Identity Verification as a Service — Enabling the New Economy
Businesses use identity verification to ensure that users and customers provide information associated with a real person’s identity. With remote transactions or sign-ups representing an increasing amount of business, knowing who you are doing business with is a vital business requirement. Identity Verification helps mitigate the risk of fraud as well as assist obliged entities comply with Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations.
Effective identity verification solutions also allow companies to deliver a user-friendly purchase or onboarding experience. Consumers are accustomed to instant access to goods and services, and will often abandon processes that are slow, cumbersome and complicated. While people understand and appreciate the need for security, they don’t want to be slowed down any more than necessary.
Not too long ago, identity verification was only attainable through manual processes that were slow, prone to errors and not suited for the modern online economy. Now, with plug-in APIs, adding an identity service with one connection allows businesses to grow quicker and capture more opportunities by outsourcing non-core functions.
This service, by focusing on one aspect of the value chain and delivering consequential solutions, represents an entire new industry.
Fuel by McKinsey projects the Identity Verification as a Service industry to grow to $20 billion by 2022, with a Total Addressable Market (TAM) growth of 9 – 15 percent annually.Click to tweet
Fuel by McKinsey states “B2C companies face the challenge of building and maintaining a seamless identity verification experience for those transactions, a task that requires significant investment in infrastructure and expertise.” As opposed to independently acquiring the necessary data, developing the required technology and operating fundamental security and privacy protection activities on an ongoing basis, companies can use Identity Verification as a Service providers.
Identity Verification Use Cases
There are different stages in the customer lifecycle where identity verification is either necessary or suggested. The first time to run identity checks is during the onboarding process, when the customer is new and the account is being opened. This is a logical time for verification, as it’s the first time to properly perform due diligence and it’s better to prevent illegal activities before they occur, rather than deal with the consequences after.
Another important time to run verification is when there are significant changes to the account, such as password resets or change of addresses. These account management actions are a vulnerable point for the integrity of the account, as unwarranted changes can lead to account takeover. Therefore, before allowing substantial account changes, ensuring that the true account holder is actually requesting the change helps prevent losses and reassures the customer.
Verifications also come into play when a transaction triggers a flag. It might be a large transaction amount or some other risk factor that changes the risk assessment and requires further due diligence and additional information.
Identity Verification Types
There are different methods to verify an identity using different technologies and data points.
Electronic Identity Verification (eIDV)
Technology that enables verification of a person’s identity remotely through digital means. eIDV bypasses physical documents and relies on the data of the consumer such as name, date of birth, address as well as many other potential data points. This information is checked against various databases of consumer data (credit bureaus, government agencies, utilities and other sources) to determine if predetermined due diligence rules for identification are met.
Quickly determine if an ID document is authentic. A Document Verification service recognizes different identity documents and performs comprehensive algorithmic-based checks on thousands of global document types. The system also checks for unique enhanced security features available in some ID formats (such as US Drivers Licenses), and analyzes and decodes these advanced security functions. A positive match on the ID provides confidence the document is real and not a forgery.
Knowledge Based Authentication (KBA)
Using private information of the individual to prove that the person providing the identity information is the owner of the identity. Traditionally, the information was static security questions such as ‘What’s your Mother’s Maiden Name?’ To help ensure the information is private, dynamic KBA, or questions based upon specific information that frequently change, is another option.
The ubiquity of mobile phone ownership enables a new method to verify identities. Similar to eIDV techniques, Mobile ID relies on information from Mobile Network Operators (MNOs) such as name, mobile number, address, along with device information, geolocation, usage and billing data. Data from MNOs provide another valuable layer of identity intelligence.
For any business considering which identity verification service is best, it’s important to understand that each method relies on significantly different information and verification processes. As with most determinations, there’s not one best answer. What are the identification requirements for the jurisdiction? What are the risk-assessment factors? What systems are in place and what is the technology migration plan? What are the international expansion plans?
Systems and processes that are flexible, that adapt to the use-case, jurisdiction and risk-level provide the best opportunity to meet the needs of complex and/or growing organizations. It’s about using multiple data sources and multiple identity attributes to create a robust, scalable, trustworthy identity. Use traditional data sources as appropriate, add in new capabilities when desirable and mix and match identity verification types and data sources to optimize results.
After all, when Identity Verification is a service, the value comes from maximizing information flexibility and not having to rely on static, limited views. With one connection, an effective identity verification service can open up a world of opportunities, assist in regulatory compliance and help reduce the risk of fraud. Choosing the right identity verification service, integrating the right connection into your tech stack, is a key decision in determining the success of any online or mobile business.