Connecting with people from different corners of the world and sharing things with our friends have become easier in this highly interconnected world. However, the risk of identity theft increases as the technology evolves, especially with the rise of artificial intelligence and Gen AI. The Federal Trade Commission’s Consumer Sentinel Network reported around 5.1 million identity fraud and theft reports in 2022, where 46% of reports were of fraud and 21% of reports were of identity theft.
Identity thefts and data breaches can be complex and incur heavy financial losses; however, they negatively impact the business's reputation in the market. Many businesses are focusing on strengthening their security forefronts, and implementing digital identity verification is one of the robust solutions to ensure a secure customer experience.
Digital identity verification is a process that assists businesses, governments, and financial institutions in verifying a person's identity online. It is done through a variety of methods, like biometric verification, identity proofing, real-time verification checks, face recognition, and digital ID document verification.
Digital identity verification service plays a crucial role as it adds a layer of security to ensure only authorized individuals can access sensitive information and services.
Digital identity verification is important to avoid identity theft, where a culprit uses someone’s identity details, like name, credit card number, and others, to commit a crime. Let’s take an example of a company that issues loans through an online portal. If the company doesn’t use digital identity verification methods to verify the person, a bad actor can secure a loan by stealing anyone’s information.
If the company fails to spot the fraud and the loan gets approved, it doesn’t affect the victim’s credit, and the company's reputation is at stake. That’s why businesses must invest in robust digital identity verification solutions to avoid such scenarios and loss associated with them.
After understanding what is digital identity verification, let’s understand the key components of this vital process.
When a customer visits a new financial app or service, the company takes the user’s permission to collect digital fingerprints, like location, browser settings, cookies, battery usage, and screen resolution. Each of these data points is compared to the other data of the user to verify they are a real person. This data helps businesses to identify the risk of identify theft and fraud.
Multi-factor authentication adds a layer of protection beyond just a username and password. It is one of the digital identity verification solutions where users provide multiple forms of identification, like OTPs, email-based authentication, fingerprint scans, and others, which makes it more difficult for the unauthorized person to access the information.
An ID document verification process checks that the ID, like a driver’s license, passport, or any government ID, is legitimate.
Businesses implement biometric verification as a part of digital identity verification solutions where selfies are used to ensure that the person presenting the ID is the same as the person who appears on the screen. Besides, liveliness detection ensures the selfie is genuine by detecting spoofing attacks, like face masks or photos of photos.
Knowledge-based authentication involves out-of-the-wallet questions or security questions based on a person’s profile to enhance security.
Device and IP checks, including IP geolocation mismatch, incognito session, blocked cookies, and proxy or VPN usage, can help to determine the fraud risk. For example, if the IP address is associated with the data center, it could signify fraudulent activity. Also, fraud can be detected if there is a time zone mismatch like the device being in the Pacific time zone but the IP address being located in the Eastern time zone.
Multiple crucial data checks are essential to ensure the accuracy of digital identity verification. Here are the benefits associated with multiple data checks:
- Digital identity verification allows businesses to confirm the individual’s identity to proceed with sensitive transactions and interactions.
- The process of implementing digital identity verification encrypts that data, which makes it difficult for hackers to access it.
- Multi-factor authentication strengthens security authentication as the user verifies the identity through multiple methods, like fingerprint, facial recognition, and time-sensitive OTPs.
- The digital verification process streamlines the customer onboarding process with faster verification time and reduces friction for customers.
- The robust process helps businesses meet industry regulatory requirements, like KYC and anti-money laundering (AML) requirements complying with GDPR, CCPA, and HIPAA data privacy compliance and mitigating legal risks.
Investing in robust digital identity verification solutions is essential because inadequate verification methods can increase the risk of losing customers' trust and, in the future, the entire business.
Fraudsters can easily identify and exploit improper verification methods; that’s why businesses require robust multi-layered identity and access management solutions, like LoginRadius’s CIAM and risk-based analytics. The robust CIAM solution makes the digital identity verification process easy as it works on the three main components of verification: identification, verification, and authentication.