What Are the Benefits of Identity Verification?

Identity verification and identity proofing are critical procedures that help confirm individuals' true identities, significantly contributing to enhanced security, regulatory compliance and trust for organizations. Through the verification of identities, organizations can more effectively counter different types of fraud and bolster the security of digital transactions. 

What is identity verification?

Identity verification is the process of confirming an individual's claimed identity matches their actual identity. This process involves using various technologies and methods, such as biometric identity verification, digital identity verification software and multi-factor authentication (MFA), to help ensure the person is who they say they are. Identity verification is critical for better preventing unauthorized access, complying with regulations like know your customer (KYC), and building trust in digital interactions.

Key components of identity verification:

• Digital identity verification utilizes technology to help authenticate identities through document scanning, biometric checks and database cross-referencing.

• Biometric identity verification uses unique physical characteristics, such as fingerprints or facial recognition, to better verify identities.

• Multi-factor authentication requires multiple forms of verification, such as passwords, security tokens and biometrics, to enhance security.

What types of fraud does identity verification combat?

Identity verification is a powerful tool in combating various types of identity fraud that threaten both businesses and consumers. 

• New account fraud: Fraudsters use stolen or fabricated identities to open new accounts — which are then used for fraudulent activities. Identity verification tools help ensure the person opening the account is legitimate, preventing this type of fraud.

• Account takeover (ATO) fraud: This entails fraudsters gaining unauthorized access to existing accounts. By using advanced identity verification methods, such as biometric checks and MFA, businesses can detect and prevent unauthorized access.

• Synthetic identity fraud: This involves creating a fake identity using a combination of real and fictitious information for fraudulent financial gain.

• Credit card fraud: Fraudsters use stolen credit card information to make unauthorized purchases or withdraw funds.

• Identity theft: This occurs when the fraudster uses a victim’s personal information to impersonate them and commit various types of fraud, such as opening new credit accounts, taking out loans or even obtaining medical services.

• Document fraud: This involves the falsification of government-issued identification documents, thus enabling fraudsters to pass verification checks and perpetrate other types of identity fraud.

• Payment fraud: This is the unauthorized use of payment methods, such as credit cards or bank account details, to make purchases or transfer funds without the account holder’s consent.

• Shipping fraud: Fraudsters exploit the shipping process to intercept deliveries or receive goods without paying. This includes rerouting shipments or using stolen credit card information to order goods and shipping them to an alternate address.

• Promotion abuse: This is the exploitation of promotional campaigns, discounts or loyalty programs by individuals or organized groups. It often involves using false or stolen identities to take advantage of these offers multiple times.

• Bonus abuse: Fraudsters create multiple accounts to claim sign-up bonuses or unfairly manipulate gameplay to maximize rewards, typically in online gaming or gambling. 

• Gold farming: This term refers to the use of unfair methods to accumulate in-game currency or items to sell them for real money.

• Money mule: This is an individual who transfers illegally-acquired money on behalf of fraudsters — often unwittingly.

• Profile misrepresentation: Fraudsters use fake photos, fabricated personal information or false credentials to create false or misleading profiles, often on social media or dating sites, with the intent of deceiving others.

• Policy violation: This is a breach of the terms and conditions of a service provider or platform. It can include using bots to enable or engage in fraudulent activities.

• Tax refund fraud: The filing of false tax returns using stolen personal information to claim refunds. This fraud often doesn’t come to light until the victim attempts to file a legitimate tax return.

What are the benefits of identity verification for organizations?

Implementing robust identity verification processes offers numerous benefits for organizations, particularly large corporations and financial institutions.

• Fraud prevention: Identity verification significantly reduces the risk of various types of fraud, including new account fraud, ATO fraud and synthetic identity fraud. By better ensuring individuals are who they claim to be, businesses can better protect themselves from financial losses and reputational damage.

• Regulatory compliance: Many industries, especially financial services, are subject to strict regulations like KYC and anti-money laundering (AML) laws. Identity verification helps organizations comply with these regulations, avoiding legal penalties and enhancing their credibility.

• Enhanced security: Identity verification strengthens security by helping prevent unauthorized access to sensitive information and systems. This is particularly important for protecting customer data and maintaining trust in digital transactions.

• Operational efficiency: Automated identity verification solutions help streamline the onboarding process, reducing the need for manual reviews and speeding up customer acquisition. This improves operational efficiency while maintaining higher security standards.

• Improve business outcomes: Effective identity verification reduces the frequency of false positives — which increases conversion rates and helps to avoid lost business from frustrated legitimate consumers.

• Trust and reputation: By implementing rigorous identity verification processes, organizations can build greater trust with their customers, demonstrating a commitment to protecting their personal information and ensuring more secure interactions.

What are the benefits of identity verification for consumers?

Consumers also benefit significantly from robust identity verification processes which enhance their security and trust in digital interactions.

• Protection against identity theft: Identity verification helps protect consumers from becoming victims of identity fraud. By helping ensure legitimate individuals can access accounts or make transactions, consumers are better safeguarded against financial losses and the hassle of resolving fraud incidents.

• Secure transactions: Consumers can engage in digital transactions with more confidence, knowing their identities are being better verified and protected. This is particularly important for online shopping and banking, and other activities that involve sensitive information.

• Improved customer experience: Automated and efficient identity verification processes reduce friction in the customer journey. Consumers can more  quickly and securely verify their identities, leading to smoother, more convenient experiences.

• Enhanced privacy: Identity verification processes help protect consumers' personal information from unauthorized access. By better ensuring data is handled more securely, consumers can be more confident their privacy is being respected.

• Trust in digital services: Consumers are more likely to trust and engage with businesses that prioritize their security. By implementing robust identity verification measures, companies can foster stronger relationships with their customers and encourage increased loyalty.