Insight: The identity verification problem facing global businesses – and how Open Banking can help

Ripsy Bandourian,
01 Jun 2023

Verifying customer identity is critical for digital finance businesses to protect against fraud and comply with stringent regulation, most notably Know Your Customer (KYC) and anti-money laundering (AML).

But there is a bigger task at hand for global businesses that must verify customer identities in multiple markets and comply with different regulations. The lack of uniformity in regulatory requirements country-to-country presents a barrier to achieving business growth in new markets.

The increasing costs and time spent on compliance for businesses to operate globally has highlighted the need for a new solution.

The localisation headache 

The European Parliament recently backed plans for a standardised EU-wide digital identity scheme for citizens across the region, which could go some way to simplifying the cross-border verification challenge for businesses. But for global businesses operating both inside and outside of Europe, it will only address part of the problem.

To operate in other countries, digital finance businesses must be able to collect information according to the specification of the local jurisdiction. Verification processes should be capable of not just collecting identity data, but also automatically accounting for the variations that exist across the countries a business operates in today – and may operate in in the future.

Ripsy Bandourian, head of Europe at Plaid

Adapting and localising onboarding journeys to fit customer expectations and comply with local rules and regulations requires building a new onboarding journey for each new market, which can stifle expansion into new markets.

The second challenge is that while identity data is formatted differently in every country, consumers and their expectations of digital identity verification today are consistent – the entire experience should be smooth and quick. Localising the product and verification flow can help provide the experience global customers expect.

However, building localised experiences often requires considerable development resources, iteration cycles, and expertise. When expanding into new countries, localising the customer experience can make or break a business’ success in a new market.

Building full-stack onboarding with Open Banking

This is where Open Banking comes into play. Businesses are already leveraging the geographic reach of Open Banking networks to enable their entry into new markets and to onboard customers the world over into digital accounts.

Open Banking can help create a seamless onboarding journey that enables customers to open an account, fund the account and use it in a matter of seconds.

While Open Banking creates opportunities for seamless experiences, many businesses are faced with the tradeoff of adding friction for added security and a seamless process. Whether their solution is built by their own developers or using multiple providers, businesses are sending customers through disjointed journeys.

But Open Banking providers with geographic reach have the capacity to solve this issue when they support the end-to-end onboarding experience and integrate identity verification into their offering. This enables businesses to verify individuals and make the account opening and funding journey seamless, unified, and instant.

It’s not just a better experience though. Real-time access to financial data from Open Banking providers allows businesses to quickly identify discrepancies in the information provided and flag potential fraud attempts.

This can be done with no new code or third party providers, enabling global businesses to rapidly expand into new markets and securely onboard customers – no matter where they are and without the localisation headache. This has the opportunity to provide digital finance businesses with a global full-stack onboarding solution.

Alleviating the localisation headache through Open Banking

Open Banking has the power to alleviate the headache global businesses face to localise identity verification and remain compliant.

It offers a win-win solution for customers and businesses.

Customers can benefit from a more seamless and secure onboarding journey from start to finish, while businesses can reduce the time and cost spent on compliance, thereby accelerating their expansion into new markets.

Ripsy Bandourian is head of Europe at Plaid