A Guide To Identity Verification For Startups

Identity verification for startups can be a difficult task. Attempting to navigate the market to discover the best identity verification platform includes many factors to consider when implementing a compliance framework. The quality of data, technology, and reliability is of detrimental importance.

Not only do startups require a solution which will satisfy regulatory requirement, but also one which will offer customers a slick and efficient onboarding journey to maximise revenue and reduce drop-offs.

Regulation varies significantly across regulated industries such as financial services, gambling, cryptocurrency and more. Therefore, it is vital for startups to ensure that the platform provider they choose will understand the nuances within different regulation and offer solutions fit for specific use cases.

In this guide, we will explore the importance of identity verification for regulated startups and highlight the best types of technology for successful compliance.

Understanding the Significance of Identity Verification

Identity verification is the process of confirming the identity of an individual or entity to prevent fraudulent activities such as money laundering, identity theft, and terrorist financing.

For startups in regulated sectors like finance, healthcare, and gaming, adhering to compliance requirements is not only a legal necessity but also a vital step in building a reputable brand. According to the Annual Fraud Report from UK finance, over £1.3bn was stolen by fraudsters in the UK alone across 2021. It has become increasingly difficult for regulated entities to handle the number of fraudulent attempts on their business, and whilst startups might not have the volume as a global corporation, that doesn’t mean that the risk is any less prevalent.

Startups must ensure that their customers are who they claim to be, comply with Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations, and implement robust Customer Due Diligence (CDD) procedures. Failure to do so can lead to severe penalties, loss of business, and reputational damage.

The Role of Technology in Identity Verification

In today’s digital age, manual identity verification processes have become less sufficient. Regulated startups, particularly those with ambitious growth plans, require sophisticated technology to verify identities while ensuring a seamless customer experience.

Since the rise of neo banks and fintech’s such as Monzo, Revolut, and Starling, the requirement for efficient onboarding has skyrocketed. Consumers are no longer satisfied with manual processes taking over 24 hours for onboarding, they expect access to services quicker than ever before. Clear and efficient identity verification plays a key role in this.

In the last decade, in conjunction with the rise of FinTech, there has also been the discovery and rapid expansion of the Regulated Tech (RegTech) market; solutions specifically designed to help regulated entities comply with regulation, but also leveraging advanced technology such as AI, Machine Learning, and complex workflows including failover and waterfalling of services to remove any manual requirement in the customer journey.

Types of Identity Verification Technology

There are many different identity verification services available to startups. Each service has its individual use, but when combined these services can provide startups with a full orchestrated compliance flow to maximise the number of customers who complete the digital onboarding journey.

eKYC Data Checks: One of the most well-known and robust forms of identity verification comes in the form of Electronic Know Your Customer (eKYC) data checks. In essence, eKYC checks validate multiple sources of data such as Credit Reference Agencies (CRA’s), utility bill providers, telecommunication providers and more to provide a match on name, date of birth, and address.

Document Verification: Document verification involves validating the authenticity of identity documents such as passports, driver’s licenses, and national IDs. Advanced document verification technology analyses security features, detects tampering, and cross-references the information against global databases to ensure legitimacy. Additional features commonly included within document verification include facial comparison which will ask the user to take a ‘selfie’, the technology will then use liveness detection and compare the image taken on the document with the selfie and provide a match percentage.

AML Screening: Complying with sanctions screening and checking customer data against global watchlists is crucial to avoid doing business with individuals or entities involved more likely to be involved in illegal activity. Screening for Politically Exposed Persons or sanctioned individuals at onboarding is a crucial step in the identity verification process. Not only doing so at onboarding, but automated ongoing monitoring of customers is also to notify businesses of changes in customer circumstances.  

Address Verification: One of the most commonly used services at the beginning of an onboarding journey is address verification. This allows startups to perform a more economical check to validate the address exists before having to perform an eKYC and AML check. This is also an effective way of detecting fraud at the beginning of the customer journey.

Advantages of Using Technology

By integrating identity verification solutions into their operations, startups in regulated industries can benefit in several ways:

Seamless Onboarding: Technology driven identity verification streamlines the onboarding process, enabling startups to acquire customers quickly while maintaining compliance with KYC and AML regulations.

Enhanced Security: The advanced identity verification technologies offer robust security measures, protecting businesses and customers from potential fraud and data breaches.

Regulatory Compliance: Services included in RegTech platforms are designed to meet various regulatory requirements, ensuring that startups stay compliant and avoid hefty fines.

Cost-Efficiency: Automating identity verification processes reduces manual labour and saves costs associated with verifying identities manually.

Customer Trust: Implementing effective identity verification builds trust with customers, as they know their personal information is secure and their interactions with the startup are legitimate.

How Can W2 Help?

Identity verification is a critical aspect of running a successful startup in regulated industries. W2’s industry leading technology offers a comprehensive suite of identity verification solutions that empower startups to navigate compliance effortlessly while delivering a seamless customer experience.

Ensure your success by embracing cutting-edge technology and maintaining compliance with the help of W2.

If you are interested in hearing more about how W2 can develop a custom compliance workflow for your startup, click here and book a demo to speak with one of the team.

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