Description: Verification of identity is essential in digital wallets because they deal with daily financial transactions and have to regularly onboard new customers.
Going cashless is one of the primary objectives of financial services providers. They have a lot on it and introduced digital wallets for it.
The electronic wallet software (usually a mobile app) that can store payment of a person and can process financial transactions is called a digital wallet AKA electronic wallet, virtual wallet, and e-wallet. It is used in POS terminals for bill payments using NFC technology. Now people can pay at grocery stores, hospitals, and other areas without carrying cash.
With the improvement in technological advancements, the trend of going cashless and adopting more digital ways is rising. In 2019, Statista finds that 81 percent of UK residents were using digital payment in different forms. About 1 billion users are actively using mobile payment apps. According to another source, there will be only 17% cash-based payments by 2022.
The security of digital payments is at risk when there is a high number of users and funds involved in it. These two factors attract criminals to disrupt e-wallet transactions. There are two levels of security, the first one is while sign-up and the second is during making a transaction. On both levels, the highest security can be achieved by identity authentication
Verification of Identity Through KYC
Financial institutions are already using KYC services as they are obliged to so by the global regulators. Verification of identity entails more than just confirming the name of a customer. In know your customer (KYC), every onboarding customer is verified through multiple checks. KYC is a process in which the below types of verification are performed:
- Biometric Verification
- Age Verification
- Address Verification
- Document Verification
For instance, when a customer onboards on virtual wallets like a mobile app, KYC verification should be performed on him. This step is also known as user authentication. Here is the process of KYC verification
This is the initial step in which a customer gives all the required information. The information consort of personally identifiable data that distinguishes a person from others like:
- Full Name
- Residential or Business Address
- Date of Birth
- National ID Number
The collection of this information makes a person unique. Because there may be a case where two persons can have the same name or address, but they can’t share the composite information. Normally there is an electronic form having a separate box for each entry. The user just has to type his information as per the requirement.
Documents supporting the above information are needed to upload to the KYC software. A live selfie is also captured in this step for biometric verification. Only the documents approved by the government and have an id photo on them are accepted for KYC.
Below is the list of id documents:
- National ID Card
- Driving License
- International Passport
One of these document images is required at this step. A normal smartphone camera having good image quality can be used for clicking the picture.
Verification is a comprehensive process of checking the originality and data of a document. First, the authenticity of the government-issued id document is confirmed. For this, the holograms, stamps, signs, and rainbow marks are analyzed and examined.
Then the data from the image is extracted using OCR technology. The data is compared with the user-entered personal information. Face recognition is carried by confirming the photo id and live selfie. The age is checked under the specified range.
If all the checks are marked, the user is allowed to register himself as a customer of that digital wallet app.
Identity verification services will allow only authentic and legitimate users to access the mobile wallets. Biometric verification can be used for account sign-in security. The risk of frauds and scams can be reduced to a minimum level. Also, the compliance with KYC/AML laws and regulations will be better.