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Electronic Identification prevents fraud

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Since the introduction of digital transactions in our daily lives, consumers enjoy many advantages and conveniences. The ease and value for users of online transactions is priceless. We now have the possibility of carrying out any action with the bank without having to go anywhere, even registering as a new customer and opening an account, all without leaving home!   

However, we cannot forget that with digital transactions, online fraud is on the rise. Cybercriminals are waiting on the other side of the screen to take advantage of the large volume of data we dump on the internet and try to steal it. A significant increase in spending by financial institutions (IF) to combat bank account fraud is expected in 2021. Bank account application fraud happens when a fraudster uses stolen PII (Personal Identifiable Information) or synthetic identification documents to open a new bank account, trying to pass himself off as a legitimate first-time customer. 

Battling identity and application fraud

Identity and application fraud cases are very damaging to financial institutions. Besides first instance fraud (when an individual or group of individuals intentionally misrepresent their identity or provide false information), stolen data obtained through data breaches is one of the top three causes of application fraud 

To prevent application fraud, financial institutions must successfully identify fraudulent activity or fraudulent identity documents in real time at the beginning of the new account opening process. At the same time, financial institutions are also under pressure to digitize the process of opening accounts so that customers can do so entirely online or via a mobile device.   

To achieve a successful fraud prevention strategy, banks must perform a balancing act between security and customer experience. Banks must implement an account opening process that includes risk assessment and real-time identity verification, while at the same time providing a seamless customer experience in the digital realm. The importance of improving the customer experience cannot be underestimated.   

With the right solution, banks can have the best of both worlds. To show how TrustCloud Branddocs‘ secure digital transaction programme and escrow platform- addresses this balancing act let’s walk through a typical first-time digital account opening experience.  

Opening an online bank account: an assumption

As we move through this digital account opening process, we have included screenshots, and full recordings of the customer authentication process, from start to finish, to demonstrate the customer experience. In addition, we will also describe what the solution is doing behind the scenes to help prevent application fraud. Although this blog presents a mobile scenario, a browser-based banking application with account opening capabilities can also provide the same seamless experience.  

Let’s make an assumption. Suppose a potential customer, Martha, switches to a new bank, and wants to open a new savings account on the bank’s website on her mobile phone. Her first step is to visit the bank’s website and select “Open an account” to start the process. 

Electronic Identity verification needed to prevent fraud   

As Martha is opening her new account remotely, not at the bank or branch, she is asked to verify her identity digitally by scanning both the front and back of her ID card with the camera on her mobile device. This is the point at which fraud is most likely to occur in the application. Catching it early in the application stage of a new account greatly reduces the chances of having to mitigate fraud later on.  

Once the ID images are captured, TrustCloud uses state-of-the-art authenticity algorithms to analyse Martha’s ID image. This produces an authenticity score to determine whether Martha’s document is fraudulent or authentic 

The solution can then be overlaid with additional authentication checks, such as facial biometrics or fingerprint biometrics, to further verify the applicant’s identity. In this scenario, Martha is asked to verify her identity through facial matching. Easy enough, she just takes a selfie 

Martha’s biometric data is then extracted from the selfie, and compared with the image on the authenticated ID document to determine whether she is physically present and is who she claims to be.  

“Proof of life” is also applied to Martha’s identity to prove genuine human presence. Live detection helps prove that an image has not been fraudulently created using methods such as high-resolution prints or pre-recorded videos.  

These digital identity verification methods verify that Martha’s identity documents are genuine, and that she is who she claims to be. These steps help mitigate application fraud. The next step in the process of opening a new account is for Martha to review, sign and execute the terms of the account agreement.  

Electronic signature

Once Martha’s identity has been digitally validated, the bank submits the pre-contractual information, and the completed application for electronic review and signature 

Because TrustCloud seamlessly combines identity verification and e-signature capabilities, it captures Martha’s personal data from her identity document and automatically imports it into the application form.  

At this point, TrustCloud allows Martha to review and electronically sign the new account agreement.  

Once the agreement has been reviewed by Martha, she simply “clicks to sign” and submits her completed application. TrustCloud electronically tracks the entire account opening process for verification and Custody, recording the process from start to finish. The tracking ensures that the financial institution has a detailed record of the digital process including both digital identity verification and electronic signature steps.  

Trusted mobile device registration

Now that the app is signed and running, Martha’s smartphone is registered for TrustCloud and the bank to recognise it as a trusted device. This means that Martha will be seamlessly authenticated when using the bank’s mobile app for everyday banking.  

To do this, Martha creates a secure 6-digit PIN number and sends it to the bank. Once her mobile device is accepted by the bank, the mobile device is now trusted and is automatically synchronised with her new savings account.  

Martha’s application has been successfully completed. It only took a few minutes to open her new account. Martha was able to complete the account opening process completely remotely and through digital channels. This provides the maximum possible convenience and flexibility.  

TrustCloud puts an end to identity and application fraud

Financial institutions need to reduce instances of application fraud. Digital identity verification can enable financial institutions to mitigate application fraud while providing a more positive customer experience. With automated identity document verification and facial matching, banks can validate customer identity in real time, whether the transaction is conducted online or via a mobile device, as demonstrated in this real-life scenario.  

Electronic Identity verification not only helps FIs prevent application fraud, but can also help them meet Know Your Customer (KYC) and anti-money laundering (AML) compliance requirements 

Secure automation of agreements through Electronic Identity verification, electronic signature and Electronic Custody also enables banks and FIs to create legally enforceable and compliant agreements. With a complete digital audit trail, banks and FIs can demonstrate to external or internal auditors that they followed a consistent and compliant process when bringing on a new customer.  

Thanks to TrustCloud’s Electronic Identity system, it is possible to combat fraud and offer maximum security to customers. TrustCloud’s Electronic Identity service has a comprehensive process that includes services such as: Biometric Identification, Mobile Identification, Identity and Company Document Validation, AML and KYC User Verification and Business Verification. It also incorporates the service of Video Identification, Assisted or Unassisted, which provides banks with an excellent quality of new user registrations. Thanks to TrustCloud Vault, a specific module safeguards all the evidence generated in the processes, combating digital fraud. Finally, TrustCloud also provides the Electronic Signature service. 

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