Online trading has become increasingly accessible, drawing millions of new users to digital platforms and mobile apps.
The global market for online trading is growing at 6.4% annually and is estimated to exceed $13 billion by 2026.
As this trend continues, ensuring the legitimacy of each user is crucial.
Robust identity verification (IDV) processes are essential for fostering trust in this environment. Stringent IDV protocols are the need of the hour, and financial trading platforms need to minimize risks and protect users. Their prime motive is to create a secure ecosystem for legitimate transactions.
We discuss the critical components of enhanced IDV and the various processes contributing to a more reliable financial trading landscape.
Identify Verification: Why It Is Important
The global identity verification market is projected to grow at an annual rate of 14.9 percent and reach $21.8 billion by 2028. There are valid reasons for this immense growth, particularly in the financial trading sector.
The accessibility of financial trading has opened doors to unlawful activities, fraud, and security issues. There are many daily transactions, and the anonymous nature of the online transactions, as well as weak identity verification, can be disastrous. It can leave platforms vulnerable to exploitation.
A robust Identity verification process involves the following key elements:
- Document Verification: Verifying government-issued identification documents is a fundamental step in confirming the user’s identity.
- Biometric Authentication: Employing biometric technologies, like facial recognition or fingerprint scanning, adds an extra layer of security.
- Risk-Based Monitoring: A continuous check on the user’s risk profile, checking transaction history, and behavior patterns helps minimize risks.
The Role of PEP Screening
PEP stands for Politically Exposed Person. This applies to users who are in influential positions, such as government officials or executives, who may be at a higher risk of financial misconduct.
A critical component of robust IDV for trading platforms is the PEP screening process. It helps platforms make informed decisions about who to allow in their platform, enhancing overall security.
Apart from minimizing risks, the PEP screening process also ensures compliance with international financial regulations, like those mandated by the Financial Action Task Force(FATF). AU10TIX suggests full compliance, including anti-money laundering(AML) and counter-terror funding (CTF) regulations.
These rigorous screening practices reassure users of a secure and fair trading environment.
Biometric Authentication
Biometric technology is literary, bringing a ‘personal touch’ to financial security. By using unique physical traits like fingerprints, retina scans, and facial recognition, this authentication technology creates a strong barrier against unauthorized access.
For instance, a trading platform can require users to undergo a facial scan every time they initiate a significant transaction. This is far superior to PINs and passwords, ensuring only authorized individuals can access accounts. It also provides reassurance to the user, as they know that their financial information is protected from unauthorized access.
Continuous Monitoring
Initial identity verification is essential, but it is important to stay constantly vigilant.
With the Federal Trade Commission reporting a record-breaking $10 billion in consumer fraud losses in 2023, a 14 percent surge over the previous year, the importance of continuous monitoring for suspicious activity gets clearer.
Continuous monitoring is an innovative approach that keeps a watchful eye on user behavior. If there is an anomaly detected in the user’s activity, like logging from an unfamiliar location, or making unusual transactions, the system can trigger additional verification steps, such as a biometric scan.
This works as a real-time security check and helps trading platforms identify potential issues.
Educating the User
Enhanced IDV systems are designed to protect users, but educating them on these security systems is also an essential part. Many users are not aware of the steps involved in identity verification, which can lead to hesitation or distrust if they are asked for any personal data.
There is a need to build trust by explaining to the users the importance of IDV and how it is only for their safety in a transparent manner.
Users will feel more at ease knowing exactly why they need to verify their identities and what will happen with their information. Providing them with information about the security benefits will help them understand how these elements protect them from fraud.
For example, a user who doesn’t know why his account is suddenly locked will feel lost and might think there is a problem with the trading platform. However, if the user is appropriately educated about the security feature that has locked the account due to suspicious activity, it would increase trust. The user will then happily share personal information to regain access or to verify credentials.
Safety of Data and Assets
An effective IDV process is essential for creating a secure trading environment. When users trust the platform, they are more likely to stay and participate. They will invest in the platform only if they know their data and assets are safe.
Trading platforms must strengthen their defenses and reassure their users for long-lasting user trust.
