The Ultimate Guide to Bank Statement Identity Verification: Enhancing Security in Data Extraction

Identity verification is critical to various online services, particularly in the financial sector. Traditionally, this process has been time-consuming and requires manual efforts, and individuals have to provide many documents to prove their identity. 

However, with technological advancements, there is a growing trend towards automating identity verification processes. This article will explore how to automate identity verification, specifically by analyzing bank statements.

What is bank statement identity verification?

Bank statement identity verification utilizes data from individuals' bank statements to confirm their identity. Bank statements offer a rich source of information, including transaction history and personal details, making them ideal for authentication purposes. Automating bank statement analysis accelerates the verification process while upholding precision.

This method finds extensive application across sectors. Financial institutions, including banks and fintech firms, leverage it for account openings, loan processing, and transactions, ensuring the legitimacy of account holders. Additionally, government agencies, cryptocurrency platforms, employers, educational institutions, insurers, and credit card companies utilize bank statement identity verification to authenticate individuals for various purposes.

The importance of bank statement identity verification

Bank statement identity verification plays a crucial role in financial transactions and data management, here’s how: 

• Fraud mitigation: Bank statement identity verification can prevent identity theft and fraud. By analyzing transaction patterns and detecting anomalies, if any, financial institutions can identify and mitigate potential fraudulent activities
• Income confirmation: It helps lending, financial, and banking institutions verify deposits, payments, and balances to assess the repayment capability of the applicant 
• Regulatory compliance: Bank statement identity verification can be a helpful tool for maintaining regulatory compliance and for seamless customer due diligence. This helps financial institutions and businesses meet legal requirements and maintain the integrity of their data management practices
• Data accuracy: It enhances the accuracy and reliability of data in financial transactions. Automating the verification process reduces the likelihood of human error and ensures the data used for transactions is correct and reliable. This is an important element of KYC checklist processes for establishing the authenticity of the identities of individuals involved in financial transactions. Incorporating comprehensive KYC checklist for banks procedures can further strengthen data accuracy and reliability, ensuring compliance with regulatory requirements and minimizing risks associated with fraudulent activities.
• Risk analysis: Bank statement identity verification allows financial institutions to assess the level of risk associated with an individual or a transaction. For this, financial institutions analyze transactions to gauge the financial habits of the concerned individuals or entities

How to prepare bank statements for identity verification?

a. Cleaning up PDF files

Docsumo’s intelligent document processing software employs advanced image recognition to deskew images, reduce noise, and convert files to grayscale, preventing colour interference during data extraction.

b. Making the PDF files machine-readable and searchable 

Automated data capture tools generally provide rule-based or machine learning (ML)-based solutions. Rule-based extraction involves using OCR technology to convert PDF images into machine-readable and searchable texts. This is particularly useful for extracting specific information from fixed template documents and expediting processes like loan approvals and new account applications.

c. AI/ML-based data extraction

AI/ML-based data extraction also relies on OCR to convert PDF formats into machine-readable formats. The automated data extraction software utilizes MultiModal learning and artificial intelligence to extract valuable data from bank statements.

d. Preparing physical documents

The OCR technology helps digitize manual documents by scanning and converting them into electronic data. Cross-check the data from the documents after extraction to flag any errors. 

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Step-by-step guide to bank statement identity verification

OCR technology has empowered financial institutions to automate data extraction from account statements, resulting in more efficient information processing. Automating bank statement processing involves scanning forms and document images, their interpretation, and data validation to ensure accuracy and eliminate errors or missing values.

When selecting an AI tool for automating data extraction from bank statements through OCR technology, look for a tool with advanced OCR capabilities to ensure accurate and reliable extraction of data from diverse formats and styles within bank statements. 

The tool should also have customization options, allowing users to define and modify extraction rules based on specific document layouts and structures. Compatibility with various file formats and the ability to efficiently handle large volumes of documents is equally important for scalability. 

Additionally, the tool should have a user-friendly interface and seamless integration capabilities and incorporate machine learning algorithms to improve data extraction accuracy over time.

Docsumo provides a comprehensive solution with a pre-trained bank statement data extraction API designed to automatically read forms and extract relevant data. 

The following steps outline the process of automating and processing bank extracts using the Docsumo platform:

Step 1: Upload bank statements

Visit app.docsumo.com and log in using your user credentials. Through the Docsumo dashboard, you can navigate to APIs & Services. Locate the bank statement API in the list of pre-trained APIs and enable it using the toggle button. Move to Document Types, find the bank statement API, and upload scanned bank statements using the platform's upload feature.

Step 2: Edit and review field entries

After this, Docsumo's API prompts you to review and approve the extracted documents. It is advisable to review fields until the API achieves a 99% data accuracy rate, especially if processing multiple bank statements. 

Docsumo's API efficiently structures raw data from unstructured texts and organizes information. Some standard fields extracted include account holder name, account number, bank name, opening balance, closing balance, fraud detection, error messages, and transaction details. You can review, update, or add missing values if any inaccuracies are detected and click 'Approve' once satisfied. 

Step 3: Convert and download

After reviewing and approving the extracted data, you can download it. Docsumo offers the flexibility to download the extracted bank statement data in Excel, CSV, or JSON file formats, providing convenience and compatibility with various data management systems.

Best practices for managing verified bank statements

a. Use software with built-in fraud protection

As per a mortgage report, 0.76% of all mortgage applications (or nearly 1 in 131 applications) were estimated to contain fraud. Frauds are devastating for lenders, and measures are necessary to prevent them. 

Automated bank statement identity verification software is designed to uncover fraud and tampering with bank statements or other documents, such as manipulated payslips. Advanced AI-led software can flag these statements as a first line of defense. 

Underwriters can then cross-check or verify statements with inaccurate data before processing the loan application. 

b. Cloud-based storage 

Choose a bank statement verification software that lets you store the data in the cloud. Ensure it complies with local, industry-specific, and international regulatory standards such as CCPA, GDPR, and PCI-DSS. 

The benefit of cloud-based storage is that your team can archive and access relevant data regardless of location. Pick the software that offers data encryption and role-based access, data backup and recovery, SSO (Single Sign-On), and has an audit trail for enterprise-grade security.  

c. Train and educate your staff 

Like any other software, the bank statement identity verification platform has a learning curve for first-time users. Train your staff on how to use the software for higher adoption rates. Build awareness around the fact that technologies and automation help your team be more productive as opposed to the myth of replacing humans. 

You can add a human-in-the-loop reviewer to validate the extracted data. They can use their time for data analysis and strategy-level tasks instead of being wasted on manual data extraction and validation. 

d. Frequent monitoring 

Remember that setting up a document verification is not a one-time activity. Conduct frequent audits and monitoring of customer identities and documents to spot anomalies and suspicious activities. Stay ahead of the curve and detect and prevent fraud before it happens with continuous improvement. 

The critical role of bank statement identity verification

As technology evolves, implementing advanced systems and algorithms for automating identity verification from bank statements can be a game-changer for ensuring security, preventing fraud, and maintaining compliance with regulatory standards. This indispensable process safeguards financial institutions and their customers and streamlines operations, fostering efficient onboarding and trust in financial institutions.

Docsumo enhances the efficiency of extracting information from bank statements and streamlines processes for financial institutions, mortgage lenders, and insurance companies. What distinguishes Docsumo from other platforms for capturing data from bank statements is a host of unique features:

• Over 99% data extraction accuracy 
• 95% STP rate increases the overall efficiency of your workflows
• Docsumo reduces document processing times from hours to minutes 
• Automatic validation and verification of the extracted data
• Docsumo uses pre-trained APIs for a wide variety of document types like Acord forms, bank statements, invoices, licenses, IRS forms, and so on. This helps organizations save time training the models from the beginning.

If you are looking for a reliable and efficient portal for automating data extraction from your bank statements, Docsumo is the perfect solution. Documo's self-learning AI helps reduce costs and manual review time by up to 80%. 

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FAQs

1. What is the importance of bank statement identity verification?

Bank statement identity verification aids in preventing identity theft, fraud, and unauthorized access, enhancing overall security in the financial sector. Moreover, it ensures compliance with regulatory standards, instils trust among users, and contributes to the efficient onboarding of customers in financial institutions.

2. How can technology improve the accuracy of identity verification?

ML algorithms and AI can analyze diverse data sources, including behavioral patterns and historical records, to detect anomalies and verify identities more accurately. Automation of identity verification processes using technology reduces the margin for human error, ensuring a more precise and efficient verification outcome.