Although digital trends are rising, the banking industry must remain concerned about fraudulent activity. Individuals are more likely to utilize digital applications to improve customer service, but the crime rate exposes the banking system’s flaws. E-commerce platforms and meal delivery applications are becoming increasingly prevalent. KYC compliance mechanisms must be in place to prevent financial mistakes. One of the essential KYC features is the protocols to verify addresses for safe business transactions.
According to the Financial Times, the scam rate has increased by 39%, owing primarily to KYC and fraudulent online address verification. Criminals employ illicit channels to achieve their nefarious goals. The blog would emphasize the importance of the verification process in reducing crime.
How Address Verification System Works?
Investing in digital models offers methods to validate addresses for better data security, one of the major concerns for businesses today. Verifying addresses of customers is the main objective of address verification before any transactions are made. It is essential to prove identity regardless of whether the address is correct. Verifying the address is now required in order to avoid falling for illegal scams.
Significance of Address Verification
For security reasons, companies in the finance industry recommend online address verification. A client’s data is insufficient without an address, and the firm is held responsible if an error occurs. One of the most essential components of KYC is understanding the significance and peculiarities of verification of address as well as the relevant documents. Accepting criminality is not an option in the digital era. Every sector, including travel, hotels, services, and business, need accurate consumer data, including current address information. The goal is to contact the fraudster in case of any unfavorable condition, such as a credit card delinquency or cybercrime.
Verifying an Address Checklist
Financial channels are becoming more numerous daily, and digitization is their top concern. Understanding the list of supporting documents required for precise address verification is essential. The checklist of documents includes:
- Tax bills
- Identity card
- Utility bill
- Bank statement
- Rent agreement
- Driver’s license
- Insurance policy, etc.
All of these papers require automatic verification for proof to validate address. Businesses are using OCR software for systematic proofreading. For precision and accuracy, the software authenticates documents thoroughly. It extracts the person’s name for verification. Furthermore, the documentation showing your address should be no more than three months old. It implies that in order to enable ongoing supervision, all information must be kept current.
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Advantages of Customers’ Address Verification
Businesses are broadening the scope of their protocols to reap significant benefits. Some of the advantages are as follows.
Reduces the Crime Rate
It’s imperative to realize that businesses are searching for efficient address verification methods due to rising fraud. It is a standard for thorough verification in the massive banking, insurance, and other financial sectors.
Overcome Shipments Return
No company is prepared to handle frequent package returns, which will result in financial loss for the company if a customer has a bad experience. According to the Financial Times, there will be a 78% increase in the number of fraudulent returned packages in 2021, as the report demonstrates $761 billion worth of returned goods.
Enhanced User Experience
Companies place a high priority on customer expectations in addition to business purposes. A trustworthy customer experience necessitates accurate customer information, including a valid address. Updating the customer database will improve the user experience and stop fraudsters.
Adherence with Regulatory Authorities
FATF is the most important regulatory compliance measure to stop money laundering and terrorism financing. Incorporating the address verification feature ensures the security of the company. FATF is tightening the rules for stakeholders who don’t comply, despite the fact that not all of the components have been implemented completely.
All business partners must participate in preventing fraud. In developing countries, stringent legislation must be implemented in order to guarantee KYC in every sector. The development of digital technology is altering the dynamics of global finance. Address verification is becoming more common in the financial sector. Manual verification is no longer immune to the system because it carries a risk when handling sensitive data and transactions. Artificial intelligence (AI) models ensure the procedure is efficient and secure for the financial platform.