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A Complete Guide to Online Identity Verification

Fergal Parkinson

9 min read
Person holding a question mark sign in front of their face, with text about a guide to online identity verification by fergal parkinson.

Ensuring the security and integrity of user identity has become a priority for businesses and individuals. Online identity verification has emerged as a reliable solution, helping organisations establish the identity of users and detect potential fraud or malicious activity. It’s estimated that 1 in 15 people globally is affected by a form of identity fraud, making protection for your business even more important than ever.

In this guide, we will delve into the concept of online identity verification, its importance, risks and challenges, the process of online ID checking, and the benefits it offers. Additionally, we will discuss the technologies currently utilised and explore the benefits of using mobile data to enhance identity verification.


Definition of Identity Verification

Identity verification is the process of confirming the authenticity and legitimacy of an individual’s claimed identity. It involves establishing the accuracy and validity of various identity attributes, such as name, age, address, and any other relevant information.


How is Identity Verification Different from Authentication?

Identity verification and authentication are two distinct processes, although they are often used together to establish trust and secure online transactions. Here are the differences between them:

Identity verification is the process of confirming the identity of an individual by establishing the accuracy and validity of various identity attributes, such as name, age, address, and other relevant information. It aims to ensure that the person claiming an identity is indeed who they say they are. Identity verification typically involves verifying identification documents and conducting background checks. Mobile data can be used to speed up this process.

Authentication, on the other hand, is the process of verifying the identity of a user during a specific session or interaction. It ensures that the user attempting to access a system or perform a transaction is the same individual who was verified during the identity verification process. Authentication is typically done through the use of credentials, such as usernames, passwords, one-time verification codes, biometrics, device information, Mobile Network Operator (MNO) data or other forms of secure tokens.


Importance of Digital ID Verification

Digital ID verification plays a vital role in ensuring the trustworthiness and security of online transactions and account access.

By verifying the identities of users, businesses can prevent identity theft, comply with regulatory requirements, reduce fraud, enhance cybersecurity measures, and establish a seamless and trustworthy user experience.


Evolution of Online Identity Verification

Over the years, online identity verification methods have evolved to keep up with the changing landscape of fraud threats. Advancements in technology have paved the way for more sophisticated and robust verification methods, such as biometrics and facial recognition.

These technologies have often replaced traditional methods, such as physical document verification, to provide a faster and more reliable means of verifying identity improving both the accuracy and user experience.


Common Methods of ID Verification

  1. Document Verification: This method involves verifying the authenticity of identification documents such as passports, driver’s licenses, and identity cards. Digital solutions now enable businesses to verify documents remotely using advanced algorithms.
  2. SMS Verification: SMS verification such as one-time passcodes involves sending a code to a registered mobile number, which the user must enter to validate their identity. This method confirms the possession of the mobile device associated with the registered number. However, there are risks associated with this method due to account takeover frauds such as sim swapping.
  3. Device Verification: Device verification analyses the device used by an individual to determine its trustworthiness. This method considers factors such as device type, location, IP address, and other device-related attributes.
  4. Authentication Apps: Authentication apps generate time-sensitive codes that users need to input for verification. These apps can be installed on smartphones and provide an additional layer of security.
  5. Biometric Verification: Biometric verification utilises unique biological or behavioural attributes, such as fingerprints, facial features, or voice recognition, to verify identity.
  6. Credit Check-Based Verification: This method involves checking an individual’s credit report and credit score to verify their identity. It assesses patterns and discrepancies in financial behaviour.
  7. Two-Factor Authentication: Two-factor authentication requires users to provide two separate forms of identification, such as a password and a one-time verification code sent via email or SMS.


Risks and Challenges in Identity Verification

While identity verification methods provide enhanced security, they are not immune to risks and challenges:

  1. Identity Theft: Identity theft involves unauthorised access to an individual’s personal information for fraudulent purposes. It can result in significant financial and reputational damage.
  2. Methods Used by Identity Thieves: Identity thieves employ various techniques, including phishing, sim-swap attacks, account takeovers, and data breaches, to extract or exploit valuable personal information.
  3. Phishing: Phishing involves fraudulent attempts to obtain sensitive information, often through deceptive emails or websites designed to mimic legitimate entities.
  4. Sim-Swap & Account Takeover: Sim-swap attacks occur when a malicious actor convinces a phone carrier to transfer a victim’s mobile number to a device they control, allowing them to intercept verification messages and gain access to accounts.
  5. Data Breaches: Data breaches occur when unauthorised individuals gain access to sensitive data stored by organisations. Stolen data can be used for identity theft.
  6. Consequences of Identity Theft: The consequences of identity theft range from financial loss and damaged credit to reputational damage and emotional distress for the victim.


Consequences of Poor Identity Verification & Lengthy Identity Verification Processes

There are significant consequences for businesses that don’t get the balance right when it comes to their online identity verification process. Regulated industries have a legal obligation to carry out ID checks, such as online banking. In 2022, over £1.2Bn was stolen through online fraud from UK banking customers.

However, it is still important to make these checks as streamlined as possible to avoid creating a poor user experience for online customers. If your verification process is too cumbersome it can directly impact customer attribution and retention rates.

On the other hand, if ID checks are not sufficient enough then businesses are at a much greater risk of becoming a victim of online fraud or finding themselves in legal trouble with the associated regulators. Mobile data is a reliable source of customer data, which can be fully integrated into your existing processes with no extra friction.


What is Digital ID Checking?

Online or digital ID checking is the process of verifying an individual’s identity through digital means. Rather than relying on in-person verification, online ID checking leverages technology and various verification methods to establish trust and verify identity remotely.


How Digital ID Verification Works

Digital ID verification involves the use of automated processes, algorithms, and technological solutions to verify identity attributes. It combines different verification methods, including document verification, biometrics, device checks, and more, to establish a comprehensive identity profile and determine the authenticity of the claimed identity.

Data provided by Mobile Network Operators is also a powerful tool for digital ID verification. This is because it is a form of trusted data, rarely changed by customers when compared to traditional factors such as address. It is also much harder to fake or manipulator for the purposes of fraud.


Traditional ID Checks vs. Online Verification API

Traditional ID checks, such as physical document verification, are time-consuming and often subject to human error. Online verification APIs allow businesses to automate the verification process, ensuring greater accuracy, efficiency, and scalability. They integrate with various verification methods, enabling a seamless and real-time identity verification experience.


The Benefits of Digital ID Verification

Implementing digital ID verification provides numerous benefits, including:

  1. Regulatory Compliance: Digital ID verification helps organisations meet regulatory requirements related to customer identification, Anti-Money Laundering (AML), Know Your Customers (KYC) rules, and more.
  2. Enhanced Fraud Prevention & Cybersecurity: By employing multiple verification methods and real-time checks, digital ID verification significantly reduces the risk of fraud and strengthens overall cybersecurity measures.
  3. Cost Efficiency: Automated digital ID verification processes streamline operations, reduce manual effort, and minimise the costs associated with traditional identity verification methods.
  4. Improved Customer Experience: Digital ID verification provides a seamless and user-friendly experience, eliminating the need for individuals to physically present documents or visit offices for identity verification.


Best Practices for Implementing Online Identity Verification

When considering the best approach for your online identity verification processes there are a few implications to consider, striking the right balance between robust checks and additional friction within your verification process. These include:

Choosing the Right Verification Method

It’s important to choose the right verification method for your customers. Using mobile data is a great way of doing this as it’s fair to assume that they will mostly own a mobile device, making it easy to use the associated data for ID checks and verification.

Ensuring Compliance with Regulations

Depending on the jurisdiction and industry in question, online businesses are legally obliged to carry out stringent ID checks to help protect against online fraud and money laundering.

Prioritising User Experience

Keeping your customers happy is also a priority when considering your online verification process. Although secure, if your ID checks are overly complex or add too much additional friction then it’s possible to see decreasing customer retention rates over time.

Regularly Updating Verification Processes

The proficiency of cyberattacks is always improving, so regularly reviewing, and updating your processes to ensure the protect against the latest risks is also important.


Technologies in Online Identity Verification

Several technologies are integral to the field of online identity verification:

  1. Mobile Data APIs: Mobile data APIs enable businesses to access and analyse data associated with mobile devices, allowing for device verification and enhanced fraud prevention.
  2. Facial Recognition: Facial recognition technology analyses facial features to identify and verify individuals, creating a fast and contactless verification process.


How Mobile Data Strengthens Identity Verification

Mobile data provides valuable insights and strengthens identity verification:

  1. Benefits Compared to Other Methods: Mobile data verification techniques, such as device intelligence checks, provide real-time and contextual information, making them more reliable and accurate than traditional methods.
  2. Reliability of Data: Mobile data sources offer comprehensive and up-to-date information, enabling businesses to verify identity attributes with a higher level of confidence.
  3. Globalisation: Mobile data available all over the world and is much more standardised that other forms of ID verification data.
  4. Instant Results: Mobile number databases can be accessed in less than a second using a mobile data API. This both speeds up the process and reduces costs when compared to checking physical ID documents.


Industries Embracing Digital Identification

Digital ID verification is becoming more prevalent in several industries, for a range of reasons:

Financial Services: There is a significant amount of legislation impacting the financial services industry. Know Your Customer (KYC) and Anti Money Laundering (AML) checks are examples where banks and other financial institutions are obliged to carry out online ID checks to protect against fraud.

Healthcare: As more patients access healthcare remotely and online, digital identity verification is becoming much more important to ensure consistent patient information and also protect from this data falling into the wrong hands.

E-commerce: As fraudulent transactions continue to rise online it has become increasingly important for non-regulated eCommerce businesses to carry out ID checks to protect from the costs of cybercrime.

Travel and Hospitality: Online ID checks are increasingly used to confirm that the person renting a holiday property is the person they say they are. This helps protect the property owner from damage and other risks to their physical assets.

Gambling & Gaming: Gambling companies have a legal obligation to ensure platform users are over 18. They place a lot of effort into streamlining their onboarding process and mobile ID verification allows them to reduce friction in their processes.

Adult Entertainment: It is important to protect children from harmful content online and as such increasing legislation is being placed on the adult industry to carry out full ID verification for users. A mobile phone number is often being used to do this instead of credit card details.


Online Verification APIs for Frictionless ID checks

For all these industries and more, online verification API tools are almost always the quickest and most effective way to streamline their existing ID checks. This is because the can be integrated into existing systems and the associated mobile data lookups can be returned quickly, from anywhere in the world. They are also more reliable when leveraging mobile network operator data as it is harder to manipulate.


 Final Thoughts

In conclusion, online identity verification is a critical aspect of conducting secure and trustworthy online transactions. By leveraging technologies like mobile data APIs and biometric verification, businesses can establish a robust and efficient online identity verification process that balances security and user experience effectively.

Last updated on April 26, 2024


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