The Identity and Passport Service has said it is saving financial institutions hundreds of thousands of pounds through its Passport Validation Service.
The service uses call centre technology to check whether a passport has been reported lost or stolen.
In the finance industry, the service is used principally by banks and building societies to verify that applicants for products and services are who they claim to be.
Passports are increasingly used as a compulsory form of ID for mortgage and loan applications, as financial institutions have stepped up the layers of security checks involved.
Linda Edwards, acting head of banking services at the Identity and Passport Service, said banks were having to work harder to process applications. "Anything that speeds up the process is a godsend. As is anything that eliminates fraud," she said.
About 300,000 passports are reported lost or stolen every year. In the year that service has been running, 211 passports that have been forged, stolen or tampered with have been seized, but only a handful of arrest made.
"But the validation service is working and saving money, the validation helps to keep the passport as the gold standard of identification," said James Hall, chief executive at the Identity and Passport Service.
Hall said the successful use of the Passport Validation Service would help the public to accept national ID cards when they come in. "This is just the forerunner of the identity checking service we can run with the ID card," he said.