Identity verification is the most critical component for almost every business in the economy, whether it be an e-commerce company or a financial institution. A person’s identity is the most crucial asset to ensure that an actual individual is behind the process and verifies that they are who they claim to be.
Even though Anti-Money Laundering (AML) and Know Your Customer (KYC) rules are responsible for developing identity verification methods worldwide, most countries have their own organizations and regulations to impose these rules.
For instance, the FinCEN (Financial Crimes Enforcement Network) is among the top leading agencies responsible for managing identity verification techniques in the US. Most of these methods come under the following major five classifications:
- Online verification
- Database methods
- Credit bureau-based authentication
- Two-factor authentication
- Knowledge-based authentication
Online ID verification uses a set of techniques to determine whether the government-issued ID belongs to the individual or not. These techniques may include computer vision, biometrics, human review, and artificial intelligence.
In this ID verification method, a user must submit a picture of themselves holding their ID close to their face. Although it is the most secure method to identify the person they claim to be, some individuals may feel uncomfortable providing their picture with their ID and face.
Database ID verification collects data from different sources to confirm the user’s identity. These online sources include offline databases and data from social media. This method is frequently used to determine the level of risk associated with a user because it drastically reduces the need for human reviews.
However, there is one way to bypass human verification in this method: they cannot confirm that the individual providing the data is the individual initiating the transaction, mostly due to the growing number of fake online IDs.
Credit Bureau-Based Authentication
A credit bureau-based authentication technique retrieves data from one or more reliable credit bureaus to match a person’s identity. These types of companies often store loads of credit information relating to consumers. It includes their name, social security code, address, etc., which helps find a definite match for an individual without compromising their user experience.
Credited-based authentication incorporates a score based on data to match individual identities. However, this method may not be successful in matching newly submitted files for some individuals, such as recent immigrants and young people.
Multi-factor or two-factor authentication requires your users to type in the code sent to their mobile phone or email. Since this type of ID verification is quite common among the users, it’s pretty easy for them to navigate throughout the process and verify their identity. With MFA or 2FA, you can quickly identify the user’s phone number and email address. Two-factor authentication becomes necessary when you want to ensure that the user does not provide incorrect information.
Multi-factor or two-factor authentication usually encourages people to provide a unique form of an identifier and their username and password to add an extra layer of protection before logging into their account. A unique identifier should be something that an individual has in possession or can easily memorize, like a unique code generated by an authenticator app or agency.
Once you enable two-factor authentication, it will drastically reduce the chances of fraudulent activities. You can even use this ID verification method for resetting passwords and creating accounts. However, users are required to have their cell phones during the entire process of authentication.
In knowledge-based authentication (KBA), users must answer some security questions to verify their identity. These curated questions are pretty simple for that individual to answer but impossible for others. For instance, “Who was your favorite singer?” or “Where did you live in your childhood?” You can also add a layer of protection by enabling a time-bound questionnaire in KBA.
Users will need to answer the question within that specified time period to avoid getting scammed. One of the significant benefits of using KBA verification is that it’s the safest and most reliable identification method for people to understand. However, the downside of this technique is that sometimes it’s easy to determine the answer from sources like social media and other traditional forms of networking.
Why Should You Incorporate ID Verification Into Your Process?
The goodwill of a business plays a vital role in its overall success. That means it’s essential for you to stand out from your competitors and become a trustworthy choice for your potential customers. A recent study shows that customers are willing to pay high prices for a product or service with complete transparency.
Consumers want to ensure that their personal information is kept safe, even in this world of data breaches. If you run various identity verification checks, you show customers that you are serious about maintaining your reputation and trust.
Today, almost every business is required to verify their customers’ identities and keep them on file for several years. Since fraudulent activities are increasing every day, make sure you run identity verification checks to reduce the risk of illegal practices.