Anti-money laundering and Know Your Customer regulations are accelerating the growth of identity verification strategies worldwide, although every nation has unique regulations on how their organizations enforce them. For instance, the Financial Crimes Enforcement Network is among the agencies tasked with regulating identity verification techniques in the US.

This post will explain five fundamental techniques for verifying user identity and how they can help your business. Please continue reading to learn more about these methods.

What is ID Verification?

Identity verification determines whether a user’s identity matches what it should be. Identity refers to a unique set of traits and characteristics related to a particular individual. Identity plays a significant role in the web ecosystem, where the probability of fraud is quite high.

Therefore, identity verification is mandatory for most offline and online processes, including filing IRS documentation, opening a banking account, forming a business, and more.

You can prove identity in multiple ways. Let’s discuss five effective methods of verifying an individual’s identity.

5 Methods of Identity Verification

1. Knowledge-based authentication (KBA)

Knowledge-based authentication is a subset of ID verification for onboarding new customers. Although this technique has been criticized for rampant data breaches, it’s still effective if used in collaboration with other verification methods.

The oldest type of KBA is the users of secret questions, where the user enters the questions and answers provided by the customer during the onboarding process. However, suppose this technique is used during onboarding. In that case, the process is usually based on non-public identification information from verified and trusted sources to provide “out-of-wallet” questions only the user can answer.

Most knowledge-based authentication providers can present around eight multiple-choice questions in one session. The most effective KBA comes with randomly-generated synthetic challenge questions to trick fraudsters.

2. Two-factor authentication (2FA)

Also known as multiple-factor authentication (MFA), two-factor authentication requires the user to enter the code sent to the mobile phone or email address. 2FA is quite popular, and therefore, the process is simple and recognizable for customers to understand and complete. This method makes it simple for a business to verify an individual’s identity, eliminating the risk of a person filling in their details incorrectly.

Multi-factor authentication typically requires users to submit a type of personal identification (also known as a token) and their correct username and password to access their account. The token is something in the users’ possession, like a code they receive from a particular authentication agency. Therefore, this token creates an effective deterrence for duplicitous activities.

Two-factor authentication comes in handy when users want to sign up for an account or reset their passwords. However, the user must have their phones during the verification process.

2. Biometrics verification

Biometric verification is the identification and authentication of customers depending on their physical attributes. Popular authentication attributes include fingerprints, voice recognition, iris scanning, and facial recognition. Biometric authentication is convenient and highly secure for customers as they don’t need to remember their passwords after setting up their accounts for the first time.

This technology uses unique biological pointers that are impossible to duplicate to offer the best solution for your business. Many smartphone manufacturers are using face ID and fingerprint technology to unlock smartphones. Since many customers are already familiar with biometric features, it’s an attractive technology to incorporate into your ID verification strategy.

However, fraudsters can compromise the biometric verification’s security levels by accessing your biometric data, such as your voice recording or social media picture. Furthermore, hackers have bridged databases in the past, stealing user fingerprints. These personal details are often used to commit fraudulent activities.

3. Identity documents

The identity document verification method enables companies to verify a user based on a government-issued ID, like a passport or driver’s license. They process the document pictures and extract data to verify the user’s identity.

Although this technique is relatively new to the industry, major improvements to automated document analysis have allowed providers to determine a user’s authenticity more accurately. This has resulted in identity documents being widely accepted.

When the document’s image quality is low or other authenticity issues arise, the providers may provide a specialist manual review service. Manual review service involves a team of document inspection experts visually inspecting the document pictures to determine the user’s authenticity.

4. Artificial Intelligence (AI)

The technologies mentioned above cannot become a complete ID verification solution. Here is where artificial intelligence and deep learning come in handy. AI can accelerate ID verification due to its ability to collect and scrutinize data at a rate people cannot reach. Furthermore, it solves the issues associated with biometric technologies, such as aging, facial hair, and makeup.

Novel AI-based ID authentication platforms employ a selfie and a picture-based identity document. Consequently, they incorporate artificial intelligence algorithms to offer a rapid, precise authentication process. This technology can process myriads of identity document formats, such as passports, identity cards, etc. Furthermore, the user’s selfie offers an extra visual that the AI platforms can use to enhance its accuracy.

Other AI-enabled tools add extra layers to the authentication process and verify customers in real-time. These tools include tracking offline and online data like IP address, email, address, phone, and the like. Moreover, some AI platforms even leverage social media and other accessible online information to verify user identities.

Why Should You Incorporate ID Verification into Your Business?

Reputation plays a substantial role for all businesses, regardless of their size. It’s crucial to stand out from the competition as a reliable, trustworthy choice for users. A survey indicated that 73% of customers are ready to pay more for a service or product that provides total transparency.

Furthermore, customers want to be guaranteed their information’s safety and confidentiality, especially in such an era where data and privacy breaches are rampant. When you run ID authentication checks, you show your customers that you take trust-building more seriously.

Incorporating ID verification can also help you avoid costly chargebacks and fines. More than 90 countries require companies to verify their users’ identities and keep those records for several years. Analyzing the risk of fraudulent activities should be your top priority because credit card fraud comprises a massive portion of identity fraud cases annually.

The Bottom Line

If you’re looking to identify your customers’ identity, it’s crucial to consider the available ID verification techniques and their applications. Choosing the right verification solution for your business is easier if you understand these techniques and those applicable to your business. However, you must reassess your verification solution regularly, assess the metrics on security levels to determine what requires improvement, and stay afloat with the rapidly changing fraud schemes and regulations. This will help you form a formidable offensive strategy to fight fraud.