With the explosive growth of digital financial services, customer expectations are dramatically increasing. While banks are moving online and shifting information storage to e-databases, identity theft is taking manifold alongside. Financial institutions strive to make their services more accessible for creating an inclusive sphere. However, criminals are disrupting their customer conversion rates.
Cybersecurity threats, document forgeries, account takeovers and CNP fraud are some of the other prevalent risks. While financial technologies are making their way to the conventional Banking, Financial Services and Insurance (BFSI) sector, service providers require more robust security measures such as efficient identity verification. These monetary institutions make up $1.5 trillion or 7.4% of the total GDP and are predicted to further experience a growth of 6% CAGR by 2025.
Automation of the BFSI Sector and Customer Digital Onboarding
In recent years, financial technologies are entirely reshaping the landscape of the BFSI sector. Touchless payments, digital onboarding, information security, and remote accounts access are some notable shifts. From physical visits to internet banking, financial institutions are receiving a huge number of customers worldwide. Along with technological changes in the BFSI sector, client demands are increasing, especially in terms of security.
Banks, insurance firms, and other financial institutions need to take stringent ID verification measures while automating their services. Where fraudsters use synthetic profiles to escape regulatory checks and create fraudulent accounts, AI-powered identity authentication solutions increase cautions against them.
AI-powered fraud prevention solutions help the BFSI sector to reduce compliance burden, perform accurate Customer Due Diligence (CDD) checks, and prevent legal penalties. Financial institutions often face severe regulatory repercussions due to unmanageable workloads and negligence in improving their Know Your Customer (KYC) procedures. Therefore, to prevent fraud, the BFSI sector needs to automate its customer onboarding and screening mechanisms by integrating identity verification services. This process further involves:
BFSI Robotic Process Automation (RPA)
Manual ID verification methods such as document handling and information cross-checking are prone to human errors. It further involves high data discrepancies, which result in inaccurate customer identification. Not just this, manual IDV tactics involve high operational costs that make them unaffordable.
BFSI institutions need to automate their customer digital onboarding processes for more accuracy. Replacing human interpretation with Optical Character Recognition (OCR) for data extraction and Machine Learning (ML) for information analysis also reduces additional charges.
The use of Artificial Intelligence (AI) technology in identity verification further streamlines convenience combined with security. BFSI institutions can detect fraud attempts in time and restrict criminals’ access in the first place.
Biometric-Based Video Identification
Biometric identity verification systems are game-changers for the BFSI sector as they offer real-time customer authentication. Financial service providers can safeguard their operations with facial recognition and liveness detection from external criminal threats. Upon arrival, customers are asked to provide a real-time selfie or video which is analysed by AI algorithms. These identity authentication tools extract facial features and cross-match them with those on documents and within databases for additional accuracy.
Identity Verification Services – Mitigating Fraud in BFSI Institutions
According to TransUnion’s report, the fraud attempts on BFSI institutions rose by 150% in 2021 and another research predicts the losses to reach a cumulative $206 billion by 2025. These increasing numbers clearly indicate that financial crimes are off the scale while making it tough to mitigate risks for both customers and the whole sector alike. Fraud attempts also obstruct the BFSI sector’s KYC compliance.
The lack of customer data’s holistic view and inefficient analysis mechanisms further hinder the implementation of identity theft protection procedures. Inadequate activity tracking procedures result in late suspiciousness detection. Ultimately, BFSI institutions fail to submit regulatory watchdogs in-time fraud reports. Collectively, all these drawbacks are an outcome of inadequate identity verification mechanisms.
The Role of AI-Powered Identity Verification Solutions
Integrating AI-powered identity verification services is helping the BFSI sector to ensure seamless and secure automation. Financial institutions can improve customer experiences while leaving less room for fraudsters. Advanced biometric checks are hard to bypass as criminals can not impersonate distinct biological/behavioral features. Technologically advanced identity verification services are also accelerating commercial lending, financial inclusion, and the overall progress of the BFSI sector.
In the End
The BFSI sector needs to bring in robust synthetic identity fraud prevention solutions to safeguard customers’ digital banking journey. The AI-powered ID verification services automate financial operations and place necessary restrictions in criminals’ way. Therefore, BFSI institutions can perform efficient identity authentication, reduce compliance burden, automate customer onboarding, prevent legal penalties, and reduce fallout chances from the competitive market.
