Verification of identity has always been of the greatest concern to financial institutions like banks, insurance companies, brokerage firms, and others. With the growth of digital solutions, processes for identity verification have become much more streamlined and sophisticated. Financial institutions have always preferred signature authentication as a method of identity verification.
The evolution of scientific systems of fintech identity verification has led to signature authentication becoming even safer and more secure. Today’s identity authentication systems protect the data of customers while verifying their identity, enabling financial institutions to serve their customers more securely and efficiently.
Verification of identity is the first process we undergo to open a bank account. How do banks and other financial institutions authenticate customer identity today?
Identity Verification and Authentication Solutions
Banks and other financial institutions may operate their own identity verification systems. Alternatively, they may outsource the task of identity verification to a company that specialises in providing identity authentication systems to institutions where high security is of the utmost importance.
- Address Verification: This is accomplished by verifying if the customer actually lives at the address they submit to the bank. It may be carried out by the bank or by an identity authentication service. Once the address is verified, the bank can accept the applicant as a customer.
- Document Verification: This is usually carried out by examining the details obtained on documents submitted by customers for identification purposes and checking them against the details on official databases. When the details match, the customer’s identity can be considered verified.
- Consent Verification: This system uses the power of the applicant’s consent as verification of identity. Should the information supplied by the applicant prove to be false, the law may take its course and the applicant may be liable to face legal proceedings.
- Biometric Signature: This type of verification uses the latest scientific and technological developments to verify the identity of an applicant and to recognise the person as a returning customer. A computerised system holds the biological data of customers in a data storage system and compares the returning customer with the data stored on file. Only if the returning customer’s data matches with the stored data will the customer be granted access to their account. Various types of biological data may be held on file. A popular form of biometric verification is facial recognition. The computer camera notes various points on the applicant’s facial features to check if it matches the stored data. Some systems use iris, retina or fingerprint recognition instead. Such data is highly individualistic and practically impossible to duplicate. It’s sometimes referred to as a ‘biometric signature’. The traditional signature was formerly a favourite method of identity verification, Yet it changes over time, which was a major drawback. The ‘biometric signature’ is much more accurate.
- Electronic Signatures: Regarding signatures, the electronic signature or ‘eSignature’ enables remote banking for customers who live at distant locations. Such ‘eSignatures’ allow customers to digitally ‘sign’ documents and engage in transactions from remote locations. These signatures are legally binding and time-stamped for accuracy. The set-up process for eSignatures obviously depends on highly technological verification.
Why is Identity Verification Important?
There are two main reasons why this is so crucial for financial institutions like banks, insurance companies, and brokerage firms. The first is that financial institutions are obliged to uphold the law, so before any other consideration, it’s a matter of legal compliance. The second reason is, of course, the reason why these laws are in place to begin with.
Without proper authentication of identity, banks and other financial institutions, and their customers can be targets for financial fraud. Not only that, the huge funds at their disposal can be misused for money laundering, not to mention financing international crime and terrorism. In order to fight fraud and the misuse of funds, it’s important to have customer identification systems in place.
Identity authentication goes a long way in preventing breaches of security and their terrible consequences.
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