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Identity verification: 8 things to consider when choosing a solution

29 Jun 2023
Blog 8 things to consider when choosing a solution

Identity verification is a key component of Know Your Customer (KYC) protocols used by financial institutions to ensure due diligence and compliance with Financial Industry Regulatory Authority (FINRA) and federal regulations.

Lenders rely on identity document verification to authenticate borrowers and reduce fraud. Automation offers immense value in the verification process as financial institutions work to improve accuracy and reduce processing time.

Before adding automated identity verification software to their lending tech stacks, banks and financial services providers must first understand what automated identity verification is, its benefits and how it can integrate with existing workflows.

These three considerations are key to finding the right solution.

What is automated identity verification?

Automated identity verification describes the use of advanced software and artificial intelligence (AI) to validate the authenticity of identity documents. Automation can help lenders accurately verify a borrower’s identity and flag any potentially suspicious or fraudulent activity within identity documents.

Technology enables lenders to automatically validate a borrower’s identity and proof of residency using advanced optical character recognition, AI, machine learning  and contextual analysis.

 Automated identity verification solutions can be used to classify, capture and analyze many types of documents, such as driver’s licenses, passports, permanent resident cards, social security cards and state identification cards.

Processing identity documents has, historically, been a time-consuming, manual task for lenders. Automating the verification process provides faster and more accurate results, improving lender workflows and facilitating better lending decisions.

What should lenders consider when choosing an automated identity verification service?

When it comes to automated identity verification solutions, eight key considerations for lenders include:

1. Your business needs

Regulatory requirements, along with self-interest, make customer identification a fundamental need for every financial institution. As a report from the Federal Financial Institutions Examination Council (FFIEC) notes, banks and fintechs must have written procedures and compliance programs for customer identification. In addition to KYC requirements, financial institutions must follow anti-money laundering (AML) best practices.

2. How an automated solution can impact your workflows

Legacy manual processes for customer identification are slow and labor-intensive. Automated workflows enable financial institutions to reduce costs, boost quality and improve KYC processes. However, successful implementation requires integration into existing workflows. Lenders must select, deploy and manage automation technology with workflow in mind. Automated workflows can facilitate everything from initial screening to enhanced customer due diligence.

3. Document verification needs

Document verification is an essential part of the identification due diligence process.  Automated document verification replaces time-consuming manual review processes and helps lenders reduce risk. With intelligent automated verification technology, lenders can proactively identify document fraud, which improves loan underwriting and reduces the risk of potential losses.

4. Speed

Eliminating manual review of documents also speeds up loan processing and ensures data accuracy by reducing human errors and improving underwriters’ data quality. Automation can help accelerate the verification process by extracting data from bank statements and other documents with high accuracy. This reduces processing time and streamlines the decision-making process.

5. Accuracy

Automation is the key to a more accurate digital workflow. In particular, automated solutions that unlock the power of AI can help financial institutions expedite steps such as processing loan documents and obtaining approval signatures. Machine learning technology also provides the ability to better structure data extracted from paper documents in order to expedite lending decisions.

6. Fraud detection capabilities

Automated identity verification enables lenders to process and scan documents for signs of fraud. This technology can improve a financial institution’s ability to identify altered identity documents, invalid dates, alterations and forgeries. In addition to document fraud detection, automated verification can help identify the use of stolen or fictitious identities.

7. Compliance

In addition to detecting fraud, automation can help financial institutions comply with government regulations. Automating KYC and AML processes improves risk management and provides an audit trail for aiding in tax, licensing, accounting and regulatory compliance.

8. Customer experience

Customer service and customer experience (CX) require financial institutions to streamline workflows while ensuring compliance and due diligence. While lenders need to verify the identity of customers, they also need to streamline the process. Automation, including the use of online verification, helps reduce friction for customers. 

According to a Forrester survey, legacy identity verification processes often create negative customer experiences, noting problems with cumbersome data collection methods and online forms that integrate poorly with existing workflows.While 74% of respondents to the Forrester survey agreed that automated processes lead to better CX, only 14% of organizations have adopted fully automated solutions. At the same time, increasing regulatory requirements and concerns about identity fraud fuel the need for automation. In fact, 75% of those surveyed said that integrated identity verification technology is critical for the financial services sector.

While 74% of respondents to the Forrester survey agreed that automated processes lead to better CX, only 14% of organizations have adopted fully automated solutions. At the same time, increasing regulatory requirements and concerns about identity fraud fuel the need for automation. In fact, 75% of those surveyed said that integrated identity verification technology is critical for the financial services sector.

Automated identity verification services with Ocrolus

Ocrolus uses robotic processing automation, AI and machine learning technologies to provide forensic-level, automated identity verification based on the information contained in loan documents. This saves lenders time and money and reduces the risk of processing a fraudulent loan application. 

Financial institutions use Ocrolus identity verification technology to automatically verify borrower identity documentation and proof of residency information using advanced computer vision and contextual analysis. This advanced identity verification process classifies, captures and analyzes many types of documents, such as driver’s licenses, passports, social security cards, permanent resident cards and state ID cards.

Ocrolus processes every document with the highest level of accuracy — thanks to human-in-the-loop technology that leverages AI for processing alongside human experts for verification. 

When choosing an identity verification solution, lenders must ensure that it provides automation, integration, authentication and verification. Ocrolus delivers state-of-the-art technology to help financial institutions verify the identity of borrowers and comply with KYC and AML regulations. Moreover, Ocrolus solutions can be easily integrated into existing workflows, improving verification processes, reducing fraud and increasing efficiency.

This combination of accuracy and efficiency enables financial services providers to make better, more informed lending decisions while delivering a seamless experience for qualified borrowers.

  • Automated identity verification uses advanced software and AI to validate identity documents, improving accuracy and reducing loan processing time.
  • Lenders should consider their business needs, workflow impact, document verification, speed, accuracy, fraud detection capabilities, compliance and customer service when choosing an automated identity verification solution.
  • With Ocrolus, financial institutions can efficiently verify the authenticity of identity of borrower documents, enabling them to mitigate risk and make informed lending decisions.

Book your demo to discover how Ocrolus can help you more accurately validate identity with our automated document verification capabilities.