A particular individual is recognized by the traits of his character and personality. These characteristics form the building blocks of one’s identity which serves as a source of verification. For financial institutions and particularly online businesses, the identity of customers is the most important foundation for that enterprise. Identity verification services are in high demand in almost every industry including e-gaming, FinTech, online banking, blockchain, P2P market, and the medical sector. According to a survey conducted by Statista, the worldwide revenue generated by identity verification services is 4.93 billion USD and is expected to reach almost 18 billion USD in the year 2027.
Importance of Identity Verification Services
The importance of user identity is twofold: (i) It is the most authentic source of knowing your customer which helps develop trust among both parties and reduces the risk of online fraud. (ii) It helps practice international financing guidelines chartered by regulatory authorities including the European Union (EU), Financial Crimes Enforcement Network (FinCen), and Financial Action Task Force (FATF) which helps maintain a steady flow of operations and prevent potential criminal activities. Below are explained the importance of both:
Know Your Customer (KYC) is a set of practices which a business employs to know better about their customer’s identity. When it comes to online businesses, they usually acquire the services of an identity verification service provider to automate the customer onboarding process. This not only helps save manual labors spent on tedious verification processes but also helps cut on operational costs for that business. Hence, KYC procedures ensure that the customer is not a potential criminal and may not harm the organization.
AML, better known as Anti Money Laundering, is a collection of internationally acclaimed guidelines which is published by EU and relevant departments. These are helpful in safeguarding a business against fraudsters who attempt to onboard a business with wrong intentions and by using dubious ways. The main incentive of these obligations is to prevent financial crimes like money laundering and terror financing which pose a serious threat to online enterprises and the banking system.
Products of Online Identity Verification
Identity verification vendors provide a comprehensive suite of services that incorporate different means of verifying the user or customer. Below are a couple of applications and services which offer user authentication solutions:
Document verification, as the name implies, uses government-issued documents provided by the user or customer as a source of their identification. These are usually photo-based identity papers that are provided by the customer and should be authentic and original. The document verification service lets online businesses detect any fake or illegitimate documents using modern AI-based models that check for possible impersonation and document format. These services usually work two in two phases:
Check the document originality and format, i.e. look for tampered, photoshopped, compromised, or hologram missing documents.
Perform an identification check by comparing the photo of the verifying user with the one provided on the identity document.
Another technology that is making its way into the market is online Facial Recognition. This process for identity authentication prompts the user to display their face in front of the smartphone/computer camera. The API integrated into the online business’ webpage uses the webcam to scan user identity by taking into account the facial features. This is quite helpful in readily enrolling customers at the comfort of their homes, and they do not have to be present physically at verification sites.
Apart from face verification, fingerprint biometrics is also emerging. Today, most smartphones come with a fingerprint sensor which serves as an effective tool for user identification. Mobile wallets and online banking apps are one fine example of identity verification performed during customer logins. These in-between checks help create a sense of security for the customer as well as at the operating end.