Why Fintech Startups need eKYC for seamless Digital Customer Onboarding?

A new paper outlines the impact of fraud on customer trust. According to the study paper “Fraud vs. Friction: How the Need for Speed is Creating a User Onboarding Crisis,” 71% of customers are “less inclined to trust a fintech service that has been harmed by onboarding fraud.”

The research, which describes Onboarding Fraud as a rising pandemic, “highlights the surge in promotional abuse or ‘promo fraud,’ in which threat actors – frequently on a large scale – defraud organisations by exploiting promotional efforts such as sign-up incentives, referral rewards, or loyalty discounts.”

According to the research, “almost half (47%) of all respondents regarded a fintech that enabled promo fraud to go undetected to be lackadaisical about security.”
Nonetheless, promotional programmes “remain a successful growth tactic,” with more than two-thirds (66%) of respondents stating they would choose a finance platform with a discount code over one without.
This exemplifies “an emerging industry dilemma in which risk managers are increasingly finding it challenging to balance expansion objectives with security.”

The Royal Society for Arts, Manufacturers, and Commerce (RSA) research “found that 48% of fraud incidents come from accounts that are less than one day old, demonstrating the enormity of the danger presently connected with incentivized growth techniques,” echoing the report’s conclusions.

Fraud risk also “endangers a company’s current consumer base.” ” According to Pi’s analysis, 32% of existing consumers are “extremely likely to discontinue using a fintech service and cancel their accounts following any occurrence of fraud.” “Additional checks” are listed as one possible remedy to onboarding fraud, however, the survey also discovered that Seamless Onboarding was still a top priority for customers.”

Despite their fears about fraud, more than 70% “indicated they would leave the sign-up process if had to go through more than three Identity Verification Checks.”
The paper continues, “using PayPal as a notable illustration of the damage promotional fraud can inflict.”
The payments giant “was a big victim of account opening and onboarding fraud” in the first half of 2022. ” More than 4.5 million bogus accounts “were established as a result of the company’s incentivized Customer Acquisition Approach,” resulting in a 25% loss in PayPal’s stock value, the greatest single-day decline on record.

While the “onboarding issue” impacts the entire sector, “growth-stage fintech is likely to feel it more keenly.”
Despite forecasts that the fintech business will “expand to a value of $937 billion by 2030,” worldwide fintech investment from investors continues to shrink, with a 33% reduction in funding observed in Q2 2022.

Each instance of Onboarding Fraud is “a cost that fintech must incur, making fraud risk a significant factor for potential investors.”

This is where intelligent AI based eKYC Verification Solutions come in, including the latest ML and AI algorithms to seamlessly verify documents, IDs, Liveness, Face Match, and provide complete Identity Verification of the customer or user on the platform. As we just reviewed that most fraud cases were noticed within a few days of login, using screening solutions helps secure digital platforms directly from the sign-up process.

How IDcentral’s ID verification mitigates fraud & supplies a Customer-centric Face Match solution

IDcentral’s flexible Digital Onboarding Solution comes integrated with the latest AI technology for accurate ID verification, precise Liveness Detection, and speedy Identity Proofing. Enable Remote-Digital Onboarding capabilities with our API based solutions which have variable levels of Identity proofing procedures according to your customer base and compliance requirements.

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