What is eIDV?
Initially, Electronic ID verification was introduced to supplement the AML and KYC implementation. Soon, it became a vital part of the system. Especially, after the global shift to electronic systems, ID verification systems are now also digitized. Virtually, IDV has become a part of our daily lives almost everywhere. Electronic IDV is where people must prove their identity through electronic means like biometrics. Thus, the verified identity through eIDV allows a person in the system distinctively.
Traditional IDV & the Loopholes in it
Traditionally, Identity Verification Methods used complex, time-consuming & difficult procedures. It was irritating for customers and regulatory firms as well. Verily, the traditional IDVs had loopholes listed below:
- Reliance on physical documents, which can be easily forged or stolen
- Lack of cross-referencing between different databases or systems, leading to potential duplication or fraud
- Inability to verify the identity of individuals remotely or online
- Manual processes can be time-consuming and prone to human error
Why eIDV?
Primarily, eIDV was introduced upon the following needs:
- Increased adoption of online services and digital transactions
- Greater global mobility, with more individuals crossing borders and needing to prove their identity remotely
- Rising concerns about identity theft and fraud
- Need for more efficient and secure ways to verify identities in the digital age.
Electronic presence of Banking customers:
Individuals need a secure electronic identity to confirm their identity in electronic transactions. It should also take different forms according to their needs. So, it allows flexibility in different contexts. Suppose, presenting oneself as a CEO in one instance and a health insurance beneficiary in another. All individuals and entities should have clear, accurate descriptions of themselves. Also, it should be readily available to avoid the issue of repeatedly providing the same information on multiple forms. Additionally, this information should be trustworthy and considered legitimate.
eIDV & KYC
Mostly, people confuse Electronic ID with Digital ID. However, the two concepts may converge. Mainly, it is used to support the KYC & AML processes through electronic verification and identification of users. Increasingly, it became popular for supplementing the Know Your Customer procedure. As banks are subjected to KYC and AML regulations, they need advanced systems for identity verification. Knowingly, it can bring in robust digitization in the banking sector as well. ATMs now have biometrics and other recognition methods as electronic ID verification. Similarly, while applying for a loan people can now use banking apps and provide the information through eIDV.
Benefits of Electronic IDV
Certainly, there are many benefits to electronic IDV in the banking sector. Businesses & individuals now shall opt for electronic IDV and banks are swiftly shifting to it. The following are the key benefits of Electronic Identity Verification.
- A seamless, fast & frictionless verification process that is electronically processed.
- Optimization of conversion rates with speed, security & smoothness during the Customer Onboarding process.
- Abruptly, it identifies fraudsters, business losses & potential threats.
- It is fully KYC-compliant and supplements the KYC/AML process.
- It is a vital part of the AML process nowadays.
- Customer Due Diligence is improved through it.
- Compliant with PSD2 and GDPR directives.
- Fully automated IDV reducing time and effort in banks KYC.
- In-depth fraud & theft identification and preventive measures.
- Fraudulent transactions through banks will be stopped through the efficient electronic IDV.
- Now electronic IDV is supported by multiple countries, languages, and systems globally.
Use Cases in Banks
Ideally, eIDV is used in the following areas in the Banking sector:
- Credit/ Debit Card validation in banks
- Identifying the high-risk and high-end transactions
- Identification & verification of the PEPs, SIPs, SDNs, shell firms, etc
- Loan disbursements and policy making
- AML/CTF compliance
Summary
Going beyond traditional passwords, implementing Electronic Identity Verification is becoming a vital part of the banking system. The banking industry has revolutionized its processes since the introduction of electronic IDVs. Visibly, there is an increase in the adoption of online services and digital transactions, as well as greater global mobility. So, there is a need for more efficient and secure ways to verify identities in the digital age. eIDV is an electronic means of verifying a person's identity through biometrics and other recognition methods. Also, it allows for a seamless and fast verification process. It not only improves the customer onboarding process but also helps identify fraudsters and potential threats. It is fully compliant with KYC and AML regulations, as well as PSD2 and GDPR directives.
Endnote
Being fully automated, it reduces time & effort in banking procedures for both customers & the banks. Banks are using eIDV in various areas, including account opening, loan applications, and ATM transactions. Predictions of experts are that Electronic Identity Verification will outcast the traditional system soon. Currently, banks are instructed to shift to electronic IDVs to enhance KYC compliance and AML procedures. Moreover, electronic IDVs are considered a tool for improved KYC and AML for banks.
