Recent research points to an increase in financial crime as criminals take advantage of access to billions of compromised data records for sophisticated application fraud attacks targeted at financial institutions.

The research we carried out with the AITE Group in 2018 found that 13 billion data records were stolen or lost in the US since 2013, which in turn is driving increased application fraud that’s set to cost banks in the US $2.7 billion in credit card and DDA loses in 2020, up from £2.2 billion in 2018. This is a global issue with the UK fraud prevention service Cifas highlighting that around 175,000 cases of identity fraud have been reported by its members per year over the last couple of years.

Consumers expect a seamless customer service

While financial crime increases the pressure on banks to eliminate friction when interacting with customers is growing. This is because in the digital age consumer expectations are shaped by their experiences in engaging with the digital behemoths, such as Apple and Amazon. This heaps pressure on those in financial services to deliver similarly friction-free interactions online, with the importance of ease of use starting with onboarding.  

Unfortunately, too many banks still experience high levels of attrition with digital channel onboarding when hurdles in the process trip up prospective customers.

Therefore, it was perhaps not surprising when asked about key business case drivers for new account risk assessment tools, top of the list for fraud executives at banks, at 88%, were those that improve the customer onboarding experience, according to our research. The challenge for banks is that in watering down KYC and AML compliance procedures to speed up the onboarding process the potential for fraud increases.

So how can financial institutions ensure that they don’t fall victim to fraud, yet meet their AML and KYC compliance requirements and deliver a seamless onboarding experience for new customers? 

Successful identity verification starts with the right data

The essential ingredient to deliver effective ID verification for KYC and AML purposes, and therefore avoid fraud, is having access to the right data. 

This data must be the most up to date, relevant data, from multiple sources of billions of global contact records from trusted reference data sources. They must be sourced from government agency, credit agency, utility company and international watchlist sources. Only then will banks be able to effectively confirm proof of address and that the potential customer is who they are who they claim to be. Any data taken from a limited number of sources won’t deliver the appropriate level of insight and leaves the financial institution open to fraud.

Ideally the data sourced should not only verify but enrich the customer data to deliver a well-rounded view of the customer for future sales and marketing campaigns. It should help tidy up the missing parts of a postal address or add an additional contact email address, for example.

Most importantly, the technology that powers the data must be able to deliver this insight in real-time to ensure a positive onboarding experience. This will help banks to not only avoid fraud, but help them standout in a crowded marketplace amongst those that don’t offer this level of service. 

Liveliness checks

Establishing ‘proof of life’ using biometrics, particularly with interactions between banks and their customers increasingly taking place online, is critical to help avoid fraud. It’s possible to efficiently do this by using a service that, for example, monitors eye movement to ensure that you are speaking to a real live person not a photo.

Biometrics also helps banks to quickly establish a customer’s identity, enabling them to avoid asking time consuming security questions. This ensures customers can access their account faster, and that they have a good experience. However, financial institutions need to source the latest facial recognition and other biometric technology to help confirm the potential new customer’s identity.

With financial institutions experiencing an increased threat of financial crime via application fraud, while at the same time under pressure to deliver a seamless customer onboarding experience in an increasingly competitive open banking marketplace, they must seek the appropriate data and technology that protects themselves and enhances the experience of the new customer.