Identity verification is the process of confirming that an individual is who they claim to be, using supporting data. It validates the authenticity and legitimacy of their personal information, preventing fraudulent activities involving fake or stolen identities.

Types of identity verification

Manual

Manual ID checking requires that the individual and their relevant documents be physically present for assessment. ID verification documents include driving licenses, passports or government ID cards. An employee is assigned to check the documents by hand.

Automated

Automated identity verification leverages software solutions to verify an individual’s identity without their physical presence. These solutions use technologies such as optical character recognition (OCR) and machine learning to verify supporting documents.

The software analyses the machine-readable aspects of the documents, such as barcodes, expiry dates and photos. It then compares the document photo with a real-time photo of the individual, verifies that the document has not expired, and ensures the person's age meets the specified threshold in the verification workflow.

Methods of identity verification

Document verification

Document verification involves analyzing physical or digital ID documents to validate their legitimacy. This includes checking specific attributes and comparing them with existing databases to confirm that the document has not been altered or forged.

Multi-factor authentication

Multi-factor authentication requires users to provide proof other than their username and password to gain access to their account. It could be answering a security question, a one-time password (OTP) or any other additional authentication method.

Online verification

Online verification uses different techniques to determine if an ID relates to the user, including AI, computer vision and manual assessment. This method typically requires users to submit a photo of themselves holding their ID to ensure they are the same person.

Biometric verification

Biometric verification uses a person’s distinct physical attributes to verify their identity. Common modalities include facial, iris and voice recognition and fingerprint scanning.

Use cases

Identity verification services prove useful across industries, including finance, e-commerce and telecommunication, in preventing unlawful activities like money laundering and identity theft. Here are their primary uses:

• Financial services: While opening bank accounts, applying for loans, performing KYC procedures and conducting transactions.

• Healthcare: To access medical records, verify insurance eligibility and patient identity for remote consultation, ensure patient privacy and securely access electronic health records.

• Government services: To obtain official documents, such as a passport or a driving license, and claim government benefits.

• Telecommunication: Whenever a customer buys a new plan, broadband service or SIM card, to prevent criminal acts supported by untraceable numbers.

• Insurance: While applying for insurance coverage and during the claims process to verify the client’s identity and ensure legitimacy of the claim.

• E-commerce platforms: During account creation and payment transactions to ensure the person is who they claim to be, verify their age and prevent unauthorized credit card use.

• The sharing economy: For screening new providers and customers to boost trust within the platform.

Challenges to identity verification

Balancing security with convenience

Finding the right balance between strict verification measures and user accessibility can be tricky. Complex processes may deter users, while lax measures can compromise security.

Location issues

It can be tough to reach people in remote or undeveloped areas with limited services. Identity verification practices must also comply with differing legal requirements across jurisdictions.

Avoiding evolving fraud techniques

As criminals continuously develop new strategies to bypass identity verification measures, it can be challenging to keep up. Evolving fraud techniques include deep fakes, phishing attacks, synthetic identities and digital injection attacks.

Regulatory framework

Payment Services Directive 2 (PSD2) is an act that regulates payment services and PSPs within the EU. The directive mandates strong customer authentication (SCA) for e-transactions to reduce the risk of fraud.

The eIDAS 2.0 regulation requires EU member states to offer businesses and citizens digital wallets that can link their national digital identities with proof of their attributes, such as driver’s license and bank account. The regulation, set to be implemented by 2026, will usher in a new era of digital identity verification across borders.

*Disclaimer: This content does not constitute legal advice. The suitability, enforceability or admissibility of electronic documents will likely depend on many factors such as the country or state where you operate, the country or state where the electronic document will be distributed as well as the type of electronic document involved. Appropriate legal counsel should be consulted to analyze any potential legal implications and questions related to the use of electronic documents.