What is identity documentation verification and how does it work in finance?

Identity document verification ensures the authenticity of presented documents, which helps to mitigate the risk of fraudulent activities and breaches in the finance sector. It’s actually a pretty important system, especially in regulated and monitored industries like healthcare and banking, where regulations are extremely strict. 

By using document verification software, businesses can reduce the risk of fraud and ensure they comply with all the necessary rules and regulations. But it’s not just about following the rules—ID document verification also helps build trust between companies and their customers. 

As processes increasingly shift online, the need for a strong identity verification system has become even more crucial. This is evident due to the significant surge in users for online banking, cloud computing, and other virtual procedures.

We’ve put together a comprehensive guide to identity document verification, including what it is, how it works, the pros and cons, and even an example of how it’s used in the finance industry. 

What is documentation verification? 

Documentation verification process defines the process of identifying documents to ensure validity. Depending on the context, common documents can include notarized documents, personal or professional ID cards, passports, and others. 

While the process can seem excessive, the importance of it can’t be understated—especially with advancements in technology and cybercrime. AI technology, for example, can create deep fakes, perpetrating fraudulent acts with some of the most sensitive data a user can have. This can be regularly seen with identity-related documents, such as passports and more. 

One of the benefits of documentation verification is that it can limit these associated risks and promote a higher-quality, secure experience for every end user. 

Online document verification is one of the most powerful and well-used tools across industries, giving users the benefit of assessing and verifying their information anywhere. 

Reasons for documentation verification among financial institutions 

While every company, brand, and industry leader should strive for safety in their consumers’ interactions, it’s especially important to maintain in the banking industry (or other regulated fields). 

As the financial landscape continues to evolve to become more digitally driven, we’ve seen further emphasis placed on the importance of the verification process, especially in the wake of a banking data breach. 

Additionally, technology and tools like Microblink help companies to remain compliant within their own native Anti-Money Laundering (AML) systems. 

For example: The Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) was implemented in Canada in 2000, undergoing continuous amendments to implement more stringent requirements around recordkeeping, monitoring and reporting tasks. Using a tool like Microblink that is designed to evolve and adapt with the most recent current standard is a simple way for companies to remain in compliance. 

Let’s dig into the possible reasons why companies use customer identity verification, as seen below. 

Fraud detection 

Identity fraud is increasing, prompting many organizations to review their policies surrounding online identity verification via official documents. High-quality tools can help to validate identification documents more quickly and with a higher degree of accuracy, making them invaluable tools to help avoid identity theft. 

Regulatory compliance 

Document verification tools can support regulatory compliance in protected industries like banking. Understanding the importance of the verification process is key to protecting the brand image and customer retention. Additionally, the investment in software like this can be significantly less than the fees a business might pay for noncompliance. 

Ensuring data accuracy 

Official documents continue to change—leaving room for possible breaches and inaccuracies at every level of the verification process. Higher-quality software (such as Microblink) offers seamless backend updates to ensure you always comply with the latest set of verification preferences. 

The process of identity document verification 

While every tool can differ in document validation steps, there are several steps you can expect from the document verification process. 

Submission of identity documents 

Documents can’t be validated until they are procured from users. Before approaching the users, though, organizations might ask: ” What documents are required for document verification?” Doing this can help create a streamlined and targeted process for team members and end-users. 

The quality and accuracy of this step comes down to the quality of the image, as mentioned above. While many software options simply “take the picture,” Microblink offers a trio of checks after the snap is taken—via data scrutiny, passive liveness, and visual inspection—to ensure the document in-shot is legitimate and ready for admission. Microblink uses AI models to support the highest-quality auto-capture experience available. This means that general quality inhibitors (like tilt, glare, or occlusion) can be easily bypassed. This results in a faster, higher-quality process. 

Additionally, a comprehensive verification process will generally include a tool to properly capture the document imagery. Higher-quality document images mean a higher-quality data extraction—allowing team members to move through the procedure more effectively. 

This step is required for all types of document verification.

Optical character recognition

OCR technology plays a crucial role in the automated verification of identity documents. It helps in extracting data from the documents the users submit. This data extraction process is extremely important as it ensures the user’s identity is verified accurately and quickly. 

It can recognize and extract relevant information from the document, such as the name, date of birth, address, and other important details. Once the data is extracted, it can be automatically verified against the user’s profile to ensure they are who they claim to be. This process is efficient, reliable, and secure, making it an important part of any identity verification system.

Validation and authentication 

After the initial capture and data processing step, additional validation steps are taken. For example, many financial institutions may incorporate a manual, human-led review process or more rigorous checks through machine learning technology. 

Comparison with trusted sources 

Verification systems use various methods to cross-check the information users provide against reliable databases or government sources. While some clients may perform database checks or look-ups (like a DMV database), this is primarily seen in the public sector. 

Organizations who complete these higher-level steps will generally look for two alternative options in their software: Direct and efficient connection and submission to government databases or flexible solutions that can integrate either upstream or downstream in the verification steps. 

Use cases in the financial industry 

As the financial industry continues to evolve and become more digitally focused, there are many use cases for technology to improve processes, increase efficiency, and, ultimately, enhance the customer experience. Let’s explore some of the most impactful ones for AI and other technologies in the financial industry.

Identity verification for online banking

Digital banking is extremely prevalent. In fact, Forbes has found that 78% of adults in the United States prefer to bank via a mobile app or website. 

With this surge in banking, though, there comes an increased risk of breach and fraud. Document verification software can secure transactions and lower organizational liabilities—boosting consumer confidence and brand loyalty. 

Document verification in peer-to-peer lending 

Peer-to-peer lending is a more intimate loan format than many other alternatives—making document verification steps crucial for confidence and awareness of all parties involved. 

While user experience should be considered in all contexts, it can be especially important here. This is because difficult processes may not be adopted or maintained by those walking through them, as the steps themselves can be overwhelming enough. Smooth, user-oriented solutions can be a worthwhile investment to limit fraud in this context. 

Identity verification in cryptocurrency exchanges 

Cryptocurrency is considered by many to be the “Wild West” of financial currency exchange. There’s been an unprecedented amount of crime clocked in 2022 alone, amounting to over $23.8 billion in fraudulent funds transfers. 

Identity verification is critical for user confidence, safety, and funds attribution, limiting risks and protecting the interests of everyone involved in the transaction. 

Documentation verification is vital for the safety of financial transactions 

Document verification is a crucial aspect of regulated sectors like finance and healthcare. Users should feel secure and confident when conducting financial transactions, and organizations are responsible for minimizing the risk of fraud and breaches at every stage of the process. 

With AI and machine learning advancements, the accuracy and efficiency of document verification and quality checks have significantly improved. We can expect further development in this area as technology continues to progress.

Now is the time to update and refine verification processes, especially with the increasing number of significant breaches and fraud claims reported annually, causing a decline in consumer confidence. Investing in modern verification solutions can set your organization apart and increase consumer trust while reducing risks and liabilities. 

If you are searching for a reliable solution, consider Microblink. Our proprietary technology and processes allow you to capture, extract, and verify thousands of identity documents per minute, using deep neural networks to automatically recognize, read, and verify them safely and efficiently. Connect with our experts today to learn more about how our services can support financial industry leaders.