Digital Identity Verification for Alternative Lenders

Digital Identity Verification for Alternative Lenders

Trust is the root of all business transactions. For any financial institution to lend money or offer a banking service, being able to identify the counterparty is a must. And though anonymity is a blessing in a lot of situations, business cannot be conducted under the cloak of secrecy. Financial services are a particular focus […]

Digital Identity Verification for Alternative Lenders

Trust is the root of all business transactions. For any financial institution to lend money or offer a banking service, being able to identify the counterparty is a must. And though anonymity is a blessing in a lot of situations, business cannot be conducted under the cloak of secrecy.

Financial services are a particular focus area for the highest standards in identification, especially due to the strong regulatory push on money laundering, terrorism financing, and KYC (Know Your Customer). Also, according to the World Bank, around 1.1 billion people worldwide cannot prove their identity. They form a major chunk of the 2.5 billion people who don’t have access to financial services. This highlights that identity is a fundamental part of financial inclusion.

Mitek Systems, a global leader in mobile capture and identity verification software solutions, is in the forefront of this growing niche industry. We had an exclusive chat with the company CTO, Stephen Ritter. He gave his views on the opportunity and developments in the ID verification space and how it will be an underlying pillar for the growth of fintech lending and blockchain-led services.

Mitek’s Business Model and Technology

Mitek started as a software company and has evolved to become the leader in mobile banking and mobile deposit solutions. It enables bank customers to take picture of checks for depositing, rendering the physical deposit process redundant. It has entered the digital ID verification market and has developed artificial intelligence (AI) and machine learning-powered proprietary algorithms. It will verify the ID by having the user take a picture of  a government-issued ID and compare it with a selfie. This allows the software to cross verify the selfie face with the picture on the government-issued ID.

Mitek’s solutions specializes in accurately identifying the personal document, and can even recognize and evaluate IDs of multiple countries. It can also extract relevant information from the document. Its advanced forensic algorithms can detect signs of forgery or fake documents. Further, it can distinguish good and bad documents and provide a risk score to determine if the document can be trusted. Its algorithms can also determine if the human face is real or a spoof.

The company’s core competency is computer vision, a specific niche within machine learning. The company has been developing software in the field for the last 15 years and considers itself among the pioneers in the space. With the intense speed of development in the field, the company is actively working with partners for integrating third-party sophisticated technology into their own solutions.

The main solutions provided by Mitek include:

  • Mobile Fill – A solution which allows personal information to be pre-filled in the forms of the applicants, taking help of the Mobile ID capture solution provided by Mitek.
  • Mobile Verify – A combination of Mitek’s computer vision technology and auto capture experience, Mobile Verify validates the authenticity of identity documents thereby simplifying the KYC compliance processes.
  • Mobile Deposit – Mobile deposit is a solution that helps in saving time by allowing the person to deposit checks to the participating banks by uploading the image using the device’s camera.

Mitek’s Competition, and Its Impact on Lending

Mitek has an operating history of over two decades. With more than 6,100 banks and financial institutions as customers, the company has a wide moat compared to startups entering the field. Its direct competitors are few and usually early-stage companies. The more traditional players in the space would be the ones that follow the data bureau approach and are beginning to integrate mobile verify solutions for verification of IDs into their platforms.

Lending will receive a boost across the board as lenders, both traditional and alternative, will be able to onboard customers faster and more securely. Alternative lenders, in particular, should see higher approval rates for prospective borrowers with increased confidence they are not being defrauded. Mitek is currently processing over several million ID documents a month. Both MoneyGram and Kabbage use Mitek’s MobileVerify technology. The company is seeing major traction in the fintech lending industry as players are nimble and the first target for most fraudsters.

Financial Inclusion, Privacy, and Real Life Applications

Ritter believes governments need to step up their efforts in ensuring everyone has access to an identity proof. Financial inclusion is positioned prominently in the United Nation’s 2030 Sustainable Development Goals agenda, and the need for a digital identity goes far beyond the ability to participate in the formal economy. Its impact is multifold and helps to increase overall trade and access to healthcare and government services. Mitek is also focused on data privacy laws, with GDPR the hot topic in Europe. It has taken GDPR as its baseline for information security and is operating with GDPR recommended data security not only in Europe but across the globe.

Kabbage Case Study
Kabbage facilitates easy funding options to small and medium enterprises through its automated technology-backed data platform. With Mitek’s digital identity verification solutions integrated into the Kabbage platform, users are able to automatically populate the loan application form with pre-filled data in less than a second allowing customers to access funding quickly. Mitek’s solution applies advanced algorithms that automatically assess the authenticity of the driver’s license, providing assurance about the identity of the ID’s holder and reducing the likelihood of fraud during the loan application process.

Anonymous Payments Processor Case Study
Customers were facing a lengthy identity verification process, which forced them to leave the platform before completing the transaction. Driven by the need to comply with Anti Money Laundering (AML) and KYC regulations, a leading global payment processor selected Mitek’s Mobile Verify to provide the customers with more efficient ways to reduce the verification process from days to just minutes. Mitek was able to eliminate 92% of the temporary restrictions that the company previously had to place on customer accounts whenever they would reach a certain dollar threshold. By eliminating these temporary restrictions, the company has improved customer experience as well as increased profitability.

Mitek’s Collaboration with Nocks
Mitek’s digital verification identity has enabled blockchain payments platform Nocks to improve their customers’ onboarding by 98%. A cryptocurrency payments platform, Nocks also has to execute AML and KYC compliances. Nocks has now been able to verify the identity of applicants in real-time, dramatically improving new customer conversion rates due Mitek’s Mobile Verify interface.

MoneyGram Case Study
MoneyGram, the money transfer giant, is also using Mobile Verify to validate its customers’ ID. To complete the identity verification step in the money transfer process, MoneyGram customers simply take a picture of their passport or other identity document using their mobile device camera. Mobile Verify then uses advanced machine learning technology to instantly validate the authenticity of the ID.

Mitek is Experimenting With the Blockchain

Mitek is also developing technology to leverage blockchain infrastructure. The public ledger approach in general is interesting as it could allow for generating self-sovereign IDs which are owned and managed by the users themselves. When businesses need their information, people can control their data and allow only limited or conditional access. Moreover, even banking customers are exploring blockchain-based solutions, and Mitek is experimenting to integrate its ID verification systems on a distributed ledger.

Mitek’s Technology Leadership

Mitek was founded in 1985 and is listed on NASDAQ with a market cap of an estimated $250 million. Mitek’s innovative solutions are embedded into the apps of more than 6,100 organizations and used by more than 80 million consumers.

Stephen Ritter is the Chief Technology officer (CTO) of San Diego-based Mitek Systems. He helps in the technological development of the key processes of the company, along with overseeing Mitek Labs. He has more than 22 years of experience bringing new commercial software solutions to market. Ritter worked as tech lead with Emotient (acquired by Apple) before he joined Mitek.

With the increase in regulatory complexities and fraudulent practices, it is critical for businesses to make sure that they are on the right side of the law and yet are simultaneously making their customers’ life easier. Mitek helps them balance this fine line with its suite of sophisticated identification technologies.

Author:

Written by Heena Dhir.

Verifying ID With A Cell Phone

Verifying ID With A Cell Phone

More people are signing up for financial services through digital channels than ever before. A third of digital transactions come from mobile devices. When a lender is approached via cell phone, how does that lender verify who is asking for a loan? The rise in security breaches is making it clear that collecting information like […]

Verifying ID With A Cell Phone

More people are signing up for financial services through digital channels than ever before. A third of digital transactions come from mobile devices. When a lender is approached via cell phone, how does that lender verify who is asking for a loan? The rise in security breaches is making it clear that collecting information like name and Social Security Number isn’t going to be enough. Wouldn’t it be great to see a government-issued ID instead? But how would it work from a remote location?

Mitek, the company that brought mobile deposits into play by letting depositors take a picture of their check and deposit digitally, has processed over a billion transactions. They essentially invented the field of mobile capture through mobile deposit. The publicly traded company has used that experience as a stable foundation and funding for the next step — solving the need to perform secure digital ID checks with mobile imaging.

“You can use the camera on a smartphone to capture ID documents,” said Sara Clark, GM, Identity of Mitek, “We can extract data from a government-issued ID and evaluate the authenticity of the document. This assures the lender that the person on the other end of the device is holding ID that has passed a series of checks. An accompanying selfie can be added to check photo ID. The lender can be confident that this person is who they say they are.”

This is primarily a cloud product with some on-premise options. The pricing is subscription based on volume. The platform can also prefill forms with data from the ID, a real convenience for a smartphone user that adds to data integrity. It is also a real benefit for their typical customers.

“We work with regulated financial institutions,” Clark said. “For example, we’ve worked with banks on the on-boarding process through digital channels. Previously, lenders needed to meet with borrowers to check ID. In the US, that is normally done by asking for name, SSN, and other personal ID. But data breaches are rampant. Over 2 billion records have been hacked so it’s easy to acquire PII. The market is looking for a more secure solution that is user-friendly.”

Mitek has gone through different phases. In this latest development, they leverage mobile imaging experience harnessed by mobile deposit. They have a mature mobile imaging platform and assign enhanced technology to use deep learning and computer vision. Computer vision within the capture experience takes images and runs an algorithm on them.

“We use deep learning to differentiate between real IDs and potential forgeries,” Clark said. “There are 6-10 ID formats in each state and they are always changing. We look for forgery techniques, font inconsistency, photo integration issues, and other things. Our ability to bring this to the market has been supported by the parallel advances in deep learning that have emerged in the last 10 years.”

There is a lot of momentum in the rise of biometrics for authentication. The world will shift to electronic ID. Developing countries seem to be ahead here because they leapfrog past the old technology.

“We are continuing to head down the path of relying on data to know who you are. Biometrics is solving a similar problem, but it can’t be based off of data you already know, so it’s in the early stages,” Clark said.

Mitek plans to focus on the ID business, to be the global leader in new methods of global ID in financial services. That includes extending their footprint into biometrics. In fact, they are currently researching and developing with facial biometrics.

“We are leveraging bleeding edge tech,” Clark said, “and that kind of talent seems to be challenging to find. I wish I could find a lot more people with skills and experience in machine learning and deep learning. We work with universities to get new talent and invest heavily in the lab team.”

Author:

Written by Nicki Jacoby.