What is digital identity verification and its importance?

How do you know if your customer is real or a fraudster? In today’s digital advancements, it’s critical to know who is really behind the screen if you are going to protect your customers and business from fraud.

That’s where digital identity verification comes in. Read on to learn how digital identity verification works and why it is essential for today’s businesses.

For many businesses, identity verification is part of their regulatory obligations, including those in financial services, crypto, and online wagering and gaming. But as online activities and transactions surge, traditional manual identity checks aren’t enough to protect against the latest fraud threats.

Businesses need to catch up by improving their processes with digital identity verification.

What is digital identity verification?

Digital identity verification is the online process of confirming an identity is genuine without meeting the individual in person. It is a critical part of the Know Your Customer (KYC) process to help prevent fraud, mitigate risk and ensure compliance with anti-money laundering (AML) and counter-terrorism financing (CTF) regulations.

Digital identity verification typically happens when onboarding a new customer, such as opening a bank account, purchasing a new phone plan, accessing age-restricted services like online wagering, or making a high-value purchase.

Using online verification, you can confirm that a person is who they say they are and that the personal information they have provided isn’t a result of identity theft or fraud.

How digital identity verification works

There are different approaches to digital identity verification, which can be used independently or together to prevent fraud, including:

• Personal data verification: Data-oriented digital identity verification matches identity data, such as name, date of birth, and address, against trusted comprehensive global data sources, such as government data, credit headers, and postal records.
• Document verification: This involves a person scanning and capturing identity documents, such as a driver license or passport, which are checked for specific features, such as watermarks or fonts. For document verification to be effective, a business needs access to a comprehensive global database of documents.
• Facial recognition: The user captures a photo of themselves on their mobile phone, which is uploaded to the identity verification platform and checked against the document to ensure a match. The image is also checked against a list of trust factors to ensure it is an actual photo of the person. Liveness detection checks can also be conducted to check that the person is a real human being and is present.

Why digital identity verification is important

1. Ensure maximum compliance

Regulated companies, such as financial institutions and online wagering businesses, must apply customer identification procedures to all customers as part of an AML/CTF program. In Australia, this is governed by AUSTRAC. Failure to do this can lead AUSTRAC to take steps to enforce compliance or seek a penalty through the Federal Court.

Digital identity verification makes it easier for businesses to satisfy compliance with AML/CTF regulations while limiting their exposure to financial crime.

2. Convert more customers

Today’s customers expect to be able to sign up for a product or service in an instant and start using it immediately, so identity verification shouldn’t add extra barriers and frustrations to the user experience. At the same time, it’s critical to have a secure identity verification process that ensures customers are safeguarded and the business is fully compliant.

Manual identity verification can be tedious and frustrating for customers, as it means lengthy processes of verifying documents and even having a face-to-face meeting to check they are the “real” person.

Digital identity verification speeds up the process by instantly verifying documents against a document library. For example, GBG’s document verification can tell you within seconds whether an identity document is genuine, fake, or tampered with.

3. Prevent the costs of fraud

According to the Australian Institute of Criminology, the annual economic impact of identity crime is upwards of $3.1 billion, not to mention the considerable disruption and stress that victims can suffer.

With digital identity verification, you can implement a layered AML and KYC strategy that deters fraud and money laundering. This can help prevent the related costs of fraud to your customers and your business.

4. Save time and resources

The digital verification process is quicker than traditional manual methods. Where verification once took days to process manually, it now takes just a few minutes. This is not only beneficial to your customers but also to your business. With more time and resources, you can streamline authentication and reallocate experts to other critical tasks.

5. Build a trustworthy reputation

An effective digital identity verification process helps organisations to build a trustworthy reputation. Customers want to know that the business is doing everything it can to protect them from fraud, and digital identity verification is an effective way for businesses to show that. It also helps prevent fraud, saving the company from much reputational damage.

What technologies can be used for digital identity verification?

Digital identity verification solutions draw on sophisticated technology to ensure that it is actually a person behind the screen and not a fake identity. Technologies can include artificial intelligence (AI) and machine learning, biometric data checks, and liveness detections.

Here’s a summary of the latest digital identity verification technologies:

1. AI and machine learning:

Artificial Intelligence is being used in identity verification technology to help improve the speed and accuracy of identity fraud detection. As identity fraud evolves and becomes more sophisticated, machine learning detects known and unknown potential frauds and helps businesses counter the latest threats.

For example, sophisticated algorithms can detect the latest digital and physical tampering methods on documents, including advanced photo editing. AI is also used for biometric authentication, enabling fast and accurate identity verification on a mass scale in large organisations.

2. Facial biometrics:

Using a single selfie image, facial biometrics technology can ensure the person on the document is the same person onboarding.

It identifies and extracts key facial biometric landmarks from the photo on the ID document, which are then compared and matched to the selfie to produce a reliable judgement of how similar the two faces are and confirm a genuine presence.

With minimal interaction required by the customer, the verification process is fast and straightforward, making onboarding a breeze.

3. Passive liveness:

Passive liveness detection technology is a fast, reliable alternative to in-person verification. Artificial intelligence will perform passive liveness checks in the background on the selfie image to quickly ensure the individual on the document is present during onboarding.

This single step is imperceptible to users and fraudsters, stopping fraudulent individuals from cheating the system.

4. Optical Character Recognition (OCR):

OCR is the technology behind converting typed, handwritten, or printed text from images into machine-encoded text.

When used in digital identity verification, it helps to automatically and accurately populate systems using the data retrieved from the ID document, such as a passport or birth certificate. This helps provide a quicker, easier, smoother onboarding experience and minimises user errors.

Boost KYC compliance with digital identity verification

With digital services blended seamlessly into our everyday lives and online fraud more prevalent than ever, digital identity verification has become a business imperative for onboarding and managing their customer due diligence requirements.

Digital identity verification helps companies verify the identity of their customers quickly, accurately, and securely, striking a balance between preventing fraud and enhancing the customer experience.

Learn more about how GBG’s digital identity verification solutions can help you prevent identity fraud, stay compliant and convert more customers.