How LAB Group lifted electronic identity verification pass rates for younger investors after one online broker saw a 350% surge in demand.

A digital client onboarding process is critical for brokers that want to deliver the best possible client experience and drive scalable, cost-effective customer acquisition. Effort and budget invested in client acquisition are diluted the moment a customer hits a manual process during sign up, because every manual step increases the likelihood of abandonment.

During the market volatility of 2020, many LAB Group customers saw a sharp increase in new account applications as falling prices drew new traders into the share market.

For one online broker, that surge exposed a problem that only becomes visible at volume: the customers most likely to fail an automated identity check are not evenly distributed.

The Customer

SelfWealth Ltd is an Australian owned and operated company offering investors a way to make informed decisions without paying high brokerage fees.

Established in 2012, SelfWealth runs an online community for investors, with a tool that lets members compare their portfolio's performance against other investors.

The Challenge: Reducing Manual Processing After Verification Failures

SelfWealth uses LAB Group's investor onboarding solutions, and saw a 350% surge in demand during the pandemic. That drove a corresponding increase in the volume of electronic identity verifications (eIDV) performed.

Digital processes like eIDV give investors a seamless onboarding experience and deliver real efficiency gains while meeting regulatory requirements. But where exceptions arise, manual work is still required, and higher volumes produce proportionally more exceptions.

An investor fails electronic identity verification when their personal details cannot be matched against the available electronic data sources. They are then typically asked to upload certified copies of their identification documents for manual review.

Getting documents certified was close to impossible during lockdown. Even firms that pivoted to accepting uncertified uploads then faced the problem of processing very high volumes of identification documents with their own workforce decentralised and working from home. The bottleneck moved rather than disappeared.

The Solution: Adjusting Verification by Cohort

LAB Group analysed recent customer data and found that investors in younger age groups were twice as likely to fail the electronic identity check.

The reason is structural. Younger people are less likely to appear on the primary electronic data sources that verification depends on, such as the electoral roll, simply because they have had less time to accumulate a record.

LAB Group adjusted the broker's verification process dynamically, based on age:

• Younger cohort: asked to provide two forms of government identification alongside name, address and date of birth
• Older cohort: existing process maintained, requiring one government data source alongside name, address and date of birth

By adjusting the application form to capture two forms of government identification, LAB Group was able to use the Document Verification Service to double the pass rate in the younger cohort and significantly reduce the number of applications requiring manual processing.

The threshold for SelfWealth was set to balance verification pass rates, abandonment rates and manual processing backlog. Business drivers differ between customers, so the configuration is always data driven and set for the specific outcome each customer is optimising for. LAB Group continues to monitor performance over time for further incremental improvements.

The Takeaway

There is no one size fits all approach to identity verification. Applying a single standard method, two independent data sources plus enhanced verification through the Document Verification Service, produces more failures when it is applied uniformly across an entire investor base.

Segmenting the approach is what changes the outcome. By adjusting data capture and verification strategy dynamically, it is possible to reduce failure rates and manual processing substantially while keeping abandonment low across the cohorts that were already passing.

About LAB Group

LAB Group is an Australian RegTech provider specialising in digital client onboarding, identity verification and compliance orchestration for regulated industries. LAB Group's modular platform, comprising LAB Engage, LAB Verify, LAB Portal and LAB Service, enables institutions, wealth managers, stockbrokers and online trading platforms to onboard clients efficiently while meeting their AML/CTF obligations.

labgroup.com.au

Ready to improve your onboarding pass rates? Get in touch with the LAB Group team.

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