What are the challenges of identity validation in banking?

In this article you will find:

The user experience is the lens through which digital businesses are viewed. It must be memorable, simple, and secure. The main challenge: Ensuring that the identity validation process not only does not create friction but also adds value. I'll explain how in this post about the challenges of virtual identity!

It's very challenging to talk about the challenges and KYC processes without sounding repetitive or redundant since we're dealing with landscapes that we already know, among them stand out that:

  • Digital transformation democratized access to banking services, granting an unprecedented user experience, which became the main asset and benchmark.
  • At the same time, security risks increased.
  • To mitigate these risks, companies need to validate the identity of their users, thus avoiding fraud and impersonation. And so it begins again, because without an optimized identity validation process, the customer experience could be compromised.

Therefore, Truora's value proposition is based on making digital identity validation a factor that adds value to the user experience from the outset.

Today, I will discuss the challenges of identity validation in banking and how to transform that process into a competitive advantage.

In this article, you will see:

  • The urgency of streamlining KYC as a competitive advantage
  • The 10 challenges of virtual identity validation in banking
  • The connection between financial growth in Colombia and digital trust
  • Make identity validation a differential

The urgency of streamlining KYC as a competitive advantage

Manual processes and the lack of agility in identity validation are the main sources of friction, inefficiencies, and obstacles.

Having to present physical documents, attend in-person meetings, and carry out multiple procedures is frustrating. Users already know that technology exists to solve these problems and prefer fintech companies that are up to date.

That's why technologies like biometrics or facial recognition, which streamline and simplify KYC processes, are a priority for fintech companies. This way, they can provide a fast and positive experience to their users.

The 10 challenges of virtual identity validation in banking

Identity validation serves as the protective shield for fintech companies and their users against threats such as fraud, identity theft, and hackers. At the same time, it presents the challenge of maintaining a balance between customer convenience and the security of their transactions.

1 - Implementation

Transforming an analog culture into a digital one is much more than just software and technology; it's a matter of mindset and habits.

# It needs to overcome resistance to change, to the new, to the unknown, both from users and from the people working in the fintech.

# It requires a careful transition from traditional authentication methods to more agile and secure systems.

# It involves the development of innovative technologies that utilize artificial intelligence, machine learning, and biometrics.

# It must ensure compatibility with regulatory and security standards established by financial authorities.

2 - Omnichannel integration

It is crucial to offer omnichannel support. In this case, the challenge lies in consistency, unifying the user experience by providing a secure service regardless of the channel they choose to interact with your fintech.

Allow your users to access and manage their accounts seamlessly, with security and convenience in every interaction.

The challenges are:

# Synchronizing identity verification methods

# Working seamlessly across all environments.

# Balancing the robustness of authentication with ease of use.

3 - Efficiency

The accessory only adds value if the core is efficient. The big challenge is implementing a system that, in addition to validating, combats persistent threats such as:


Malicious software designed to damage, access, or control a computer system without the owner's consent can affect digital validation in several ways:

  • Personal data theft: passwords, credit card numbers, and identification data.
  • Identity theft: creating fake profiles or engaging in fraudulent activities on behalf of the victim.
  • Unauthorized access: to online accounts, allowing unauthorized transactions.
  • Session hijacking: taking control of active online sessions.


It's a technique used to deceive and obtain confidential information, and it can have a significant impact on the following:

  • Fraudulent data acquisition: tricking victims into revealing this information on fake websites or emails.
  • Identity theft: impersonating legitimate entities to gain access to accounts.


It is the invasion of computer systems or networks and can have serious consequences such as:

  • Unauthorized access to sensitive data: obtaining personal information through vulnerabilities in systems.
  • Data manipulation: modifying, stealing, or destroying personal data, affecting the integrity of the information used in validation processes.

4 - Adapting to regulations

The challenge in this item is the constant updating. It is practically a global consensus on the need to legislate the digital economy, with a focus on data protection. Compliance with these regulations requires:

# Strict and sophisticated identity validation to ensure transparency, security, and regulatory compliance.

# Close collaboration with regulatory entities to ensure that identity validation methods meet established standards.

5 - Sustainability

Another challenge is aligning all your efforts with a purpose of social responsibility. Digital validation can positively impact the environment in several ways:

# Paper reduction: less deforestation and a smaller carbon footprint associated with paper production and disposal.

# Lower consumption of physical resources: such as offices and storage spaces.

# Reduced carbon footprint: reduces the need for transportation and traffic congestion.

# Energy efficiency: by reducing the need for physical equipment and using cloud resources, they are more energy-efficient.

6 - Adapting to new payment methods

This includes digital currencies, digital wallets, and fast cross-border payments.

# Incorporating digital currencies and wallets requires adapted security protocols, with emphasis on secure authentication and data protection in decentralized environments.

# Fast cross-border payments pose additional challenges in identity validation due to varied regulations and the diversity of financial systems between countries.

7 - Integrating blockchain

Digital validation and blockchain technology can collaborate in various circumstances to strengthen security, authentication, and online identity management.

Here are some situations where both can work together:

# Decentralized identity systems: where individuals have control over their own digital identity, verified and managed in a decentralized and secure manner.

# Smart contracts: on the blockchain can enable automatic and secure validation of identity, without compromising personal data.

8 - Open Finance

The challenge here lies in allowing users to authorize third parties to perform operations or access specific private information.

# The key is to develop robust authentication systems that allow users to grant and revoke permissions securely, ensuring that only authorized information is shared with third parties.

9 - Privacy

The privacy of digital validation is crucial for the user experience and must ensure the protection of sensitive data while confirming user authenticity.

The main difficulty lies in developing authentication systems that maintain the confidentiality of personal information, avoiding vulnerabilities and ensuring that data is not compromised at any point in the process.

10 - Interoperability in Financial Digital Environments

And, finally, the challenge of interoperability in financial digital environments to ensure that identity validation systems are compatible and work seamlessly across different platforms and financial entities.

To ensure that this integration does not create friction, standardized protocols are necessary to enable efficient and secure sharing and verification of user information. 

The connection between financial growth in Colombia and digital trust

The financial sector in Colombia is experiencing significant growth, largely driven by digital trust among consumers and the rapid adoption of digital channels for financial transactions.

This shift in consumer behavior has been a key factor in the evolution and development of the country's financial landscape.

Trust as an Asset

Identity validation is the fundamental pillar of this trust because it ensures security in financial transactions.

By accurately and securely verifying the identity of each individual in transactions, the risk of fraud and identity theft is significantly reduced.

Validation as the engine of the economy

The trust generated by identity validation translates into increased economic activity, as users are more willing to take advantage of digital opportunities without fears, such as:

Making investments;

# Taking loans;

Engaging in various financial transactions.

Make identity validation a differentiator

I invite you to discover Truora´s Digital Identity, so you can overcome the challenges of virtual identity validation in your fintech and turn it into a differentiator for your clients.

It's a platform specialized in providing maximum security, enhancing user experience!

Discover Truora's Digital Identity today, take advantage of the free trial, and start offering your users the most advanced technology experience.

click here!