Financial services organizations in Canada currently face regulatory challenges and a lack of standardization which makes it difficult for them to implement new forms of identity verification technologies such as biometrics, according to Michael Magrath, OneSpan’s director of global standards and regulations. 

Canadian regulators have declared digital identity verification as a legal form of ID verification banking, allowing banks to accept digital photo IDs for digital identity verification and the utilization of tools such as facial comparison that can test if the digital ID is valid or not. 

“Banks and financial institutions in Canada need to adhere to multiple standards and find the appropriate technology for each use case, while also understanding the risk level of each threat,” Magrath explained. “The forthcoming pan-Canadian trust framework will address these issues when the DIACC [Digital ID and Authentication Council of Canada] completes its work and officially launches it. With holistic security solutions that incorporate strong identity verification, multi-factor authentication and continuous, real-time risk monitoring across channels, devices, user behaviour and other data points, banks can comply with relevant regulations and stop fraud in its tracks.” 

In Canada, biometric identity verification and authentication techniques, such as using facial comparison technology to match a new customers’ selfie to their government-issued ID, is compliant with FINTRAC’s regulatory requirements to verify the identity of an individual, and many banks are currently using this technology. 

“Regulatory compliance is a notoriously complex subject. Financial institutions rely on experienced legal teams to decipher the requirements of relevant legislation and ensure the institution remains compliant. It’s a tough job, and regulations are always changing,” OneSpan noted in a blog post. 

In response to stay-at-home orders due to COVID-19, Canada has been making great strides forward on digital identity verification, especially in the banking industry. Eighty-five per cent of financial institutions in the country now offer digital account opening services out of necessity. In March, 2020, RBC became the first Canadian bank to introduce digital government identity verification solutions.

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However, as open banking is gradually becoming the norm in Canada, at the same time, this also makes them a prime target for cybercriminals – to impersonate another person and successfully steal their credentials. Hence, when it comes to digital id verification for online banking and account opening, banks and financial institutions must balance usability and security well. 

“The challenge for organizations has always been how to verify who this person really is. Because many peoples’ personally identifiable information (PII) has been exposed through data breaches, identity fraud has unfortunately become prevalent in digital channels. Organizations, especially those in financial services, need the ability to conveniently yet securely onboard new customers in digital channels. Consumers want to be able to sign up for new accounts or apply for a loan entirely online or via mobile, without having to visit a business or branch location,” said Conor Hickey, head of solution architecture for OneSpan’s secure agreement automation, in an interview.

For banks and financial services organizations, which must adhere to know your customer (KYC) and anti-money laundering (AML) regulations, SMS verification methods alone will not suffice, said Hickey.

“To securely verify identities online and in the mobile channel, there is a need for a wide-ranging portfolio of authentication methods. Banks and financial services organizations should leverage a combination of document verification and facial comparison technologies to verify that the person opening the new account or applying for the loan really is who they claim to be. Once verified, customers can electronically sign their application for a convenient yet secure process that takes place entirely in the digital channel,” he explained.