Mo’ money mo’ problems, except, not really. More money, more chances to scale, more business opportunities, and more clients. I really can’t recall anyone else besides Biggie Smalls complaining about having more money. It is true, however, that in order to make money you have to spend money; which is why today we’ll talk about the benefits of Identity Verification and how you can start making more money by implementing one.
But before digging into this potential new source of revenue, let’s go back to basics for one second, and properly introduce this money-making concept: what the heck is Identity Verification? Well, if you’re reading this blog article, you’re probably well versed already, but let me establish a quick definition:
Identity Verification is a process carried out to ensure a person is actually who he or she claims to be. This is typically used to prevent users from creating an account on someone else’s behalf, or stealing someone’s identity outright in order to commit fraud.
There are 2 ways to carry out an Identity Verification procedure: live or digital. Live verifications were introduced and used when the internet was a new concept and required the person to present himself as well as some documents (official ID, proof of residence, social security number) at a physical institution such as a bank or store to corroborate face-to-face that he is, in fact, the same person as the one in question. Digital Identity Verification, however, can be done online, from any place in the world, using a computer or a smartphone. The objective remains the same, though, to verify the identity of a user. At Mati, we’re strong supporters of the digital procedure – after all, we’re not in 1990 anymore (not a good enough reason for you? Well, you should check this article).
So, when do we get to the part of me making more money?
Reason 1: Identity Verification can save you from very expensive fines.
Depending on your industry (and something tells me yours might be financial services, which is the most heavily regulated of all), verifying the identity of your users at account creation is mandatory – and it is known worldwide that regulators aren’t particularly nice with the companies that don’t comply. Last year alone, The US and UK financial regulators led the way in anti-money laundering (AML) penalties issued in 2019, collectively accounting for more than 30% of the $8.14bn total handed out in fines globally. The German neobank N26 was fined for violation of the General Data Protection Regulation ‘GDPR’. In particular, the Berlin Commissioner stated that N26 Bank had kept former customers’ names on a blacklist for anti-money laundering purposes, regardless of whether the customers were actually suspected of money laundering. So, unless you are Google or Amazon, we seriously doubt your business or any other business for that matter can afford a fine this big. Which is exactly why KYC and AML procedures are necessary. (jump into this article to get a better understanding of what KYC & AML are)
Reason 2: Identity Verification can also reduce your business operational costs
That is, however, if you implement a digital Identity Verification process. According to a study conducted by Cloudtask, an in-house team of 4 people dedicated to manual verification could cost around $259,955 dollars per year. A team of 10 people would cost roughly about $649.988 dollars per year. Now depending on the volume of users you’d like to verify, this price could be easily reduced by half with a digital Identity Verification solution. Not to mention the time you’ll also be saving. We’re not saying you have to implement a digital one, a manual one is still effective, what it won’t do, however, is run continuous AML checks or government database checks and therefore it probably won’t save you from ridiculous fines.
Reason 3: electronic Identity Verification Improves user experience (UX) &, therefore sign-up rates.
Another great advantage of implementing a digital Identity Verification is that it will improve the overall UX of your service at onboarding and account creation, which will result in higher sign-up rates. Electronic Identity Verification like we mentioned, will save you and your customers a lot of time since it takes place in real-time, thus making the process quicker and simpler (and isn’t this what we all want when we sign up for anything?) Implementing a manual one, on the other hand, will also get you results, but they could take days or even weeks to process and consequentially, make you lose customers.
Reason 4: Cut down fraud once and for all!
Aha, I bet this interests you deeply, especially when you know that fraud is currently the biggest threat to financial services or e-commerce! You see, when companies started authorizing consumers to use credit cards for online purchases, fraud became much simpler as most transactions fell into the “virtual-card” category. As a result, people would use credit cards that were not theirs to purchase items online, and once the card’s real owner found out, they would cancel the transaction. Without being able to identify and locate the original fraudster, the company has to pay back the money, and even pay an additional fraud fee charged by the bank. This is known as a chargeback. According to a study by chargebacks.com, It’s estimated that for every $100 in chargebacks, your actual chargeback cost is $240 in wasted time, expensive fees, penalties, or additional losses of goods and services (yes, this is a shocking number. Good news is: Identity Verification puts an end to this by thoroughly verifying each and every customer.
For many businesses, avoiding costly chargebacks is simply a case of implementing Identity Verification procedures for card-not-present transactions to incorporate one or more identification methods (such as facial recognition or document submission).
Some other types of scams you could encounter and avoid are:
Altered documents, meaning a fraudster has manipulated an original document and is trying to access your platform. This fraudster also could have stolen an original ID and is pretending to be the person on it, or they simply created an entire document from scratch to mess with your business and get some sort of reward from it. Scary right?
Reason 5: Increase the good reputation and reduce incidents on your platform
(This one is more relevant if you’re running a sharing or gig economy company – but it is also relevant for financial services). Okay, but what does this have to do with me making more money? Uhmm… that a good reputation = good reviews = more clients = more money! In case you haven’t noticed, reputation nowadays is EVERYTHING (have you not heard of cancel culture). There are so many options for consumers today, that even the tiniest scandal could make them jump ship onto a different brand. Trust has become more important than ever, and consumers are constantly looking for businesses they can fully rely on. In times where data breaches and information violations have become an obstacle people face every day, potential clients want to know their information is completely safe. When you implement an Identity Verification process in your platform, you are letting consumers know you care and are serious about building trust and protection.
To conclude, we’d just like to say that if you are not convinced by now, we don’t know what it is that will get you over the fence. Hey, we just gave you 5 excellent reasons to implement an Identity Verification process and even told you exactly how you can earn more money by doing so! Yes, implementing a good Identity Verification service will cost you money, but nowhere near as much as you might lose if you don’t. Right now is not the time to lose money to potential online scams (or ever for that matter) Find a provider that can help you scale and take your business to the next level. Not sure where to start? Our KYC consultants can help!