Identity Verification as Your Competitive Advantage

Identity fraud is a growing business risk that threatens financial institutions’ revenue, reputation, and customer trust. As fraud attempts rise, organizations face mounting financial losses and increasing pressure to enhance security measures.

However, businesses that invest in modern identity verification (IDV) solutions aren’t just protecting themselves from fraud; they’re also gaining a strategic edge in customer experience, compliance, and long-term growth. This blog post explores how financial institutions can leverage IDV to mitigate risk and create a competitive advantage.

The high cost of identity fraud in the financial sector

Identity fraud is escalating worldwide and across industries. As noted in The Future of Global Identity Verification, a report co-authored by Entrust and Docusign, over two-thirds (69%) of surveyed organizations report seeing an increase in fraud attempts, making it a top concern – especially in the financial sector. Why? Banking and financial service organizations face higher direct costs because fraudsters are either creating fake accounts at onboarding (and accessing monetary services) or accessing and draining legitimate accounts later in the lifecycle. In both cases, the financial institution is either losing money or paying money back out to the genuine user.

Globally, 41% of businesses (banking and otherwise) estimated over $1 million in direct identity fraud-related costs annually. When you include indirect losses, the numbers can skyrocket. Of the larger enterprises (10,000+ employees) we surveyed, 20% of them estimated their direct and indirect identity-fraud losses to be a staggering $50+ million per year!

Beyond financial impact, identity fraud erodes consumer confidence. Customers who experience fraud are less likely to trust financial service providers – and that’s bad for business. To mitigate these risks, financial institutions must prioritize proactive fraud-prevention strategies.

Why IDV is a game changer for financial services

Traditional fraud prevention methods focus on detecting fraud after it has occurred, but modern IDV solutions allow businesses to identify and stop suspicious activity at the earliest stages of the customer journey.

Our research shows:

• Businesses that use IDV are more likely to detect fraud earlier in the funnel (during account creation, login, or payment authorization) than those relying on outdated methods
• IDV provides a 16-point higher fraud-detection rate at the login/authentication stage, making it a critical tool in preventing account takeovers

Better yet, this proactive approach translates into tangible business benefits. Organizations that invest significantly more than their peers in IDV – compared to those who report investing the same or less than their peers – are:

• 2.2x more likely to have saved over $1 million
• 4x more likely to be very satisfied with the IDV solutions they use
• 2.7x more likely to believe their IDV solutions give them a competitive advantage

Real-world examples: IDV in action

Many financial institutions are already leveraging IDV to their advantage. Here are a couple examples:

• GXBank: Malaysia’s first fully digital bank reduced fraud risk while improving the onboarding experience through AI-powered identity verification. The result? GXBank onboarded over 750,000 customers within 8 months, achieving a 86% straight-through processing rate.
• Rand: This financial solutions provider enhanced customer trust by integrating biometric verification. Now, 95% of its users are verified within five minutes.

Balancing security with a seamless customer experience

A common grievance about fraud prevention is that increased security inherently creates friction for customers. But it’s only partly true.

Yes, 66% of organizations we surveyed believe customer experience and identity fraud prevention are competing priorities; and 58% worry that adding security measures will frustrate customers and increase abandonment rates. But with today’s IDV solutions, that doesn’t have to be the case. Modern tools can enhance security and streamline verification without significantly sacrificing user experience.

IDV helps resolve this issue by:

• Accelerating the process: AI-driven biometric and document verification enable faster, more secure account creation
• Minimizing friction: Risk-based verification strategies allow businesses to apply adaptive authentication measures that require additional steps only when a transaction appears high-risk
• Enhancing authentication: Multi-factor authentication (MFA) and biometric verification provide security without adding unnecessary complexity

By adopting intelligent IDV solutions, financial institutions can protect themselves from fraud while ensuring a smooth, user-friendly experience.

Technology is the future of fraud prevention

As fraud tactics become more sophisticated, financial institutions must invest in advanced technology to stay ahead. Our survey found that 70% of businesses believe investing in technology is the most effective fraud-mitigation strategy.

Today’s AI-powered IDV tools outperform traditional authentication methods. They analyze the legitimacy of customer photo IDs (i.e., document verification for document forgeries), and can analyze behavioral patterns, allowing them to detect suspicious activity in real time.

Moreover, biometrics and GenAI are playing an increasingly important role in fraud prevention, helping businesses minimize false positives. Institutions that embrace these innovations will be best positioned to minimize fraud while maintaining a competitive edge in security and compliance.

The business case for IDV investment

Our survey found that 74% of organizations plan to increase IDV spending. Why? Because they recognize its value in fighting fraud and protecting their customers.

Plus, it safeguards the bottom line. Businesses that prioritize IDV see significant savings, often exceeding $1 million. In fact, our study found that organizations saved an average of over $8 million by using IDV solutions. Much of that ROI comes from:

• Lower fraud losses
• Higher customer retention
• Improved compliance

Institutions that fail to modernize their IDV strategies risk falling behind competitors that offer safer, more seamless customer interactions.

Make IDV your competitive advantage

Enterprises that invest in IDV gain more than just fraud protection. They also position themselves as industry leaders in security, compliance, and customer trust. IDV’s proactive measures can help differentiate you in a competitive market, while also helping you stay ahead of continuously evolving threats.

When deciding whether to increase your investment in IDV, keep these points in mind:

• Identity fraud is a rising business risk, but modern IDV solutions provide a powerful competitive edge
• Businesses that invest in IDV save money, improve security, and enhance customer experience
• AI-powered IDV, biometrics, and risk-based authentication will shape the future of fraud prevention