What is proof of address and why it is important? What type of common challenges has to face the fintech companies with proof of address documents.
Account opening, loan application, mortgage application, credit card application, and others often require proof of address verification alongside customer ID verification. Proof of address verification is an important part of the KYC process and for reducing the instances of financial fraud. An address is an important part of ID verification to verify if a person is who they claim to be.
Not just for verifying customer identity, proof of address via utility bill verification also allows financial institutions to provide services to a specific geographical area. Banks and financial institutions can prevent fines for non-compliance with KYC directives, and also minimize fraud. For example, social networks or neighborhood apps restrict users to resident-only to avoid any type of fraud.
Before digitization became prevalent in the industry, proof of address verification used to be a tedious process that offered poor customer experience, and fraudsters with sophisticated technology could easily fool the manual process. Relying on manual checks for verifying proof of address increases the chances of human errors and creates unnecessary friction and delays for the customers.
For the proof of address verification process, customers must find, scan, and send pages of documents in the required format. The process that should be instantaneous ends up taking days or even weeks, which results in poor customer experience. As there are seemingly endless documents that can be used for proof of address verifications and unique document review standards which can result in multiple failure points. Now that there are instant online proof of address document verification technology available, banks and financial institutions need to find better processes.
What is Proof of Address?
As the term suggests, proof of address is a document that states where a person lives. The address mentioned on the document and the real address should be the same. In financial services, some services are just available to customers living in a specific location, customers living in a high-risk location are generally met with an extreme level of scrutiny. For example, cryptocurrency exchanges in Europe may not want to accept US customers simply to avoid sanctions by the SEC for dealing with unregistered securities.
Restrictions like these can be a regulatory requirement or a company may have set its own policies. Verifying residential information via proof of address documents can help organizations provide services online and comply with regulatory requirements and internal policies.
There are multiple ways to provide location evidence, including a proof of residency letter (Affidavit of Residence), However, the most common way to help prove proof of address is by providing documents that contain address, date of issue, and the customer’s name. Each organization can set its rules on which documents they find acceptable and which they don’t for proof of address verification. Some of the most accepted documents are:
Common Challenges with Proof of Address Documents
Even with constant improvement in technology, not much has changed in the proof of address verification process. Here are some of the biggest challenges faced by proof of address documents:
There are thousands of services that can provide a customer with proof of address documents, add various document styles, formats, types of information, and the problem of verifying the document’s authenticity becomes a major challenge in verifying the documents. Based on the use case, there can be hundreds of possible acceptable documents with little to no similarity. It becomes incredibly tough for banks to verify different documents.
The time consumed in verifying the documents till the account is too much for a customer to ignore. Customers want instant solutions, most people don’t have the time to find the documents, scan them and then wait for days to check if the document is acceptable or not. According to a survey, 50% of customer applications drop off because they were asked to provide proof of ID documents.
The lack of fixed rules and regulations in the financial services industry makes the process confusing for the customers. Additionally, as consumers are becoming familiar with digital technologies, the risk and friction of providing a physical document don’t seem worth the hassle. Even the smallest of errors in a scanned document provided by customers can lead to failure, thus resulting in enhanced poor customer experience.
Apart from the challenges mentioned above, handing in physical documents and manual verification can cost too much. Approving dozens of applications per month is easy but going through thousands of applications is where the system fails. Banks also have the obligation of maintaining records, and keeping document data safe, which only adds up to the overall cost.
Embedding Technology in Proof of Address Verification Process
One of the best things about technology is that if it’s used in the right sense, it can streamline the most monotonous and tedious tasks. By successfully embedding technologies into the proof of address verification process, banks can speed up onboarding, automate address verification and help in delivering better compliance and fraud prevention outcomes. As with other ID verification methods, you need a combination of different technologies catering to every part of the address verification process.
Online document verification or online proof of address verification technologies should be the first and foremost choice while looking to enhance the proof of address verification process. Online proof of address verification software from DIRO can help businesses in enhancing their verification process, customer onboarding process and improve the detection of fraudulent and forged documents.
