Consumer Duty, as defined by the FCA, requires financial institutions in the UK to prioritise the development of customer centric products and processes, ensuring that their services lead to positive outcomes. This involves preventing foreseeable harm, providing fair value and supporting customers in achieving their financial goals, with a mandate that firms integrate these principles into every aspect of operations. The implementation of Consumer Duty has far-reaching implications for identity verification processes.

Financial institutions must now reassess their entire customer journey, with a particular focus on how identity is verified at various touchpoints. This reassessment is not just about ticking regulatory boxes; it's about fundamentally reimagining how customers interact with financial services. Consumer duty emphasises the need for firms to ensure good outcomes for customers. Delivering appropriate interactions across all touchpoints, IDSPs can not only comply with regulations but also enhance customer trust and promote financial inclusion for their clients.

The Consumer Duty requires firms to:

• Provide high standards of care 
• Prioritise customer outcomes 
• Act in good faith towards customers 
• Avoid causing foreseeable harm to customers 
• Enable and support customers to pursue their financial objectives 
• Consider the differing needs of vulnerable customers 
• Show evidence of the outcomes that customers experience

Identity verification is essential for complying with regulations such as anti-money laundering (AML) and know your customer (KYC) requirements. It acts as the first line of defence against fraud, protecting both the business and its customers. Ineffective verification can lead to unauthorised access, financial loss, or the inability for legitimate customers to gain access to services. Conversely, strong verification processes deliver a greater experience for good customers, building trust through secure interactions.

Recent data from UK Finance suggests that in 2022, fraud losses across payment cards, remote banking, and cheques totalled £1.2 billion. This staggering figure underscores the critical importance of robust identity verification in safeguarding financial institutions and their customers.

Effective identity verification is crucial for ensuring that customers have secure and seamless interactions with financial institutions. Leveraging inclusive verification methods enables firms to reduce fraud and enhance customer satisfaction. These processes should be designed to be both secure and user-friendly, minimising friction and ensuring that customers can access services quickly and confidently.When customers feel secure, they are more likely to trust and engage with the business, leading to stronger, long-term relationships.

On the other hand, overly complex or slow verification processes can frustrate customers and negatively impact their experience. In order to enhance customer experience, businesses are encouraged to reduce 'sludge', where unnecessary friction is observed in a journey.

In our experience, improved verification journeys and leveraging of data and technology assets that increase conversion by up to 10% through automated means, help firms to reduce sludge and ensure high levels of customer satisfaction.

Inclusion is a vital component of Consumer Duty, particularly when considering identity verification. Traditional methods often exclude marginalised groups, such as those without standard identification documents, access to digital technology or a limited digital footprint. About 5.9 million people in the UK are classed as ID challenged, some of which could potentially be genuine customers. Financial institutions can overcome these barriers by adopting more inclusive solutions, such as technology underpinned by alternative authoritative data sources such as National SIRA, proven to increase coverage on otherwise thin file demographics. Embracing inclusive verification processes will extend access to a broader range of customers, ensuring that everyone, regardless of background, can safely and efficiently access financial products in a way that suits them.

By implementing authoritative syndicated data sources, financial institutions can increase their customer approval rates by up to 50% among traditionally ID poor individuals.

This not only fulfils the inclusivity mandate of Consumer Duty but also opens up new market opportunities for businesses.

To comply with regulations and deliver positive customer outcomes, regulated firms must strike a balance between stringent identity verification and a smooth customer experience. IDSPs can help financial services by utilising their state-of-the-art identity verification solutions to help minimise delays and improve customer satisfaction. Clear communication and support during the verification process are also crucial for maintaining a positive customer experience, along with on-going customer support post completion, particularly where customers are deemed to be vulnerable. The key to achieving this balance lies in adopting a risk-based approach to identity verification. By tailoring the level of verification to the specific risk profile of each transaction or customer, firms can apply appropriate security measures without unnecessarily burdening low-risk interactions. 

As the digital landscape continues to evolve, so too must our approach to identity verification. The future of IDV lies in adaptive, AI-driven systems that can learn and improve over time, ensuring that financial institutions remain one step ahead of fraudsters while providing seamless experiences for legitimate customers. By embracing these technologies and aligning them with Consumer Duty principles, UK financial institutions can set new global standards for customer-centric financial services.

To learn more about how you can carry out IDV checks in compliance with Consumer Duty, AML/KYC requirements and build a seamless customer journey, click here to set up a call.