What Are Identity Verification Services?

The growth in identity fraud makes robust digital identity verification a critical step in supporting more secure and efficient interactions between organizations and their customers.

The rapid adoption of digital wallets and mobile payments, and broader shift toward ecommerce and online financial services is driving significant growth in digital transactions. With an expected annual growth rate of 14.7%, the total transaction value of digital payments in the US is projected to reach $3,528 billion by 2027. As more transactions move online, the opportunities for fraudsters to exploit vulnerabilities in digital systems also rise. The Federal Trade Commission reported identity fraud losses in the US amounted to $52 billion in 2022, affecting 42 million adults.

For organizations in all sectors, implementing a strong identity verification service is vital not only as a means of better detecting and reducing fraud — but also to help safeguard sensitive information, better ensure compliance with regulatory requirements, and build greater trust with customers.

What is a digital identity check?

Given the predominance of digital transitions, digital identity checks are a very common form of identity verification that involve verifying an individual’s identity using electronic methods, and better ensuring the person interacting with your organization is who they claim to be, reducing the risk of fraud and identity theft.

What’s the best way to verify identities online?

A highly effective way to conduct digital identity verification is through a multi-layered approach that combines several advanced technologies and methodologies. These include:

Device intelligence

Better distinguish between risky transactions and trusted digital interactions using powerful insights in device recognition, context and behavior. This involves using device reputation (including identifiers like device IMEI numbers and geolocation tracking) to link the device to the user’s account, and device history which helps verifies previously reported risk associated with the device.

Biometric verification

This entails using facial recognition, fingerprint scanning, voice recognition, iris recognition and even behavioral biometrics (unique user behaviors like typing patterns and mouse movements) to better authenticate the user.

Real-time database cross-referencing

This uses data matching algorithms and connections with authoritative databases (including government records, financial institutions’ records, credit records, identity graph, fraud consortiums and telephone operator databases) to check information provided by the user to better ensure its accuracy.

Document verification

Validating government-issued IDs and other official documents using optical character recognition (OCR), specialized software to identify and verify security features like holograms and watermarks, and machine learning (ML) algorithms that detect anomalies and forgeries by analyzing document structure and data consistency.

Multi-factor authentication (MFA)

Adding extra security layers like sending verification codes via SMS or email.

Machine learning (ML) models

ML-based models help identify suspicious activities and patterns that might be missed by traditional methods.

Employing such a robust identity verification process not only enhances security and reduces the risk of fraud, it also improves the user experience by offering more seamless and efficient verification processes.

How does digital identity verification work?

Digital identity verification typically involves several steps:

1. Device risk: Assessing the known risk of the device (including device reputation and characteristics) being used to interact with an organization.

2. Data collection: Gathering personal information (e.g., name, email address or phone number) from the user.

3. Data validation: Cross-referencing the collected data against authoritative sources.

4. Risk assessment: Analyzing the data for any signs of fraud or inconsistencies.

5. Step-up verification: Collecting and assessing further information that can help authenticate the user if the identity they provided is suspected to be risky. This can mean using biometric data, such as fingerprints, facial recognition or voice recognition, or sending a confirmation one-time passcode (OTP) via SMS or email.

6. Approval or denial: Based on the verification results, the user is either approved or denied access.

What is an identity verification service?

An identity verification service is a solution provided by specialized companies to help businesses verify the identities of their customers or employees. These services use advanced technologies to help validate personal information and better ensure the authenticity of individuals prior to allowing access to systems and transactions.

What are the benefits of using an identity verification service?

Using an identity verification service offers numerous benefits to organizations and their customers alike:

Risk mitigation: Reduces the organization’s risk profile by better identifying and preventing fraudulent activities early.
Enhanced security: Helps protect customer and organizational data.
Regulatory compliance: Better ensures adherence to legal and regulatory requirements.
Improved customer experiences: Streamlines the process for granting customers access to systems and transactions, thereby reducing friction for legitimate users.
Operational efficiency: Saves time and resources by automating and accelerating the identity verification process, and reducing resources required to detect and resolve cases of identity fraud and fraudulent transactions.

Which types of organizations benefit from using identity verification services?

Identity verification services are crucial for a wide range of industries and used wherever security, data privacy and regulatory compliance are important. These industries include:

Financial services

Banks, credit unions and online payment platforms use identity verification services to comply with regulations like know your customer (KYC), reducing fraud and better ensuring secure transactions.

Healthcare providers

Hospitals, clinics and telemedicine services use identity verification services to better protect patient data, comply with the requirements of the Health Insurance Portability and Accountability Act (HIPAA), and reduce medical fraud.

Education

Universities and online learning platforms use identity verification services to help verify student identities, thereby increasing security of online examinations, better protecting student data, and helping ensure the integrity of the admission process.

Retail and ecommerce

Online retailers and marketplaces use identity verification services to help detect and reduce payment fraud, better secure customer accounts and build greater trust with users.

Telecommunications

Mobile network operators and internet service providers use identity verification services to reduce account fraud, better secure customer data and comply with regulatory requirements.

Government agencies

Various government entities use identity verification services for system access and in the process of providing public services, such as issuing passports, driver’s licenses and other official documents.

Travel and hospitiality

Airlines, hotels and travel agencies use identity verification services to help secure bookings, better verify travelers and reduce fraud in loyalty programs.

Real estate

Property management companies and real estate agencies use identity verification services to check the identities of tenants and buyers.

Gaming and gambling

Online gaming and gambling platforms use identity verification services to better comply with age restrictions and limit new account fraud and promotional fraud.

What are the latest methods for digital identity verification?

As technology advances and identity verification service providers anticipate and respond to ever-more innovative methods of identity fraud, identity verification services are constantly evolving. The latest methods for digital identity verification incorporate highly sophisticated technologies into various verification steps. Some examples include:

Device intelligence is based on a combination of insights about device history and reputation and device-to-identity linkages to assess risk of a device and its transactions during account origination and digital onboarding.
Biometric verification uses facial recognition, fingerprint scanning, iris scanning, voice recognition and behavioral biometrics to help verify identities.
Artificial intelligence (AI) leverages machine learning (ML) and AI algorithms to better detect anomalies and predict fraudulent behavior.
Document verification analyzes and validates official documents, such as passports and driver’s licenses, using optical character recognition (OCR) and other technologies.
Multi-factor authentication combines multiple verification methods to enhance security.

What does the future of identity verification services look like?

The capabilities of digital identity verification will progress rapidly as identity verification service providers incorporate technological advances. Identity verification services are poised for significant advancements that will offer even more robust and efficient solutions for businesses worldwide. Emerging trends to watch include:

Greater adoption of AI and ML: Enhancing the speed, accuracy and efficiency of identity verification processes.
Blockchain integration: Using blockchain technology for immutable and transparent identity records.
Increased use of a wider range biometric data: Expanding the use of biometric verification methods for more secure and convenient identity checks.
Privacy-first solutions: Developing verification systems that prioritize user privacy and data protection.
Global standards and interoperability: As global adoption of digital wallets, mobile payments, ecommerce and online financial services continues to grow, expect to see universal standards for identity verification established to facilitate cross-border transactions and interactions.

What are the most important features of an identity verification service?

When selecting an identity verification service, consider the following key features:

Broad solutions: Look for providers offering a range of services, including identity verification, device intelligence and advanced fraud analytics.
Data: Make sure the provider has access to vast amounts of public, credit and proprietary data, including fraud consortium data.
Advanced analytics: Choose a provider that uses advanced analytical processes and technologies like synthetic identity models, AI and machine learning (ML) for more accurate and efficient verification.
Identity graph: Your provider should be able to deploy proven identity resolution ML models to help connect identities and identity elements.

Configurable business rules: Ensure the service better enables you to customize the set-up, for example, determining your own fraud thresholds.
Compliance: Ensure the provider meets all relevant compliance standards for your industry.
Reputation and reliability: Consider the provider’s market reputation and the reliability of its solutions.
Customer support: Good customer support is crucial for addressing any issues more quickly and effectively.

How do you choose the right identity verification provider for your organization?

When selecting the right identity verification service provider for your organization’s requirements, there are multiple factors to consider:

Accuracy

The best identity verification services deliver higher precision in verifying identities — with reduced false negatives.

Speed

Faster (ideally, real-time) processing speeds are essential to delivering better identity verification without introducing friction to the user experience.

Scalability

Given the growth in digital transactions, the identity verification service provider must be able to handle large volumes of verifications simultaneously.

Compliance

The identity verification service must adhere to all relevant regulations and standards in the jurisdictions and locations where your organization operates or has customers.

Security

Ensure the identity verification service employs robust measures to better protect data and prevent breaches.

Integration

Easy integration with existing systems and workflows will accelerate implementation and decrease operational disruption.

User-friendly interface

An identity verification service with intuitive design of its user-facing interface will help simplify and accelerate the verification process, deliver superior customer experiences, and reduce resources required for customer support and issue resolution.

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What are Identity Verification Services?