How Does Digital Identity Verification Work?

How does digital identity verification work?

Digital identity verification is a critical component of modern security for any organization that manages a high volume of digital transactions. The goal of digital identity verification is to help ensure the authenticity of individuals' identities without the need for physical interactions, thereby better safeguarding the organization and its customers against potential fraud. By implementing robust identity verification solutions, organizations can maintain more stringent security standards, better comply with regulatory requirements, and foster increased trust with their customers.

What is digital identity verification?

Digital identity verification uses electronic methods to help confirm a person's stated identity matches their actual identity. This process integrates various verification methods, including document verification, biometric identity verification and other identity authentication techniques to provide a broader verification solution.

• Digital identity proofing: The first step involves gathering and validating personal information, such as name, address, date of birth, and government-issued ID numbers. This process may employ advanced technologies for document verification like document scanning and optical character recognition (OCR) to help confirm the authenticity of the provided documents.

• Biometric identity verification: In addition to document verification, biometric data, such as fingerprints, facial recognition or iris scans, are increasingly used. These methods offer a higher level of security by relying on unique physical characteristics that are more difficult to replicate or forge.

• Identity verification software: The use of specialized software helps streamline the verification process by integrating various methods, including database cross-checks and biometric verification, into a more seamless solution. This software is essential for real-time identity verification, reducing the risk of fraud during digital transactions.

How does digital identity verification fight identity fraud?

Digital identity verification is a powerful tool businesses can use to combat various types of identity fraud they may encounter.

• Preventing new account fraud: By verifying identities before new accounts are created, digital identity verification helps prevent fraudsters from opening accounts using stolen or synthetic identities. This type of fraud can lead to significant financial losses and reputational damage for businesses.

• Mitigating account takeover fraud (ATO): Account takeover fraud occurs when a fraudster gains unauthorized access to a legitimate account. Digital identity verification helps mitigate ATO fraud by using multi-factor authentication (MFA) and continuous monitoring to better detect and prevent unauthorized access.

• Detecting synthetic identity fraud: Synthetic fraud involves creating fake identities using a combination of real and fictitious information. Digital identity verification solutions can help detect synthetic identities by cross-referencing data with authoritative sources and analyzing inconsistencies.

• Enhanced identity fraud detection: Advanced identity verification tools use behavioral models and machine learning to detect anomalies in user behavior, such as unusual identity connections or transaction activities. These tools enhance identity fraud detection by providing real-time alerts and better preventing fraudulent activities before they cause significant harm.

What does the digital identity verification process involve?

Digital identity verification typically involves several key steps to help ensure an individual's identity is accurately verified:

1. Data collection: The process begins with collecting the individual’s information. This data can include personal details, such as name, address, phone number, email address, date of birth, and government-issued identification numbers. This information is often gathered through online forms or mobile applications.
2. Database cross-referencing: The collected data is then cross-referenced with authoritative databases, including government records, credit bureaus, mobile phone operators and watchlists. This step helps ensure the individual’s information matches existing records and they’re not known to be involved in fraudulent activities.
3. Document verification: Where necessary, this next step involves verifying the authenticity of the provided documents. This can include passports, driver’s licenses, or national ID cards. Advanced identity verification software uses optical character recognition (OCR) and machine learning algorithms to analyze the documents for signs of tampering or forgery.
4. Biometric verification: To further enhance security, biometric identity verification may be used. This involves capturing and analyzing biometric data, such as fingerprints, facial recognition or iris scans. Biometric verification is more reliable because it’s based on unique physical characteristics that are difficult to replicate.
5. Two-factor authentication (2FA) or multi-factor authentication (MFA): Many digital identity verification solutions incorporate two-factor authentication or multi-factor authentication to add an extra layer of security. These methods require the individual to provide further forms of verification, such as an answer to a security question and/or a code sent to their email address or mobile device, in addition to their password.
6. Real-time analysis: Modern identity verification tools use artificial intelligence and machine learning to perform real-time analysis of the data. These technologies can help detect patterns and anomalies that may indicate fraudulent activity, allowing organizations to respond more promptly.