‘May I see your ID?’ is such a regular request in our daily lives that we barely take notice. Even if we ask for your ID before you read this article, you won’t find it weird. Whether you are opening a new bank account or applying for credit, ID verification is the first step before you even begin the process.
However, as more high-value purchases move online, especially in the aftermath of the COVID-19 pandemic, the ability to accurately and effectively authenticate consumer identification has become extremely crucial.
With over five billion data breaches reported in 2020 alone, the risks of account takeovers and identity theft have never been so apparent.
Therefore, it is important for businesses to use a reliable method of confirming a person’s identity.
In this article, we will talk about what identity verification is and how it works. We will also talk about the problems related to the conventional manual identity verification process.
What is Identity Verification?
In simple words, identity verification is confirming that you are who you claim to be. It prevents a person from acting on your behalf without your consent. It also prevents someone from forging phony identities and committing fraud.
84% of businesses agree that identity verification reduces their risk and the costs associated with it. In 2020, penalties for non-conformity with Know your Customer (KYC), Anti-Money Laundering (AML), iFID regulations, and data privacy against financial institutions were more than $10 billion.
Not only businesses, but customers are also concerned about identity verification. 27% of customers abandon an online transaction when they fail to see a proper security system.
How Does Identity Verification Work?
The traditional method of identity verification is through document verification. You simply check the documents like a driver’s license or a PAN card and verify a person’s identity.
There are several problems associated with conventional identity verification.
- Criminals generally target customer records of large organizations. These stolen identities are auctioned on the darknet.
- Users are lured into voluntarily sharing personal information through phishing techniques like fake Amazon refund emails.
- Fraudsters can easily make duplicate documents by photoshopping their pictures into someone else’s ID card.
Sadly, both B2B and B2C firms use inefficient manual ID verification. This usually leads to bad client experiences, a higher risk of forgery, and an inability to meet regulatory criteria.
In such circumstances, it becomes difficult for businesses to retain a positive client impression.
As per a study on digital verification, 78% of decision-makers believe that identity verification solutions are necessary to balance consumer experience and safety. Many organizations rely on the capacity to reliably verify identities in a reasonable timeframe. This enables them to form legal agreements, comply with regulations, and supply services to customers.
Businesses are moving on to the digital methods of identity verification. These include biometrics, face recognition, digital footprint verification, and several more.
As an example, identity verification with SEON involves a process known as digital enrichment. In this process, open source databases are ‘rummaged’ to gather a person’s information through phone numbers, email addresses, and social media activity. This method of identity verification has minimal friction, is quick and increasingly successful.
Other methods of digital verification are as follows.
- Biometric verification: Checks whether the selfie in the ID is of the same person who presents it.
- OTP verification: It is one of the most common ID verification processes. It uses a single-use passcode that is sent via a text message or email, to verify a person’s identity.
- Trusted identity network: It uses the claimant’s current credentials from another source to authenticate their identity and eliminate friction during account creation and activation.
- Knowledge-based authentication: It generates ‘out of the wallet’ queries using an applicant’s credit file data.
- Liveness detection: It determines the authenticity of a snapshot by identifying spoofing attacks such as face masks or images of pictures.
Wrapping Up What is Identity Verification and How it Works
Hopefully, this article helped you learn about identity verification and how it works.
Having the capacity to correctly and comprehensively verify your clients and staff can help safeguard your business against fraud. In fact, in some jurisdictions, a digital contract is not legally binding unless it is linked to a secure identity verification mechanism.
Accurate verification procedures also put clients at ease and open up more options for your company to expand. Creating a digital identification process lowers risk, boosts confidence, and ensures legal validity and conformity.