KYC AML Guide: the Clock shows the average reeding time of the blog13 min Read


KYC AML Guide: the Clock shows the average reeding time of the blogNovember 15, 2023

How is the KYC Document Authentication Process Done for FinTech?

Identity assurance is required for financial institutions and other enterprises to verify whether they are dealing with authentic consumers, and adequate due diligence is a requirement for regulatory compliance. Fraud, identity theft, and money laundering, among other crimes, continue to pose a threat to these firms, particularly if they do not implement current, stringent security measures. Illegal transactions can harm a company's or financial firm's reputation, resulting in lost income and customer distrust. Companies must replace obsolete, manual controls with modern document verification in FinTech that are more efficient and effective in screening out bad actors and promptly onboarding good clients when adopting new online identity verification processes. Knowing a customer's true identity during remote access aids in the prevention of crimes. Implementing innovative identity verification and identity document verification in FinTech can increase your security while also providing a seamless user experience and compliance.

Belal Mahmoud

KYC Product Consultant

What is Identity Document Verification in FinTech?

KYC Document verification is the authentication of a government-issued identification document, such as a driver’s license, passport, or state or national ID card. The identity document verification answers the following questions:

  • Is this ID authentic?
  • Is the displayed identity the same as the person on the ID card?
  • Is the document current and valid?
  • Is the document free of tampering?
  • Is the individual on any watchlists or has a criminal record?
  • Is the individual authorized to make financial transactions?

Applicants no longer need to be physically present with digital onboarding. To expedite and secure boarding, the ID card can be pre-checked while complying with legislation requiring stricter control – such as age verification for limited transactions – and preventing fraud. When previous checks are inconclusive, the ID and selfie ID verification check is performed farther down the waterfall as step-up verification.

Also Read: KYC Document Verification in Banks: Requirements & Best Practices

Main Challenges in FinTech

Some of the main challenges the fintech sector faces include:

Fraudulent Document Submissions:

Individuals with ill intent may attempt to trick the verification process by submitting false or modified papers. Such bogus submissions necessitate sophisticated technologies and persistent supervision in document verification in FinTech.

Data Privacy Concerns:

The collection, storage, and processing of sensitive personal information for document verification raises privacy concerns. To ensure customer trust, fintech companies must implement strong data protection procedures and adhere to privacy legislation.

Regulatory Sanctions:

AML standards for fintech organizations around the world are stringent, including user authentication, AML training, suspicious activity reporting, and more. Failure to meet these responsibilities will result in harsh sanctions.

Screening for Fraudsters:

Scammers create bogus identities to complete transactions or begin phishing attacks. To avoid bad actors, fintech companies must be alert.

Cross-Border Challenges:

Working across borders adds new problems, such as language barriers, different document formats, and various levels of document standardization. To overcome these cross-border problems, fintech organizations require adaptive solutions.

In short, fintech firms must continuously strike a balance between ease of use and security. This is partly accomplished through automated solutions such as Know Your Customer (KYC) and transaction monitoring.

How to Perform KYC Document Verification in FinTech?

While document verification can take place in both physical and digital environments, the phrase is most commonly used to refer to online or digital document verification. In both circumstances, document verification in Fintech looks somewhat like this:

KYC Document Verification Process


6-Step Process Flow of KYC Identity Document Verification

  • As part of the account creation procedure, the user supplies personal information. This information varies for every company, however, it may include an individual’s name, proof of address, date of birth, SSN, and so on.
  • If necessary, the user will be prompted to produce one (or more) paper that can confirm the provided information. A letter confirming the person’s address, for example, and a birth certificate confirming the person’s age and date of birth may be asked.
  • The provided document is verified to ensure the authenticity
  • If the document has been successfully checked, it can attest to the accuracy of the information provided by the individual.

Documents that get rejected during Verification process

Some examples of documents that get rejected during verification

Online Document Verification in FinTech

The exact nature of the online KYC document verification process is determined by a variety of criteria, including your sector i.e. banks, document verification in Investment firms, cryptocurrency exchanges, etc., and the type of documents you manage. The document verification process, on the other hand, can be divided into four distinct steps:

Document collection

The first step in verifying the document is, of course, collecting it. Although this can be accomplished in a variety of ways, it is typically accomplished by requesting that the user take and submit one or more photographs of the document. The document is pre-processed and analyzed once the individual submits it to ensure that it fulfills the company’s criteria.

Is it a photo of the required paperwork rather than a cat? Is the image clear and of sufficient quality? Is the photograph capturing the complete document or merely a portion of it? Is there any evidence that the document (or image) has been tampered with? Is the information required for verification included in the document?

  • Is the document complete in terms of the necessary information required for verification, such as name, date of birth, and other pertinent information?
  • Is the uploaded document a true depiction of the required identity, rather than a digitally manipulated image or a different sort of document?
  • Is the photograph of the entire document, giving a complete view, or is it a partial or cropped image?
  • Is the document valid in terms of regulatory standards, such as expiration dates for identity documents?

Documents that do not satisfy these requirements will be rejected for any reason. Those who meet the qualifications advance to the next round.

Data extraction

When a user submits a document for review, they send an image of the document. The data must be extracted to access the information included in the document. This extraction can be accomplished by a variety of approaches, including optical character recognition (OCR), pattern recognition, and others. After every relevant information has been extracted, it is compared to the user’s data.

For example, if a user uploads a utility bill to verify an address, the address in the document is compared to the location the user originally gave. Differences between the user’s data and the data in the document are highlighted in red. While this difference could imply an error, it could also indicate fraud.

Document validation

The verification of the authenticity of the provided document is the next step in the procedure. Depending on the type of document being verified, this may include dozens or hundreds of separate validation checks. Common validation checks include:

Document Completion Are all required pages of the document uploaded if it consists of multiple pages?
Cropping and Detecting edges Does the document’s edge appear natural and untouched, without signs of cropping or tampering?
Special Feature Identification Are special features on the document, such as watermarks, holograms, stamps, foils, fonts, and textures, consistent with genuine characteristics?
Colorspace Analysis Does the photo exhibit authentic color, lighting, and shadow, providing additional context for determining the legitimacy of the document?
Verification of Databases Depending on the document type, is there a verification step against the issuing database to further confirm its authenticity?

Manual Verification

In cases where a document is flagged as suspicious, companies have two options. They can either simply reject the document, or move the document into a manual review process where a human reviews the issue. Although less efficient and secure, manual inspection can be an effective tool to reduce the rate of false negatives. This manual review may involve gathering other documents.

Also Read: Why is KYC Document Verification Significant?

Benefits of KYC Document Verification in Fintech

A KYC document verification in FinTech can help ensure that you are dealing with the genuine consumer you claim to be. This can shield your company from forming potentially criminal commercial ties that can have serious consequences.  KYC can also assist you in developing a stronger relationship with your clients by offering information about financial interactions and the types of services required. KYC verification can help to prevent the following:

Identity Theft

KYC document verification necessitates a person proving their identity. To ensure that the consumer is who they claim they are, reasonable steps must be made. This can make it more difficult for threat actors to open bogus accounts using stolen or forged credentials.

Financial Fraud

Financial fraud has surged by roughly 50% since the pandemic began, costing organizations an average of 5% of their yearly income. Furthermore, every dollar of fraud costs financial services firms in the United States $4. To combat crime, financial regulators such as the FATF, FinMA, FINTRAC, and others have developed KYC and AML compliance standards that businesses are encouraged to follow. Financial fraud is a unique hardship for businesses. KYC document verification can aid in the prevention of fraud by preventing bad actors from impersonating legitimate customers using stolen IDs or credentials, or from opening phony accounts to steal money.

Money laundering:

KYC document verification in FinTech makes it more difficult for fraudsters to create fake accounts for money laundering. KYC also monitors accounts and transactions, issuing notifications when anything unusual occurs.

Ensured Compliance

Organizations can use document verification to verify compliance with customer identification such as KYC, AML, and CDD.

How Can a KYC AML Guide Assist with KYC Document Verification in FinTech?

KYC AML Guide provides a streamlined research-based consultancy to fintech difficulties with document verification. We specialize in assisting fintech businesses by providing research-based KYC technology buying, guiding them to invest in the proper solution from trusted vendors by doing KYC Vendor Analysis and assuring seamless document verification and regulatory compliance. Improve your document verification in FinTech by leveraging our knowledge to determine the best KYC solution for your FinTech firm.


KYC AML Guide: the Facebook share KYC AML Guide: the Linkedin share KYC AML Guide: the Twitter share
Belal Mahmoud
KYC AML Guide: the Linkedin share

Belal possess over 8 years experience in the KYC Identity Verification industry. He has consulted KYC solutions for over 20 new economy companies at DIFC and ADGM while ensuring a seamless technical integration and helped in jurisdictional compliance audits.