Fintech Identity Verification and Onboarding : a Case Study
As of this writing, there are currently 30,000 fintechs globally, with over 650 being African. These numbers may seem like a lot. However, the fintech industry is still expanding. As of 2023, the fintech space is worth $179 billion, though it is projected to reach $492 billion by 2028. These fintechs provide several services, including online payments, lending, point-of-sale payments, wealth management, insurance, BNPL, open banking, cryptocurrency services, and neobanking.
There is clearly a lot of money to be made in fintech, explaining why new startups keep emerging. However, being a profitable and growing market also comes with dangers, as fraudsters quickly follow the money like a moth to a flame. Juniper Research projects that digital payment fraud losses could exceed $206 billion by 2025.
Fintechs are waking up to the fraud and cybersecurity risks that bad actors pose to their platforms and users and are taking more steps to reinforce their systems against these threats. A 2023 Dojah survey showed that Africa’s fintech industry had the highest number of identity verification checks in 2022, with 67.57% of checks, followed by the non-profit and technology industries with 12.31% and 5.59% of checks, respectively.
In this article, we will explore how fintechs can effectively navigate the complexities of digital identity verification and customer onboarding as they build and expand their services locally and globally.
How Not to Do Identity Verification and Customer Onboarding in Fintech
I’ve signed up on many fintech platforms over the past few years, probably one too many. In that time, I have experienced different customer onboarding and identity verification processes. While most have been smooth and seamless, that hasn’t always been the case. A few were so difficult to navigate that I eventually abandoned the process altogether. Till today, I haven’t been able to use those platforms.
One platform, in particular, had an interesting verified process that required users to receive an OTP code that would be sent to their phone number. Now, that wasn’t an issue. The problem was that the phone number users input had to match the number linked to their BVN. This meant anyone who lost that phone number could not complete the verification flow. This was a huge blockade. I can only speculate about why they used such a restrictive onboarding process. However, I do know that the identity verification process ultimately blocked me from using the application, affected my user experience, and caused me to churn.
This next one is a very interesting one that still leaves me puzzled till today. I’d been hearing about this fintech app for a long time, and I made a mental note to give it a try. Eventually, I needed a virtual USD card for dollar-based transactions. The fintech offered that service, so I decided to sign up. I got to the stage of the onboarding process where I needed to verify myself with my BVN. I inputted the BVN and got a response that “another user has already verified their account with the same document.” So, someone could somehow use my BVN to verify their identity on the platform. The first thought that came to my mind was, “How did the fraudster pass the liveness check or video KYC.” Then I realized there was probably no liveness check, which made it easy for the fraudster to take on my identity. If there was a liveness check, the face of the person who used my details would not have matched the face on my BVN, and they would have been unable to get verified successfully.
The lesson from this is that fintech providers should put multiple KYC checks in place to dissuade fraudsters. Not only are biometrics verification systems like liveness checks extremely difficult for fraudsters to bypass because they require people to show their faces, but they also make the onboarding process more seamless and help reduce churn.
How to Reduce Identity Verification and Customer Onboarding Friction: Case Studies From Other Fintechs
Moniepoint is a Nigerian fintech that provides businesses with banking infrastructure. They recently expanded their services and launched a consumer app to cater to individuals’ banking needs. The app allows users to purchase airtime, make transfers, pay bills, and more.
Sure enough, I couldn’t wait to sign up and create my account. I really enjoyed Moniepoint’s customer onboarding and identity verification process. Let’s explore some things they got right.
The first thing customers encounter after the onboarding splash screens are carousel screens that educate them on why they need to be verified. This comes before the verification process and helps customers know why they need to get verified. This way, they understand why they need to provide certain documents and information like IDs, NIN slips, and BVNs ahead of time. This approach reduces the friction of the identity verification process.
After that, customers are taken to a section of the app that shows the different verification stages, the status of the verification process, the requirements, and the benefits of each stage. With this process, users know what is expected of them at every level and the benefits of being partially or fully verified. This risk-based approach helps Moniepoint manage the potential fraud risks that every user brings by using the verification levels to limit the amount of transactions users can perform.
Lastly, Moniepoint adds clear and descriptive instructions at every stage of the identity verification process and also provides multiple document verification options. This means users verify themselves with their preferred document, which reduces friction and improves the onboarding and verification experience. As someone who has used a few fintech apps, I can say that Moniepoint gets a lot of things right.
All You Need to Know About Identity Verification and Customer Onboarding Level Up Your Fintech Game
There are several components to building a successful fintech product that users love. As a fintech provider, you have to navigate customer onboarding, fraud prevention, cybersecurity measures, and regulatory compliance.