It has never been easier to set up and run an online business. So much of the infrastructure that was once built in-house (cloud computing, payments, marketing) has been automated and made available through off-the-shelf APIs. However, many online businesses—from financial services to marketplaces—are still manually verifying customer information.
A key component of fraud and compliance is verifying facts about who you are doing business with. Traditionally, identity verification has received most of the attention in this space, but with more business going online and new business models being created, there is a need to verify a host of non-ID related data points. Depending on the product or service, online businesses may need to prove attributes such as name, address, income, residency, education, insurance cover, etc.
Why do you need to verify this information in the first place? From our experience at Inscribe, there are 3 main reasons:
- Risk of fraud - to reduce the financial cost of fraudulent activity.
- Trust and reputation - to maintain the integrity of your platform.
- Regulatory requirements - to comply with KYC and financial regulations in an effort to protect other consumers and prevent criminal activity.
The old way of verifying customers
The old way of verifying customers was invented long before the internet. In the very early days, your relationships were the main source of trust in the exchange of goods and services. You likely knew who they were, where they lived, what they earned etc., and had an intuition of whether they were trustworthy.
More recently, companies began using a combination of databases (governments, Equifax, etc.) and large teams of support agents to request documents and make phone calls. A series of manual reviews would then be performed to approve or reject an application. This old way of verifying information worked great for many offline businesses where customers were local, in relatively low volumes, and the threat of fraud was low. However, in today's online world, it leads to:
- A team of support agents that scales linearly with growth
- Slow onboarding processes with low conversion rates
- Ineffective fraud defenses
This traditional high-cost and friction-filled onboarding process hinders growth and is not fit-for-purpose in today’s world. This is why Inscribe is building the digital infrastructure to verify customer information.
The new way of verifying customers
Today’s fastest growing businesses are global, high volume, and aim to maintain integrity on their platforms. They require dedicated and fit-for-purpose processes to verify customers. These new processes make use of machine learning models, user-permissioned data, and advanced decisioning systems. In the future, we envisage even more widespread automation of workflows, the use of atypical data sources, and an adoption of portable identities.
At Inscribe, we are tackling some of the most cumbersome workflows these fast growing businesses face today—namely, checking documents for fraud and verifying the information within them is correct. At the same time, we are questioning existing processes to further automate these verifications.
In the future, the customer verification process will be transformed, just like cloud computing, payments, and marketing have been in recent years. Below are some of the transformations we see happening:
- Human operated → automated: large teams of support agents approving and rejecting applications will be a thing of the past. Companies will use an auditable and reliable system that operates instantly, automatically, and at scale.
- Variable coverage → widespread coverage: performing verifications today often means some demographics are rejected (lack of documents, no credit score, lack of bank accounts). In the future, we see companies offering a selection of options to verify details allowing for all demographics to be supported.
- Built for fraud teams → built for developers: verification workflows have traditionally been something that fraud and compliance teams lobby an engineering team to build. In the future we expect engineering and product teams to be taking the lead on these efforts.
- Single-source → multi-source: in the future we see companies using more diverse sets of data points to verify details. It will move beyond the traditional government databases, bank account checks, and documents to include more atypical data sources like ecommerce and social platform data.
- High fraud rates → minimal fraud: reducing fraud is a cat and mouse game that companies tend to lose. With improved models, greater collaboration between companies, and new sources of data, fraud and the problem of false positives will dramatically decrease.
- Data breaches → data privacy: with the adoption of user permissioned data and portable identities, consumers will demand control of their data and data breaches will become less frequent and more unacceptable.
- Painful UX → delightful UX: onboardings that involve complex verifications are often poorly designed. In the future, these will be optimised just like payment forms which will drastically improve conversion rates.
We are on a mission at Inscribe to make these transformations happen sooner rather than later. Over the past 2 years we have worked with leading fintechs, marketplaces, and Fortune 500s to begin this transformation in customer verifications. In the end, we will know we have succeeded when a new business can instantly and reliably verify customer information from day one just like they can scale up servers or accept payments.