Customer Onboarding and KYC: Top Trends for Improving Identity Verification & Fraud Prevention

In the fast-paced world of customer onboarding and KYC, businesses need to stay ahead of the curve to ensure that they are offering efficient and secure services to their customers. In recent months, we have seen several trends emerge in this space, which are shaping the way businesses approach identity verification and fraud prevention. From the increasing use of facial biometrics with liveness checks to the prevalence of document verification and the need for more stringent regulatory compliance, businesses must be proactive in their approach to KYC and customer onboarding. This blog post will explore some of these trends and discuss how they can help businesses improve their identity verification and fraud prevention strategies.

1. The use of facial biometrics with liveness checks

As the incidence of fraudulent activity is expected to increase in the coming years, it has become more crucial than ever to perform liveness checks during the customer onboarding process. Fraudsters are getting easier access to information and technology, so it's important to ensure that users are who they say they are. This is where liveness checks come in handy. By confirming that the photo being submitted is of a live person who is taking the selfie at the time of submission, businesses can prevent bad actors from impersonating legitimate users and gaining unauthorized access to their platform.

In today's highly competitive business environment, having valuable and trusted users is critical for ensuring sustainable growth. Implementing robust liveness checks not only helps prevent fraudulent activities but also safeguards the trust of your users, which is essential for maintaining your business's reputation. While accepting still photos or uploaded photos from a user's gallery may seem convenient, it introduces vulnerabilities that could compromise your business's security. Therefore, it's imperative to prioritize implementing liveness checks as a key part of your identity verification and fraud prevention strategy. Learn more about Smile Identity biometric authentication here.

2. Enhanced due diligence (EDD) and continuous monitoring

Enhanced due diligence (EDD) is a higher level of due diligence that involves more in-depth investigations of customers, products, services, and transactions. In today's world, EDD is increasingly emphasised, particularly for high-risk customers, such as Politically Exposed Persons (PEPs), or for high-risk transactions. KYC is no longer considered a one-time event; it necessitates ongoing monitoring to ensure that your current and new customers do not threaten the platform in terms of fraudulent activity or regulatory compliance. By conducting EDD, businesses can understand their customers' risk profiles and assess the potential risk of onboarding them. This helps companies to make informed decisions, meet regulatory requirements, and minimize the likelihood of financial crimes. In addition, EDD provides an extra layer of protection against financial losses and reputational damage caused by fraud and other criminal activities.

3. Prevalent use of Document Verification

In some African countries, identity verification through government databases is often unreliable due to long downtimes that impact service availability or lack of open access. In response to this challenge, businesses are turning to document verification using Optical Character Recognition (OCR) technology. OCR technology enables identity verifiers to read the text on identification documents, identify any signs of forgery or tampering, and provide assurance that the submitted documents are genuine. With more people accessing online services, taking an image of a document and trusting that the user has given a proper identification document is no longer sufficient. Businesses are also looking to offer streamlined services to their users, and any service downtime can result in business losses as well as loss of customer trust. By leveraging OCR technology, companies can ensure that their services are accessible, secure, and dependable, regardless of their customers' location. This approach empowers businesses to offer an improved customer experience while mitigating identity verification and data privacy risks.

4. Automated and streamlined customer onboarding

With the increase in competitor options for any provided service, new user behavior has emerged that is affecting the way businesses onboard and retain customers. Nowadays, users expect to start using a product or service quickly and smoothly. If the customer onboarding process is slow or problematic, users may opt for a competitor's service.  This is particularly true for younger users who are accustomed to seamless digital experiences.

As businesses, there is a significant cost involved in acquiring new customers, and onboarding is a crucial step in the customer journey. Therefore, optimizing the onboarding process for ease of use and efficiency is essential to reduce the risk of losing users.

5. More stringent regulatory compliance laws

Governments and other regulatory bodies in many African countries have tightened their regulatory frameworks, imposing stricter business rules and regulations to ensure compliance with legal and ethical standards. This is primarily due to the growing need for transparency and accountability in business practices and the need to safeguard consumers as they engage with businesses. While this has presented a challenge for businesses, it has also resulted in better business practices and enhanced customer and investor trust. As the use of digital technologies continues to grow and new businesses and industries come up, we expect these regulations to get stricter. Businesses should choose a KYC partner, like Smile Identity, who is conversant with various KYC/AML laws around the continent and are up to date with any changing requirements.

6. More cross-industry collaboration

Cross-industry collaboration is critical for identity verification and digital identity management. We see examples in open banking, telecommunications, and fintech. These industries operate in different spaces and have unique perspectives on identity verification and digital identity management.

Open banking brings together banks, fintechs, and other financial institutions to collaborate and provide innovative financial services to customers. Telcos have vast amounts of customer data, which can be used to authenticate customer identities. Fintechs are well-known for developing cutting-edge technology and services, including biometric authentication and AI-powered fraud detection, which can be utilized to improve identity verification.

By combining these industries' resources and expertise, cross-collaboration can lead to the development of more comprehensive and reliable identity verification systems. Standardized frameworks are being developed, to foster greater interoperability across different industries ensuring consistent and seamless identity verification experiences for users.

In conclusion, the evolving trends in customer onboarding and KYC underscore the need for reliable identity verification and continuous monitoring to prevent fraudulent activities, safeguard business reputation, and comply with regulatory requirements. To keep up with the changing landscape, businesses must adopt innovative technologies to streamline their onboarding processes without compromising data security and privacy. Collaboration across industries can also help businesses learn from each other and enhance the customer experience, drive innovation, and achieve compliance.

At Smile Identity, we're committed to helping businesses onboard customers across Africa with ease while they stay KYC/AML compliant. Our proven solutions have enabled millions of successful customer onboarding experiences. Check out our case studies page or contact our team of experts to see how our KYC and onboarding solutions might benefit your organisation today