# How Digital Identity Verification Will Revolutionize Security Defenses in the Financial Services Industry
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-10-26
Category: TECHNOLOGY
Category URL: https://financedigest.com/category/technology
Meta Title: Digital Identity Verification: Transforming Financial Security
Meta Description: Learn how digital identity verification can revolutionise security in the financial services industry, ward off fraudsters, and aid in meeting compliance
URL: https://financedigest.com/how-digital-identity-verification-will-revolutionize-security-defenses-in-the-financial-services-industryhtml

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_![Bala Kumar, CPO of Jumio](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/378-1736814968919-compressed.jpg)_

_By **Bala Kumar,** CPO of Jumio_

One of the reasons why the financial services industry is so heavily regulated is to ensure organizations aren’t onboarding customers involved in money laundering and other financial crimes. Client onboarding has always been an essential requirement for financial organizations to collect critical client information and perform customer due diligence to ensure there are no risks associated with the individual. But with the digitization of onboarding, customers no longer need to be physically present at brick-and-mortar branches and [stores — everything can be done online](https://www.financedigest.com/the-benefits-of-developing-online-stores-through-shopify.html "The Benefits of Developing Online Stores Through Shopify"). This means [financial institutions](https://www.financedigest.com/the-future-of-financial-institutions-in-2023.html "The Future of Financial Institutions in 2023") need to be more diligent in verifying people’s identities. It’s harder to [know if the person opening an account](https://www.financedigest.com/how-to-get-started-on-a-career-in-accounting-and-how-to-know-if-its-right-for-you.html "How to Get Started on a Career in Accounting (and How to Know if It’s Right for You)") behind their screen is who they claim to be.

There is absolutely no room for error when it comes to financial enterprises verifying their [users’ identities during onboarding](https://www.financedigest.com/getting-started-with-user-onboarding-tools-in-2022.html "Getting Started with User Onboarding Tools in 2022") and authenticating them during every subsequent online visit. However, it can be tricky to confirm [customer identity through manual identity checks and legacy authentication](https://www.financedigest.com/how-strong-customer-authentication-can-prevent-cart-abandonment.html "How Strong Customer Authentication can Prevent Cart Abandonment") methods. Fortunately, digital identity verification is one technology that can help transform [financial services security](https://www.financedigest.com/post-brexit-uk-workers-can-have-financial-security.html "Post Brexit – UK workers CAN have financial security") as we know it. By leveraging the power of biometrics and AI, [digital identity verification](https://www.financedigest.com/what-is-id-and-verification-and-why-is-it-such-an-integral-part-of-digital-life.html "What Is ID and Verification and Why is it Such an Integral Part of Digital Life?") compares a physical document (such as a passport) to a selfie taken during the onboarding and login process to confirm a user’s true identity. This technology can then be used during every subsequent login to confirm the user is truly who they claim to be. Here’s how that [protects and serves organizations and their customers:](https://www.financedigest.com/id-fraud-is-on-the-rise-can-financial-services-do-more-to-protect-their-customers.html "ID fraud is on the rise: can financial services do more to protect their customers?")

**Warding off Fraudsters**

It’s becoming increasingly difficult to defend against fraudsters, while the stakes for falling victim to their schemes are higher than ever before in terms of cost and [disruption to business continuity](https://www.financedigest.com/despite-return-to-work-virtual-meetings-will-continue-to-disrupt-business-as-usual-in-finance.html "Despite Return to Work, Virtual Meetings Will Continue to Disrupt Business as Usual in Finance"). [Eighty-three percent](https://www.ibm.com/security/data-breach) of organizations suffered from more than one data breach in the past year, with the average cost of each amounting to $4.35 million. This doesn’t even include the vast number of organizations that were infected with malware or were forced to shut down their systems due to other [cyber incidents](https://www.financedigest.com/uks-morgan-advanced-materials-reports-cyber-security-incident-on-its-network.html "UK’s Morgan Advanced Materials reports cyber security incident on its network").

Furthermore, threat actors are using more [innovative techniques to bypass tools already built to be more secure](https://www.financedigest.com/why-the-finance-sector-must-prioritise-mobile-security-over-innovation.html "Why the finance sector must prioritise mobile security over innovation") than passwords, such as multi-factor authentication (MFA). Back in March, the Cybersecurity and Infrastructure Security Agency (CISA) and the FBI [warned enterprises](https://www.cisa.gov/uscert/ncas/alerts/aa22-074a) that Russian state-sponsored threat actors had obtained network access by exploiting default MFA protocols and a known vulnerability. These instances are becoming far more common, yet enterprises are still relying on these tools, [thinking they keep](https://www.financedigest.com/the-pull-of-the-past-1-in-5-keep-items-they-think-will-be-valuable-in-the-future.html "The pull of the past! 1 in 5 keep items they think will be valuable in the future") their networks safe. [Digital identity verification serves as a more secure](https://www.financedigest.com/digital-experience-and-security-the-crucial-combination-for-banks.html "Digital experience and security – the crucial combination for banks") alternative, as it can help organizations identify sophisticated methods fraudsters may deploy, including deepfakes and other forms of synthetic media. In addition to detecting threat actors, this form of identity verification can help [financial enterprises stay compliant with increasing regulations](https://www.financedigest.com/australia-financial-crimes-regulator-opens-investigation-into-britains-entain.html "Australia financial crimes regulator opens investigation into Britain’s Entain").

**[Meeting Compliance](https://www.financedigest.com/why-leading-financial-institutions-are-relying-on-video-to-meet-compliance-needs.html "Why leading financial institutions are relying on video to meet compliance needs") Mandates**

Due to the stringent policies and requirements surrounding the [financial services](https://www.financedigest.com/how-crowdsourcing-can-help-drive-the-benefits-of-advanced-analytics-in-financial-services.html "HOW CROWDSOURCING CAN HELP DRIVE THE BENEFITS OF ADVANCED ANALYTICS IN FINANCIAL SERVICES") industry, banks, fintech companies and other financial institutions must monitor all customers, examine their transactions and report any suspicious activity to the authorities. Conducting these [processes manually not only takes considerable time](https://www.financedigest.com/tightening-up-time-consuming-processes-in-the-financial-industry.html "Tightening up time consuming processes in the financial industry"), effort and resources, but is also highly prone to errors. Unfortunately, [financial enterprises can face](https://www.financedigest.com/disconnected-customers-are-one-of-the-biggest-problems-facing-financial-companies.html "Disconnected customers are one of the biggest problems facing financial companies") severe consequences for conducting business with criminals who have previously engaged in fraud and money laundering. For example, they may face large penalties and fines, lose customers and tarnish their reputation. Digital identity verification technology can help take the burden off of compliance teams and minimize errors by automating many [Anti-Money Laundering](https://www.financedigest.com/anti-money-laundering-time-to-take-a-new-approach.html "ANTI-MONEY LAUNDERING: TIME TO TAKE A NEW APPROACH?") (AML) and Know Your Customer (KYC) procedures during onboarding and beyond. It also provides customers with a simplified, positive [digital onboarding experience](https://www.financedigest.com/digitalisation-why-using-the-opportunity-of-fintechs-can-create-an-innovative-digital-client-experience.html "Digitalisation: why using the opportunity of Fintechs can create an innovative digital client experience").

**Creating a Frictionless User Experience**

End-users are increasingly opening up new accounts from the comfort of their home, whether it be a new credit card, insurance policy or [bank account](https://www.financedigest.com/new-legislation-makes-switching-bank-accounts-simples.html "New legislation makes switching bank accounts “simples”"). Customers expect onboarding processes to be as safe, secure, quick and friction-free as possible, or else they may move on to the next [financial institution](https://www.financedigest.com/what-the-future-holds-for-financial-institutions-in-2023.html "What the Future Holds For Financial Institutions in 2023") that can provide them with a smoother experience. For instance, passwords, knowledge-based authentication (KBA) and MFA may all make the authentication [process far more complex](https://www.financedigest.com/board-report-highlights-complex-decision-making-process-across-banking-and-finance-sector.html "Board Report Highlights Complex Decision-Making Process Across Banking and Finance sector") and time-consuming than it needs to be, causing frustration and fatigue among end-users. [Digital identity verification technology](https://www.financedigest.com/you-cant-get-faster-than-that-spring-statement-update-delivered-digitally-as-it-happens-with-app-driven-technology.html "‘You Can’t Get Faster Than That’ – Spring Statement Update Delivered Digitally As It Happens with App-driven technology") removes any barriers that cause friction, enabling a seamless onboarding process. In turn, this will lead to a positive [user experience and an increase](https://www.financedigest.com/fintechs-how-to-increase-loyalty-through-user-experience-and-fraud-prevention.html "FinTechs: How to increase loyalty through user experience and fraud prevention") in online client conversions for the institution.

Customers now have [higher expectations](https://www.financedigest.com/italian-hearing-aid-maker-amplifon-expects-higher-2023-earnings.html "Italian hearing aid maker Amplifon expects higher 2023 earnings") than ever before, while fraud and other cybercrimes are escalating at an exponential rate. Automated tools, such as digital identity verification, can help organizations [stay ahead](https://www.financedigest.com/staying-ahead-of-risk-this-black-friday.html "Staying Ahead of Risk This Black Friday") of threat actors, maintain compliance with KYC and AML regulations and enable a friction-free digital experience. This technology will not only be critical in the [financial services](https://www.financedigest.com/as-hackers-declare-cyberwarfare-financial-services-cannot-afford-to-be-complacent.html "As hackers declare cyberwarfare, financial services cannot afford to be complacent") industry, but other sectors including e-commerce, online gaming and more.


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