re-verification workflows while eliminating unsecure password workflows. | |||||
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Conclusion
Layered identity verification is not a luxury; it’s a necessity. Financial institutions must embrace this approach to mitigate risk, protect their reputation, and build trust with customers in a competitive marketplace.
Oliu’s plug-and-play solution helps financial institutions confidently implement identity verification and authentication workflows into their existing applications without building functionality from scratch. Join Oliu today to combine technology with customer-centric-functionality, and build towards a more secure digital world: https://oliu.id/banking/