Almost every day, people face situations where it's necessary to prove their identity, whether they’re using a credit card, withdrawing money from their bank account, or ordering a glass of wine. In these situations, identity verification is an appropriate and simple way to ensure people are who they say they are. It helps protect the identity of the person who is asked to show their ID, and the business that requires it.
It's not as easy (or as secure) to verify someone's identity during digital transactions — and manual identification processes can result in a less-than-ideal customer experience. Further, it can also put businesses at reputation and financial risk. Digital identity verification is an important step in businesses' digital transformation journeys — an essential capability to provide seamless and secure digital experiences.
What is ID verification?
When it comes to business transactions, identity verification is the process of authenticating and proving the identity of a person, and is typically done before a sensitive or important transaction.
What is digital ID verification?
Digital ID verification is the same process explained above but applied to online transactions – and it's a critical part of the agreement-signing process. Because this verification doesn't happen in person and some types of transactions are more susceptible to fraud, this identification process can be more challenging and require more verification steps.
How does the identity-checking process work?
ID verification can be manual or automated, and the process can vary depending on the type of transaction and the method used.
An applicant or customer provides a physical ID or documents with traditional identity verification. A photo ID is compared with the person presenting it and other verification documents can be compared with the information already available to the business via public databases.
With electronic ID verification, a simple email verification may be enough to verify identity. Additional methods may be required for higher-value or riskier transactions. Such methods may include sending a two-factor authentication code to a cell phone or requesting a customer send a photo ID along with a real-time selfie. More of these methods are described below.
What are the benefits of digital ID verification?
Digital ID verification is effective in minimizing risk, reducing fraud, and protecting consumers, among other things:
- Enhances user experiences: Application processes can be stressful, time-consuming, and tedious. Digital ID verification streamlines the process, keeps the applicant's sensitive information secure, and gives a more seamless user experience.
- Reduces fraud from remote applicants: Fraudulent applications can cost lenders money and increase the chances of approving risky transactions. Digital ID verification helps ensure people don't file fraudulent applications in other people's names, protecting lenders and consumers.
- Helps with meeting Know Your Customer (KYC) requirements: Digital ID verification helps businesses meet the customer identification procedures required under the ethical standards of KYC regulations.
- Automates and accelerates the data entry process: Data extraction and verification removes the need for time-consuming manual data entry. This verification can happen in minutes or near real-time to quickly affirm identity, thus minimizing risk.
What are the methods of digital ID verification?
- Government-issued photo ID: A customer can submit a photo of their ID—or even a real-time photo of themselves holding an ID.
- Bank login credentials: Integrations with financial institutions allow customers to securely log into their bank accounts within the application process to verify their identity.
- Facial biometric technology: Advanced algorithms extract data from a facial image and compare that information with a separate dataset to determine whether the photos are of the same individual.
- Knowledge-based authentication (KBA): Applicants are asked to correctly answer highly identifiable questions from their credit profile to confirm their identity.
- Two-factor authentication: This method requires the customer to correctly enter a secure code sent to an email or cell phone.
- One-time password verification: A single, one-time password is sent via SMS or email to verify the applicant.
- Digital footprint analysis: Information from the applicant's online activity, like social media data linked to the applicant's email address and phone number, can be used to verify their identity.
- Online notarization: Signers can get their identities verified by a live notary through an online notarization platform like Notarize.
What are the business use cases for digital ID verification?
ID verification helps minimize risks for many types of online transactions by helping ensure valid signatures are gathered from verified people. Digital ID verification also helps facilitate compliance with banking regulations like KYC and Anti-Money Laundering (AML).
Other occasions in which digital identity verification may be required include:
- Closing on a home in an online closing (eClosing)
- Signing will and trust certificates
- Assigning power of attorney
- Processing an insurance claim
- Ongoing service agreements
- Acquiring medical consent
- Opening a bank account
- Completing a loan application
How Notarize helps facilitate digital identity verification
As digital identity theft becomes more common, it's never been more important to strike a balance between client experience and fraud protection. Notarizations — an age-old method of identity verification — can be done online through the Notarize platform, allowing you to provide a seamless, digital customer experience while helping to mitigate the risk of fraud.