5 Trends Impacting the Document Identification & Verification (ID&V) Market

The accelerating digital landscape has resulted in the rapid growth of digital services such as digital banking, telehealth and online marketplaces. With many businesses, particularly those in banking and financial services, serving more customers online, the importance of accurately verifying the individual on the other end of a transaction has increased significantly. As digital engagement models become more prevalent, companies that fail to adapt their identity proofing processes to be digitally relevant will find themselves losing customers, becoming targets of fraud and facing the consequences of not complying with regulation.

Ineffective identity proofing opens the door to fraudsters trying to pass as “good” customers that are nefariously using stolen personally identifiable information (PII) and synthetic identity fraud—usually for financial gain and other illicit activities, including money laundering, terrorist financing and drug and human trafficking.

Document Identification & Verification (ID&V)

One of the primary ways of validating a customer’s digital identity is through document identification and verification (ID&V). As part of this process, customers present some form of identity documentation like a government-issued driver’s license or passport—which includes PII and a photograph of their face—and when prompted, a selfie image as part of the verification process during digital onboarding.

This information is critical for any business that provides goods or services digitally, especially financial institutions (FIs), because it allows them to establish trust by not only validating that the document is legitimate, but by also verifying that the person claiming the government-issued documentation as their own is actually associated with the presented identity.

5 Trends Impacting the Document ID&V Industry

As the adoption of digital continues to grow, here are five trends from Aite-Novarica Group* that are influencing the document identification and verification market that FIs should keep in mind as they plan for digitization.

1. The Move to Digital & Mobile
2. Increased Cost Pressures Lead to Digitization
3. A Thriving Competitive Market
4. Responding to Evolving Fraud
5. Complying with Data Protection Regulations

1. The Move to Digital & Mobile

The push towards a more digital-first landscape was already happening in the years preceding the COVID-19 pandemic with consumers accessing goods and services online, but there is no doubt that the global pandemic and lockdown restrictions significantly increased online use—mobile especially. In a post-pandemic reality, digital and mobile services are expected to become the norm for onboarding and account opening for financial services, but also gain traction in industries including healthcare, gaming, retail and government, to name a few.

2. Increased Cost Pressures Lead to Digitization

Over the last two years, many people were required to stay home, unable to visit brick and mortar locations such as bank branches. Thus, firms that faced a potential loss of income increased costs and began to adapt to a new, more digitally focused reality. Adopting digitization into their control framework has enabled firms across numerous industries to meet consumer demands and offer a wider range of services (and prices). More so, using digital identity proofing solutions like document ID&V has helped to streamline and automate processes, while ensuring firms comply with current and expanding AML regulations.

3. A Thriving Competitive Market

Digitization and advancing technologies have made it easier for more startups to enter their respective markets, and traditional banks and financial institutions are facing strong competition from fintechs such as neobanks and challenger banks. These virtual providers offer a wide range of financial services and use advanced technology to streamline customer onboarding and identity proofing to help carve out a competitive advantage over established players. Traditional business models need to adapt if they want to avoid being left behind.

4. Responding to Evolving Fraud

Having the proper protective measures against fraudsters, including a rigorous KYC process, document ID&V and secure logins, is crucial for financial institutions in today’s digital age. As technology evolves, so too does a fraudster’s modus operandi. With data breaches and data leaks a common occurrence, fraudsters can collect people’s PII and identity documents on the dark web to use as part of fraudulent account creations and account takeovers. Having the right identity proofing technology to verify the person on the other end of a transaction is more important than ever for businesses that want to avoid fraudulent customers and operate digitally.

5. Complying with Data Protection Regulations

The focus on privacy and data protection has intensified—and likely will continue to—as regulators around the world are increasingly concerned about the security and privacy of people’s data. With strict data privacy laws like the EU’s GDPR and California’s CCPA as models, regulators around the world are introducing and enforcing stricter privacy restrictions for businesses. To ensure they can comply with data privacy regulations, companies that handle people’s data digitally must stay informed and track evolving data privacy laws in every jurisdiction in which they operate.

Choosing the Right Document ID&V Vendor

While all industries that are consumer-facing can benefit from adopting document identification and verification as part of their identity proofing and Know Your Customer (KYC) onboarding methodologies, doing so is imperative for banks and financial services to stay compliant with industry and Anti-Money Laundering (AML) regulations while also preventing fraud and thus, the subsequent financial and reputational losses.

In their 2021 Document ID&V Impact Report, Aite-Novarica Group advocates for standards they believe document ID&V vendors should meet to be considered a leading contender in the market. Some of the key features their solutions should include are:

• Investment in R&D: the right vendor is one that invests heavily in research and development and is improving and expanding its identity proofing solutions on an ongoing basis to adapt to current and future market demands.
• Provide a White-Label Solution: a white-label solution will allow companies to integrate the platform without compromising branding and customer experience. Vendors that provide a white-label version of their solution will also typically have additional features within their platform that help streamline functionality.
• Document Onboarding & Geographical Scope: to effectively authenticate government-issued documents, the right identity platform will have a large document library that covers a wide range of different types of identity documents and geographic regions.
• Integrations & API: an identity platform that integrates with a single-API and utilizes next-generation features such as machine learning (ML) and artificial intelligence (AI), helps automate, digitize and streamline previous manual processes—minimizing disruption to current operations during integration.

While having document ID&V is critically important, a comprehensive identity platform is key to effective identity proofing and complying with anti-money laundering regulations. It’s not enough to only have document authentication, but in today’s digital-first economy—and for companies in any industry that want to maintain a competitive edge and prevent fraud—a complete identity platform that also provides identity verification, KYC and AML technologies is a necessity.

Acuant has been named a leading contender for document identification and verification services by Aite-Novarica Group. Read their Global Document Identification and Verification Impact Report and learn more about the importance of document ID&V for effectively adopting a digital engagement model here.

*Aite Matrix: Global Document Identification and Verification, December 2021 ; Aite-Novarica Group