Even in regulated sectors like financial services and real estate, customers increasingly expect to engage entirely through digital channels. In these sectors, companies must carry out appropriate customer due diligence and verification, typically verifying customer-provided information from supporting documents. This article examines the importance of the documentation verification process, common checks that it supports, and how automation can streamline a slow and inefficient onboarding bottleneck.

The critical importance of verification

Many businesses must comply with Know Your Customer (KYC), Anti-Money Laundering (AML) and Customer Identification Program (CIP) rules. Together these regulations demand understanding exactly with whom you conduct business, ensuring that they are fit and that companies can adequately assess their risk. To meet these requirements, companies implement extensive customer due diligence and verification procedures. These screening protocols minimise blind spots that criminals and bad actors exploit to conceal involvement with illicit transactions. Similarly, financial service providers need to understand the the financial position of their customers and prospects.

Traditionally, these verification and monitoring processes have been conducted manually, a method that is both time-intensive and prone to human error. The automation of ID Verification and AML screening has transformed the KYC process. But verifying other data - especially financial data - typically involves collecting physical or digital copies of supporting documents, manually entering data into verification systems, and physically reviewing documents for authenticity.  

This labour-intensive process demands back-and-forth with the applicant, risks inconsistent outcomes, and may expose institutions to regulatory non-compliance as rules evolve. For a mid-sized lender, costs stemming from labour-intensive verification typically reach millions annually, and risk introducing a significant source of risk.

Industries that typically use Document Verification

• ‍Financial Services: Banks, credit unions, lenders and fintech platforms apply document verification for onboarding processes including new accounts, loans, credit cards and more. This validates customer identities and income sources. ‍
• Mortgage Lending: Mortgage originators inspect tax documents, bank statements, and employment records to confirm borrower financial standing and ability to repay loans compliant with federal regulations. ‍
• Insurance Firms: Insurers leverage document verification to underwrite policies for individuals and businesses by validating details submitted such as income, licenses, and business locations. ‍
• Rental Housing: Landlords and property managers validate tenant identities and income history by requiring supporting documents like pay stubs during rental applications and screenings. ‍
• Payment Providers: Payment services utilise document verification to validate merchant identities, bank accounts, and business licenses to minimise fraud and ensure regulatory compliance.  
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What is Document Verification and why is it important?

Document verification is the process of confirming the authenticity of customer-provided information from documents including bank statements, pay slips, licenses, and more. Document verification is crucial for catching potential fraud and ensuring prudent lending, aligned with applicants' true financial profiles – an important consideration for those with consumer duty obligations.

Consider a consumer applying for a mortgage or a small business seeking a loan. Initial approval decisions are often rapid, powered by credit bureau data or similar. However, later in the application process, lenders will need confirmed, validated data to make an informed lending decision. This information comes from diverse sources - bank statements, pay slips, IDs, etc. – and typically cannot be automatically validated. This requires extensive manual verification and cross-checking, extracting data and often derived or calculated insights, to ensure the right decision is made. Without a verified source of information, lenders may make incorrect decisions which may be detrimental to the lenders, the borrowers, or both.

Different Documents often incorporated in document verification  

Document verification encompasses a broad spectrum of methods, tailored to suit the particular requirements of your business. These documents are often key financial documents, such as payslips, utility bills, P60, tax bills, and bank statements. With these, financial institutions can verify multiple pieces of applicant data.

• Bank statements are a critical document for verifying employment, net pay, affordability, and other important financial indicators across many financial products. Similar data can often be accessed via Open Banking, but this doesn’t allow you to carry out such a broad range of checks such as verifying an address.
• Payslips are another important document for verifying consumer income and employment; and can help verify important additional fields like addresses.
• Tax statements such as SA302s may be required where an applicant has more complex income profiles.
• Identity documents are often used in KYC scenarios and can typically be verified digitally by biometric ID verification providers.
• Utility bills are often submitted to verify an address.

Often, many documents may need to be submitted to verify all the information in an application. For example, in joint applications you would want to verify data about all applicants; and verifying more complex income details may need multiple documents of many types.  

Common verification checks that include Document Verifications  

• Employment and Income Verification: Employment status, length of employment, job titles, and income history can be verified by document verification where applicants submit sa302s, pay slips, employment contracts and related paperwork issued by their employer.
• Identity Verification: Although not commonly part of qualification, identity verification remains key to confirming applicants are who they claim. Methods can include document validation, facial recognition, database searches, and more.
• Address Confirmation: Verifying an applicant's address through multiple sources is another important KYC check. With an accurate name and address, additional information such as credit data can be access to support prudent lending decisions.
• Affordability Calculation: With income, expenses, and debts verified, tools can rapidly analyse if the customer can likely meet repayment terms for a given loan amount and interest rate based on their cost of living. This provides data-backed affordability estimates.

As inflation, rising interest rates, and economic turmoil strain household budgets, assessing true affordability is more vital than ever. An estimated 66% of prospective UK home buyers now see unaffordable mortgages as the biggest barrier to home ownership according to a survey [source].

Additionally, 34% of first-time home buyers reported that mortgage brokers helped by assessing finances to determine affordable lending options [source]. The significance of sound advice is clear given 17% of prospective buyers now enlist brokers to navigate uncertain markets.

Document verification underpins reliable affordability analysis by validating integrity of incomes claimed on applications. By corroborating real incomes, document verification enables regulated institutions to implement prudent affordability assessments aligned with an applicant’s realistic budget. This minimises lending risk and maintains sustainable home ownership even amidst inflation or economic turbulence.

The power of Document Processing and Automated Verification

Document Processing revolutionises the way we handle documents by automatically verifying them and streamlining assessments. This method involves extracting crucial data from various types of documents and transforming it into a digital format, which significantly expedites the verification process time.

Thanks to automation, tasks that were once repetitive and time-consuming can now be completed up to 10 times faster than traditional manual methods. For instance, while a human might take over an hour to review a single application, automated systems can perform the same integrity checks in less than a minute. This dramatic increase in efficiency allows for the evaluation of significantly more applicants without sacrificing compliance standards.

End-to-end audit trails log verification events for complete transparency. This ensures governance and compliance absent in many manual processes. Ongoing analysis continuously tunes the system's fraud detection capabilities.

Automation empowers staff to focus uniquely human skills on the most complex cases flagged for further review. This balances automation with personal insight were prudent.

By synergising automated verification with human oversight, regulated institutions dramatically simplify and accelerate onboarding. Clients enjoy straightforward application experiences culminating in near-instant decisions. Risks are mitigated without sacrificing customer satisfaction.

Advantages of Implementing Digital/ Automated Document Verification

• Comply with Legal Standards: Industries vary in their regulatory landscapes, and your business might be obligated to authenticate the identities of new clients. Utilising document verification is a recognised and effective strategy for adhering to these legal requirements.
• Reduce Fraud Risks: Independent of legal obligations, verifying the identities of users can significantly lower the risk of identity theft and various fraud types, such as fraudulent account registrations on your platform.
• Enhance Consumer Confidence: Incorporating identity verification into your customer onboarding routine significantly strengthens trust in your services or platform. The uniform application of verification measures suggests a reduced likelihood of fraudulent activities, fostering a safer environment for all users.
• Accelerate Customer Onboarding: Leveraging automated online document verification processes can drastically speed up the onboarding timeline, completing verifications in mere seconds. This efficiency is a stark contrast to manual checks, which can span from several minutes to multiple days, depending on the complexity of the process involved.
• Increase efficiency: On average, the verification of each application could take between 1-2 hours, a substantial period that underscores the inefficiency of traditional methods. Automated Document Verification processes can save up to 75% in efficiency gains.  
• Reduce operational cost: The onboarding and verification process, particularly for mid-sized financial firms, has traditionally been a time-consuming and costly affair, which can amount to £2-3 million annually.
  

About Sikoia:

Sikoia streamlines and automates part of the customer verification process for financial services providers. While initial onboarding decisions are swift, subsequent stages often require manual verification from diverse sources like open banking, payslips, credit bureaus, and identity documents. This manual process, prone to inconsistency and regulatory risks, often costs millions to process for just mid-sized institutions.  

Sikoia addresses this challenge with its unique Customer Verification Platform, leveraging technology to centralise and standardise data from various sources. The platform ensures more consistent decision-making and automatically generates insights. Catering to both startups and established companies globally, Sikoia has successfully reduced manual verification processes and application turnaround times by over 75%, providing a cost-effective solution for clients navigating complex regulatory landscapes.

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