In ancient times, the shopkeeper identifies his customers by their faces and names. He assigns names with their faces along and stores the memory in his mind. This is sort of a human biometric verification scanner. If a fraudster reaches his shop and claims to be his customer, he can easily spot the fraudulent attempt
Now digitization and virtualization have given the ease of remote dealing. It means that a customer does not need to visit the shop for purchase. Also, shopping over phone calls is in the society used for buying grocery items.
Since the arrival of the internet and modern communication gadgets, id verification was a challenge. The reason is that users on the internet are not physically present and one has to verify their digital identity.
The virtual identities over the internet created using some personal information is known as digital identity. Like others, digital identities are also compromised, created using fake and fraudulent data. These are known as fake or synthetic identities. Fraudsters create false identities to pursue their criminal activities there. Usually, they commit payment frauds and financial scams on digital spaces. They also steal users’ data and other information to blackmail them. The reason for using fake information is that by doing so they have very little chance of getting caught. In case of any illegal activity, the police will not be able to knock on the criminal door because of false information.
Another crime associated with it is identity theft in which digital identities are created using legitimate user information. Social media is a platform where there are numerous cases of identity theft. Social media has very weak ID verification protocols thus can be manipulated easily. As the primary motive of identity fraud is financially benefited, thus the financial institutions are most affected.
Financial institutions are using different ways for verifying their customers’ identities. They are obliged to perform solid identity verification on all onboarding customers by native and international financial law enforcers. They have set strong protocols on verification processes and what measures to be taken on. The victims of payment fraud are both customers and businesses. But it is the duty of the business to prevent itself and customers from financial scams. Regulatory bodies can also penalize businesses over noncompliance with identity verification laws.
Know Your Customer (KYC)
It is a method of online identity verification of customers mostly used by financial institutions and businesses dealing with sensitive information. But the regulations have also pushed other businesses to perform KYC on their customers. KYC is conducted by an AI-associated online software that uses optical character recognition (OCR), machine learning, and natural language processing for document verification. The customer’s age, residential address, and full name are verified through an identity document. He just has to upload a picture of it that can be clicked through a mobile phone. The software also recognizes his facial biometrics through a live selfie.
This process is robust and automated giving ease of remote verification. Customers do not have to visit a business office to complete their verification.
This is also known as the live interview verification where the customer is linked with a KYC expert on a video call. This method is semi-automated, performed by both software and humans. The software checks for deep fakes and spoof practices.
The customer shows his identity documents to the KYC expert. He takes a screenshot of it and the software checks its data and authenticity. Video is also recorded but with the consent of the customer.
- The customer feels more comfortable on video call because of human interaction
- Video KYC also have fewer drop-offs unlike normal KYC
- There is no need for integration of hardware or software installation for business in video KYC
- Video KYC also checks the live ness of the customer