How Does Identity Verification Software Work?

Identity verification software is an essential tool for organizations and institutions that handle digital transactions in high volume. As an integral part of an identity verification service, identity verification software helps authenticate the identities of users, minimize identity fraud and support compliance with regulatory requirements.

What is identity verification software?

Identity verification software is a technology solution designed to better confirm individuals are who they claim to be, making it a critical component of digital security infrastructure. This software is essential for financial institutions, ecommerce platforms and any online service requiring secure user verification prior to granting access to sensitive information and services. Identity verification services use this software as part of a range of techniques and technologies to achieve more accurate, faster and more reliable identity verification results.

What role does identity verification software play in identity fraud prevention?

Identity verification software is crucial to better preventing identity fraud, which includes various types of fraudulent activities like new account fraud, account takeover fraud (ATO) and synthetic identity fraud. Here’s how it contributes to identity fraud prevention:

• Enhanced security: By using device intelligence, biometric verification and multi-factor authentication (MFA), identity verification software helps ensure only authorized individuals can access accounts and perform transactions. This significantly reduces the risk of unauthorized access and identity takeover.

• Real-time verification: The software provides real-time verification, helping allow organizations to immediately authenticate users. This helps prevent fraudulent activities by verifying identities before transactions are completed or services are accessed.

• Fraud detection: Advanced identity verification tools include fraud detection features that analyze user behaviors and transaction patterns. These tools can better identify anomalies and suspicious activities, enabling organizations to respond more quickly to potential fraud.

• Compliance with regulations: Identity verification software helps organizations comply with regulatory requirements, such as know your customer (KYC), which mandate robust identity verification processes to better prevent financial crimes.

• Reducing synthetic identity fraud: By cross-referencing user information with multiple authoritative databases, identity verification software can better detect inconsistencies that may indicate synthetic identities.

How does identity verification software work?

The functioning of identity verification software can be broken down into several stages.

1. Initial user interaction: As soon as a user digitally engages with a website or mobile application, services like device intelligence and IP analysis help distinguish legitimate digital interactions from risky ones to reduce fraud risk, false positives and manual reviews.
2. Account setup: When a user signs up for a service or initiates a transaction requiring identity verification, they’re prompted to provide their personal information and upload identification documents. This initial interaction is crucial for collecting necessary data.
3. Document and data analysis: Once the user submits their information, the identity verification software begins analyzing the data. Optical Character Recognition (OCR) technology extracts information from the uploaded documents — while the software checks for authenticity by examining security features. This step also includes analyzing biometric data if applicable.
4. Cross-referencing and validation: The extracted and analyzed data is then cross-referenced with multiple databases. The software checks the validity of the information against records from government agencies, financial institutions and other trusted sources. This robust cross-referencing helps identify discrepancies or fraudulent activities.
5. Biometric matching: If biometric data is involved, the software matches the captured biometric information with stored records. For instance, facial recognition software compares the user’s live image with the photo on their ID document, helping ensurethey’re the same person.
6. Multi-factor authentication (MFA): As an additional security measure, the user may need to complete MFA. This involves entering a one-time passcode (OTP) sent to their registered phone number or email. MFA helps ensure that even if a user’s password is compromised, unauthorized access is still prevented.
7. Final verification and approval: After completing all the checks and validations, the identity verification software makes a final decision. If all the data matches and there are no signs of fraud, the user’s identity is verified and they’re granted access to the service or transaction. If any issues are detected, the software flags the user for further review.
8. Continuous monitoring: Identity verification software also includes continuous monitoring features that track user behaviors and transaction patterns. This ongoing analysis helps detect suspicious activities that may indicate identity fraud.

What are the benefits of identity verification software?

Implementing an identity verification platform offers numerous benefits for businesses and organizations.

• Enhanced security: By using more advanced verification methods, identity verification software significantly reduces the risk of fraud and unauthorized access.
• Regulatory compliance: Many industries have strict regulations regarding identity verification. Using a more reliable identity verification service helps businesses comply with these regulations and avoid hefty fines.
• Improved user experiences: More efficient and accurate identity verification processes reduce user friction, providing smoother and quicker onboarding experiences.
• Increased conversion rate: Identity verification software more quickly recognizes legitimate users, better enabling businesses to move those customers along their purchase journeys more smoothly and without interruption from false positives.
• Cost savings: Automating identity verification reduces the need for manual checks, saving time and resources for businesses.
• Trust and credibility: By better ensuring the security and authenticity of user identities, businesses build greater trust and credibility with their customers.

What are some common applications of identity verification software?

• Financial services: Banks and financial institutions use identity verification software to help authenticate customers, comply with KYC regulations and better prevent fraud.

• Ecommerce: Online retailers implement identity verification software to better secure transactions and protect customer accounts from unauthorized access.

• Healthcare: Medical institutions use identity verification software to help ensure only authorized individuals can access sensitive patient information.

• Telecommunications: Telecom companies use identity verification software to better prevent fraud and ensure customers are who they claim to be.

• Gaming and gambling: Gaming organizations utilize identity verification software to help comply with regulatory requirements like age, and help prevent gold farming and bonus abuse.