What is Identity Verification (IDV)? A Comprehensive Guide
In the dynamic landscape of the Digital Age, the significance of identity verification cannot be overstated. New tech takes center stage on a regular basis to provide robust solutions for this critical need. If your company is in an industry that needs identity verification (IDV) services, like the financial or healthcare industry, this guide will help you understand how today’s top technology can be utilized to meet your challenges.
The Significance of Having an Identity Verified in the Digital Age
Gone are the days of walking into a physical bank to open a new checking account or signing the documents in person to buy a new car. The world has gone digital! Yet, all of these people taking advantage of online services need their identity verified before a major transaction can take place.
As the world becomes increasingly interconnected and reliant on digital transactions, the risk of identity fraud and cybercrime rises exponentially. Identity verification serves as the indispensable safeguard that fortifies online trust and security. An advanced IDV solution empowers businesses and organizations of all sizes and in all industries to verify the authenticity of their users. Doing so ensures that only legitimate individuals gain access to services, like opening a bank account, as well as high-priced products, like cars.
Understanding the Process of Identity Verification
An AI-powered identity verification solution aims to balance compliance and conversion in order to provide authorized access to life’s essential services, like bank loans and healthcare, while at the same time maintaining robust security measures to prevent fraud. In order to do so, today’s best identity verification processes involve several steps that leverage artificial intelligence algorithms to ensure the reliability of the verification process.
Here's a general overview of how it works:
Step #1 Your Customer Receives a Link
When your customer initiates the identity verification process, their first step is to receive an invitation. This invitation, containing a link to the start the process, can be delivered via email, SMS, or directly within the mobile app.
Step #2 ID Document Verification
Next, the customer is guided to take a photo of the front of their ID. This could be any valid government-issued identification document, like a driver's license, passport, or national ID card.
Step #2 ID Document Verification
Next, the customer is guided to take a photo of the front of their ID. This could be any valid government-issued identification document, like a driver's license, passport, or national ID card.
Step #3 Submitting Critical Information
The AI-powered technology recognizes documents with critical information on the reverse side of the ID and requires the user to capture a second image. In seconds, it verifies the validity of the identity document.
Step #4 Biometric Authentication
The next stage of the identity verification process involves the customer capturing a selfie image. This image not only serves for visual confirmation but also allows the AI-powered technology to collect and analyze biometric data. The technology conducts a liveness check and utilizes advanced facial recognition algorithms to compare the user’s selfie with the photo on their ID, ensuring an accurate match.
Step #5 Decision and Onboarding
Finally, the AI-powered technology makes a decision regarding the user's identity verification. If the confidence level is high and all checks pass, it registers a successful identity verified. This happens when the selfie matches the photo on the ID, meaning your customer will then continue with your onboarding flow. If any doubts or discrepancies arise, the software may require additional verification steps or manual intervention by a human reviewer.
The AI-powered technology recognizes documents with critical information on the reverse side of the ID and requires the user to capture a second image. In seconds, it verifies the validity of the identity document.
Step #4 Biometric Authentication
The next stage of the identity verification process involves the customer capturing a selfie image. This image not only serves for visual confirmation but also allows the AI-powered technology to collect and analyze biometric data. The technology conducts a liveness check and utilizes advanced facial recognition algorithms to compare the user’s selfie with the photo on their ID, ensuring an accurate match.
Step #5 Decision and Onboarding
Finally, the AI-powered technology makes a decision regarding the user's identity verification. If the confidence level is high and all checks pass, it registers a successful identity verified. This happens when the selfie matches the photo on the ID, meaning your customer will then continue with your onboarding flow. If any doubts or discrepancies arise, the software may require additional verification steps or manual intervention by a human reviewer.
Common Applications of Identity Verification
There are quite a few industries and use cases where a company needs an identity verified. This includes, but is certainly not limited to, healthcare, automotive, and financial services.
Know Your Customer (KYC) Processes in Financial Institutions
AI-powered IDV solutions play a crucial role in streamlining and enhancing the KYC processes in financial institutions. The IDV process analyzes a government-issued identification document, such as a driver's license, to ensure its authenticity. It checks for security features, examines the document's physical characteristics, and detects any signs of tampering or forgery. At the same time, AI-powered technology is able to quickly cross-reference an individual's provided information with multiple databases and trusted sources, like government databases, watchlists, and other identity verification services.
Technology designed for identity verification helps to automate and optimize these processes. By relying on today’s top technology advancements, financial institutions ensure compliance with regulations, as well as reduce manual work and improve accuracy.
Age Verification in Age-Restricted Industries
In the same way an IDV solution can be used for KYC adherence, it can also ensure underage people are not using false information to gain access to highly-regulated industries. This includes pharmaceuticals, tobacco, e-cigarettes, alcohol, and gaming. Companies in these industries must implement stringent age verification processes to stay in compliance and protect themselves from possible legal actions.
User Authentication in Online Platforms and Marketplaces
Online purchases skyrocketed in the early days of the pandemic and continue to show no signs of slowing down. Having an identity verified before a large purchase reduces the risk of significant asset losses for those who sell their products over the internet. Companies can maximize security and ensure every customer is legitimate by augmenting a visual identity verification solution with digital data analysis, social security validation, and real-time driver’s license validation.
Challenges and Limitations of Identity Verification
While identity verification has made leaps and bounds in the past few years, it’s not without its challenges. However, this shouldn’t hold companies back from implementing new technologies. Identifying and addressing these concerns will go a long way in avoiding potentially-negative outcomes.
Filling in the Gaps of Visual IDV Alone
Visual IDV is absolutely essential, but it’s important to note that it won’t catch everything. Top-of-the-line data checks are also needed to combat the increase in fraud technologies, including generative AI and deepfakes.
Balancing Security and User Experience
The last thing companies want is to lose a new customer or client during onboarding because the process of getting their identity verified is too time consuming and invasive. Yet, certain regulations must be adhered to and steps of caution cannot be overlooked. While ensuring robust security is essential to prevent fraud and authorize access to necessary services, a positive user experience is equally important to retain customers and avoid frustrating them with lengthy or cumbersome verification processes.
Simplify the onboarding process by reducing the number of steps and the amount of information required from the user. One of the main benefits of AI is that it can streamline ID document verification and data extraction, making the initial registration smoother for everyone.
Addressing Privacy Concerns and Data Protection
It isn’t uncommon for people to be leery of giving away private information over the internet, particularly their social security number or bank account information. Companies should implement a data minimization strategy, meaning the system only collects and retains the minimum amount of data necessary for the verification process. Additionally, utilize strong encryption techniques and make it known to those whose identity is being verified that their sensitive user data is protected. Provide users with a clear and easily accessible privacy policy that outlines how their data will be collected, used, and protected. Above all else, ensure that data is securely stored in a controlled and monitored environment.
Dealing With Evolving Fraud Techniques and Social Engineering
As AI-powered technology evolves, so too do fraud techniques. This includes the rise of social engineering tactics, like phishing, baiting, and impersonation. An AI-powered IDV solution that incorporates adaptive and multi-layered verification methods is able to significantly strengthen identity verification processes and bolster defenses against evolving fraud. Combining multiple verification methods, such as ID document verification, biometric authentication, and behavioral analysis, strengthens identity verification and makes it much more difficult for fraudsters to bypass the system.
Harnessing the Power of Identity Verification
If you’re in one of the industries mentioned above — or any other for that matter — what you’re looking for is an identity verification solution that offers rapid and accurate ID verification powered by a cutting edge AI solution, one that is just as easy to integrate into your existing tech stack as it is for the end customers to use.
Ready to implement secure identity verification for your business? Discover how Vouched uses digital identity verification in our case study, BHG Wows Customers with Fast and Trusted ID Verification. When you read it, you’ll learn more about how this direct lender adapts to today’s complex digital demands with Vouched.
Sharon Shi
Sharon Shi leads Customer Success at Vouched, drawing on her extensive experience at Twitter and various ad agencies. In her pivotal role, she focuses on driving customer satisfaction and success while supporting Vouched's growth and market leadership in identity verification.