What Is Digital Identity Verification?

What Is Digital Identity Verification?

Digital identity verification is the process of confirming an online identity. It confirms the people with digital identities exist, authenticates they are who they say they are, and investigates their reputation to help prevent fraud, mitigate risk and ensure compliance.

A digital identity verification service is a reliable and quick way to build a layer of trust in a remote business relationship. It enables organizations to safely deliver services and handle transactions for global customers.

How Does Online Identity Verification Work?

There are two main digital identity verification methods: analyzing data and analyzing identity documents.

The first approach involves checking a person’s identity data – name, address, phone number, birthdate – against data sources such as electoral records, credit bureaus and census information.

The other method involves analyzing digital images of identity documents, usually captured with a mobile phone camera, to determine if an ID is authentic. The image is then compared to a live selfie for liveness detection to determine if the ID matches the person presenting it.

Both methods have merit. The best approach depends on the use case, market, regulations, customer expectations and business requirements for assurance. 

When deciding which method to use, companies can consider:

  •       What’s the company’s industry?
  •       Where does the company operate?
  •       Where are the customers?
  •       What are the company’s products and services?
  •       What is the volume of transactions?
  •       What is the value of transactions?

Identity analysis helps companies comply with legal requirements and safeguards against problematic accounts. But if that analysis inconveniences customers, they could abandon the onboarding process.

A strong identity program strikes a balance between speed and security while meeting business and regulatory requirements. Companies can find that balance by taking a risk-based approach to verification that helps them apply different steps to different risk scenarios.

Digital Identity Verification Use Cases

Digital identity verification can solve many different business problems and provide growth opportunities.

Compliance With KYC and AML Regulations

Most countries and regions require identity verification to open an account for regulated industries, such as banks and other financial services. Those regulations include Know Your Customer (KYC) and Anti-Money Laundering (AML).

The growth of digital banking and other online financial services has amplified the need for remote customer onboarding. There are often prescriptive rules for collecting, verifying and using personally identifiable information for identity verification.

Failure to comply with KYC regulations can lead to fines as well as financial and reputational damage if criminals gain access to accounts.

Customer Safety and Security

As digital channels for online retail and other interactions expand, so too does the need to verify participants. Some measures, such as the INFORM Consumers Act, are legal requirements, while other initiatives build trust and safety for the platform.

When consumers engage with digital channels, such as ride-share, for the first time, they often have doubts or concerns. If the experience is safe and convenient, they’re more likely to do it again.

Identity verification helps establish that sense of safety because it helps companies vet users and provides a way to hold everyone accountable.

Fraud Prevention

Online fraud is a constant threat, and consumers expect companies to provide secure digital interactions.

Companies that show consumers they are taking steps to prevent fraud and identity theft can build digital trust, loyalty and engagement. As reliance on digital services continues to grow, this will become an even more essential ingredient for success as businesses move into an uncertain future.

Beyond that, companies protect themselves by verifying identities at account opening and at critical points in the customer life cycle to gauge risk.

Protecting Minors

Companies that provide age-restricted digital services, such as online gaming or alcohol sales, are legally required to conduct age verification. Identity verification helps establish a person is the legitimate user of an account and meets age criteria.

Digital Identity Verification Benefits

The Benefits of Reducing Manual Verification

Businesses that verify users manually often devote costly staff time and effort. Manual verification involves labor-intensive data entry, potentially introducing errors that lead to onboarding delays or in-person visits.

Manual identity verification can be a slow process in a fast-paced digital world. Automated verification can play a critical role in expanding a company’s digital footprint.

Enhance Customer Experiences and Improve Conversions

Customer onboarding is the bridge between someone considering a purchase and becoming a customer. It sets the tone for the business relationship.

Digital onboarding is a fast, convenient onboarding method that avoids the paperwork and long waits that can lead to abandonment. 

Growing Digitalization Initiatives

In a world where all businesses will be digital, streamlined verification can open the digital door for everyone.

Digital identity verification can operate across borders, adjust to changing markets and help businesses grow.

How to Analyze Digital Identity Verification Solutions

Identity verification isn’t one size fits all. Regulatory requirements vary across industries and countries. Fraud prevention programs adjust due diligence to different risk profiles. On top of that, customer expectations and willingness to share personal information vary worldwide.

Here are some ways to evaluate digital identity verification vendors.

Data Security and Privacy Expertise

There are strict legal requirements around consumer privacy and collecting and handling sensitive data. Failure to meet those requirements can lead to steep noncompliance fines, security breaches and eroded customer trust.

Robust data and privacy standards, sophisticated technology and operational expertise are differentiators in the identity verification market. 

Does the vendor incorporate best practices, such as ISO 27001? Does it have a comprehensive suite of data policies and procedures?

Global Coverage

Different countries require different data sources and verification procedures. Is the verification solution agile and able to add new markets, optimize performance or adjust to new requirements?

Companies can evaluate vendors based on contracting procedures, ease of integration and workflow adaptability. Does the provider understand the nuances of doing business in the company’s target markets?

A Balancing of Security and Speed

Every new customer is unique. Can the identity verification program quickly assess the person’s risk profile and adapt accordingly?

Vendors should quickly onboard legitimate customers while applying additional scrutiny to problematic accounts. Can the vendor provide verification workflows that minimize risk while delivering positive customer experiences?  

Total Cost of Ownership

Lower upfront costs may be tempting, but optimized, holistic identity verification services can bring more value. Weighing the total cost of ownership can give organizations a clearer picture of what they’re getting and giving up.

Comprehensive Digital Identity Verification

Identity proofing and assurance are fundamental to building trust, enhancing security and achieving compliance.

Comprehensive, agile digital identity verification can give organizations a competitive edge in the market and fuel global growth.

Frequently Asked Questions

Discover more about digital identity verification.

Digital identity verification is the process of confirming an online identity. It confirms the people with digital identities exist, authenticates they are who they say they are, and investigates their reputation to help prevent fraud, mitigate risk and ensure compliance.

Digital identity verification compares information supplied by a person with known identity data about that person. Common techniques include checking personally identifiable information and other data against records or examining digital images of identity documents.

Digital identity verification enables businesses to enter markets around the world while satisfying compliance and fraud prevention requirements. Automated processes can accelerate accurate verification.

Manual identity verification can add friction to the customer onboarding experience, leading to potential abandonment. Digital identity verification helps deliver fast, smooth onboarding.

A risk-based approach helps organizations achieve compliance and mitigate fraud while still meeting customer onboarding expectations. Companies can strike the right balance between speed and security when they understand a customer’s risk profile.

Companies can find the right partner if they first have a clear understanding of their identity verification compliance requirements, market needs and risk thresholds. Companies can start the evaluation by assessing where they operate and which digital identity solutions can best meet the requirements in those regions.