The meaning, impact, and benefits of artificial intelligence change depending on context. AI is such a diverse breed of technology that it means different things to different industries. Today, we’ll investigate how AI is changing the ID verification space for the better and what we should expect going forward.
Data Accuracy
Picture this: a new client is submitting their passport, government-issued ID, and proof of residence for review. In a non-AI world, these documents would have to be checked by a human being. What are the two obvious problems with that? Firstly, it takes a lot of time, and secondly, there is always the possibility of human error.
Here comes artificial intelligence. With AI, this process is automated. Documents are uploaded through an app or a website, the review happens almost instantly, and the possibility for error is minute. What you have as a result is the opportunity to onboard more clients at a faster pace. From a client-facing perspective, you get happier and more satisfied people who no longer have to wait for ages for their accounts to be approved.
Building Risk Profiles
Verifying a potential customer’s identity and onboarding them to your company is simply the beginning of a long relationship. Once the customer is onboarded, there needs to be a real-time evaluation of their activity, risk status, and a constant re-assessment of eligibility.
This process is extremely complicated as it is practically impossible to manually monitor clients, keep track of their activity and record data to build a risk profile. Artificial intelligence can process unstructured data and create these risk profiles on the fly. Just so you get an idea, here are a few external sources AI technology can access to build these risk profiles.
- PEP lists
- Corporate registries
- Deep web search
- Government data
- Sanctions lists
- Ultimate Beneficial Owner data
- Adverse media
The sources mentioned above would take time, effort, and resources to access, let alone isolate and analyze. What AI can do is amass the necessary information, build the profile, and afford you the time to assess it critically. Compliance and KYC teams are offloaded from the burden of building these profiles and are gifted with the time and peace of mind to make informed decisions based on the data.
Workflow Automation
ID verification and KYC are processes that involve a series of steps. These steps need to happen in a specific order, and each stage requires time, effort, and resources to be executed. In a world where people have no patience and an excess of options and alternatives, there is a realistic chance that you will lose potential customers during these steps if you are not making their life easier.
In an ideal world, people would want to breeze through this process, click “Next step” as quickly as possible and find themselves on the other side of the process in a few minutes. What artificial intelligence does is make each step of the process more efficient and streamline the entire process end-to-end. It creates a seamless workflow where users jump from step to step, decreasing the chances of them switching to another provider.
From OCR checks and 3D liveness detection to gathering personal information, AI is unifying the process, making it flow.
Cutting Costs
ID verification and KYC cost a lot to companies. The untrained eye might not see the costs associated with these processes, but a lot goes into it. Here is a list of the main components that contribute to the total cost of KYC:
- The salaries and wages of compliance teams dedicated to reviewing documents and managing the process.
- The cost of outsourcing or developing the necessary technology for identity verification and KYC processing.
- The loss of revenue from an inefficient onboarding process causing potential customers to quit or switch providers.
- The regulatory fines associated with an inadequate verification process.
- The reputational harm and loss of customer trust due to a security-related incident such as a personal data breach.
These components might not sound like a lot, but they have many zeros attached to them. According to Fenergo, financial institutions have been hit with $10.4 billion in global fines and penalties related to AML, KYC, data privacy, and MiFID regulations in 2020.
According to Autonomous, a financial research firm, by the year 2030, financial institutions can cut up to 22% in costs. Here’s how the report breaks down those cost savings:
Front Office – $490 billion in savings mainly from cutting back on retail branch networks, security, tellers, and cashiers.
Middle Office – $350 billion in savings by simply applying AI to compliance, KYC/AML, authentication, and other data processing forms.
Back Office – $200 billion in savings. $31 billion of this will be attributed to underwriting and collections systems.
The potential is endless. AI is not only making the process faster and better, but it’s obviously making it way more affordable. AI is changing the ID verification industry for the better and you should be looking at solutions that have AI at their core.
Check out our free Identity Verification & KYC Solution Buying Guide.
