AI-Fueled ID Verification Is Redefining Friction

There is no “workaround” for the great digital shift, and remote onboarding is the way of the world now. Fortunately, that’s being well-managed with technology including artificial intelligence (AI) that has come a long way in a short time, and now possesses the “smarts” necessary.

Identity verification is a prime example of how more advanced forms of AI are helping to turn the tide in the digital identity war now being waged between fraudsters and all online businesses.

“AI is especially handy in easing the frictions customers face when applying for accounts or services online, where stringent and often intrusive anti-money laundering (AML) and know your customer (KYC) procedures cause many to abandon the processes,” according to PYMNTS’ new AML/KYC Tracker® done in collaboration with Trulioo. “A recent study found that almost half of all U.S. consumers have abandoned an online account opening process in the past year because they thought it was too difficult or untrustworthy — an increase from the 37 percent of consumers who said the same the previous year. Two-thirds of respondents also felt that companies did not adequately protect their personal information.”

Those types of trends concern eCommerce merchants at every level. The issue now revolves around applying the ideal amounts of friction across oceans of transactions, at scale and in real time. That’s not a job for humans, whose time is better spent on intuitive work ill-suited to machines.

PYMNTS’ new AML/KYC Tracker® is a compendium of valuable information gathered from around the identity space, with clear directions for dealing with the digital deluge.

Fines Rain Down for AML/KYC Fumbles

For any banks or financial institutions (FIs) that are unclear as to the current regulatory climate around digital identity and finance, don’t let ambiguity obscure the matter.

“Preventing cybercriminals from abusing their systems is often incentive enough for banks, FinTechs and payment providers to crack down on money laundering, but government oversight can also keep FIs honest,” noted the new AML/KYC Tracker®, adding that “FIs — including large players like Commonwealth Bank of Australia, Deutsche Bank and Goldman Sachs — were fined more than $17 billion between 2009 and 2019 for improper anti-money laundering (AML) procedures.”

This illustrates the cost of non-compliance, which at this point is hard to comprehend as AI-powered digital identity verification is among the most robust of financial solutions. And because cyberthieves also have good gear, it’s on FIs to tech-up properly versus that threat.

“Identity verification plays a crucial role in helping organizations keep fraudsters away. However, as identity thieves grow more sophisticated, so do identity verification technologies,” Trulioo’s Chief Operating Officer Zac Cohen told PYMNTS. “Merchants need to strengthen identity verification and fraud prevention techniques without adding too much friction to the customer onboarding process. New tools have emerged to help companies unequivocally answer the question ‘[are these customers] who they say they are?’ before moving forward with authorizing a transaction.”

Consumers Demand Security With Speed

The worry among eCommerce players is that too much friction, even for the right reasons, is causing too many false declines at a time when sellers can hardly afford it. It’s yet another argument for using ID verification that integrates muscular AI capabilities.

Per the Tracker, “Consumers may find it frustrating to encounter difficulties in account opening, but they do recognize the need for ironclad security.”

“A recent study … found that 62 percent of consumers prefer onboarding experiences that prioritize security over speed across all industries except online gaming,” the report continued. “All customers were displeased with poor account opening experiences, with 73 percent of consumers saying they have become less tolerant of these deficiencies over the past few years.”