Digital identity verification explained

Have you ever asked the question, “What is digital identity verification?” and wondered what the industry best practices are? In this article we explain the term of digital identity verification and how it can help your business during the customer onboarding process. Plus, we will give an overview of different identity verification methods and what to consider when thinking about implementing one of the methods.

What does identity verification mean?

The definition of identity is the characteristics determining who or what a person or thing is. A digital identity is an online or networked identity used for interacting with digital resources and online services. In a technological context, digital identity is or should be unique to an individual, prove their existence and define their attributes. A digital identity can be an online username or screen name, or a more complex digital identity that is verified and authenticated by digital means. And this directly leads to the definition of digital identity verification: It is the process of authenticating an individual's identity using digital means. This can be done through the use of digital signatures, biometrics, or other digital means.

Why is digital identity verification important?

The verification of identities has always played a crucial role in the analog world when it comes to the transaction of goods and services. Transactions were often face-to-face, involved eye contact, and were usually concluded with a handshake. In this way, the parties involved could more or less ascertain whether or not the opposite party was acting honestly and whether or not they were who they said they were. Meeting in-person offered a level of authentication that was and still is hard to beat.
However, nowadays many transactions takes place online – a tendency which has been further amplified by the ongoing Covid-19 pandemic. Thus, the verification of one’s identity (built on the standards of liveness) is of growing importance as more industries take their services online.

Digital identities bring risks: Identity fraud

In the last 10 years, some of the largest data breaches have involved some of the most well-known brand names, i.e., LinkedIn with 172 million user accounts or eBay, with 145 million user accounts being hacked. Every time there is another large-scale hack of personally identifiable information (or PII in industry speak), gigabytes of highly compromising data of digital identities are sold across underground dark web markets. The data often comprises various identity components such as name, address, date of birth and encrypted passwords – but it can also be much more revealing when it comes to our identity and financial documents, including government ID / social security numbers, driver's license numbers, etc.

Digital identity verification helps to avoid fraud

Digital identity verification can help to prevent fraud in several ways. First, it helps to ensure that the person who is using a particular digital account is who they claim to be. This is important in preventing identity theft, which can lead to financial fraud. Additionally, digital identity verification can help to prevent other types of fraud, such as account takeover, in which a fraudster gains access to a user's account and uses it to commit fraud. 
Today, various forms of identity verification methods are used to authenticate and prove digital identity. While most forms of online transactions require the verification of one’s identity, the actual level of verification required differs from platform to platform and the regulatory framework that governs the industry where the product or service is based. Here are two very different examples:

• eBay Kleinanzeigen asks only for an email address to establish user identity. An email of course, can easily be faked. Thus, the site warns both buyers and sellers to trust their instinct and to only deal locally and in person. 
• The online bank N26 requires all new users during its onboarding process to identify themselves via a live video-identification chat with a human operator. And that’s in addition to sharing personal information such as passport and other supporting documentation with this operator. This manual method of identity verification is regulated by a stringent legal framework governing all financial institutions (also known as AML or Anti-Money Laundering checks) that operate within Germany.
  
  

Digital identity verification methods explained

So, as we now learned, what digital identity verification is and why it is important, let's have a look at the different methods: To accurately verify and authenticate an identity, three ways have emerged and are often used in tandem during digital onboarding:

1. Document Verification

Document Verification is the process of reviewing documents to ensure that they are authentic and accurate. This can include verifying the identity of the person who submitted the documents, as well as confirming that the information contained therein is correct. Document verification allows users to get verified via an electronic scan of a government-issued identity document. Government-issued identity documents (such as a passport or national ID card) are used when it comes to verifying an identity, particularly as these documents perform a critical regulatory or compliance step during the digital onboarding process.
The setup is simple: A user only needs a smartphone camera to scan their ID and process the results. But this simplicity can have a downside too. Government-issued documents can be faked, and as you’d expect, there are different levels of quality when it comes to document tampering.

What you should consider with document verification:

Most digital identity verification vendors claim high pass rates as well as broad document support worldwide. However, many vendors still heavily depend on human interaction in the verification process, employing many back-office agents who manually check the verification results. This not only has an impact on the user experience and overall process speed, but it also poses a significant privacy risk since it is not clear where the data really ends up during the verification process.

2. Biometric facial verification

A biometric facial verification is a system that uses facial recognition technology to verify the identity of an individual. Facial biometric solutions provide an almost fully-automated identity verification experience without the downsides of a human operator or the costs associated with higher dropout rates.

What you should consider with biometric facial verification:

Many solutions cannot adapt to different challenges that regularly pop up during routine customer onboarding. Others are not optimized for specific use cases. Typically challenges include

• Poor document photo quality
• Aging of the person
• Beards, glasses, and make-up
• Poor lighting conditions and uncontrolled user environments

Therefore, it’s crucial to have a solution that is designed to perform optimally under multiple scenarios.

3. Liveness detection

Digital liveness detection is the process of verifying whether a digital image or video is of a real, living person. This can be done through various means, such as facial recognition or analyzing body movement. Identity verification vendors offer different liveness solutions to their customers, but most approaches use ‘active’ liveness detection, which requires a user to perform actions like facial movements, eye blinks and head twitches in order to ‘prove’ they are a real person (sometimes referred to as a ‘challenge response’).

What you should consider with liveness detection:

When vendors refer to liveness detection technology, they often conveniently forget to differentiate between the two different technological solutions available: active vs. passive liveness detection.

Passive liveness detection is an advanced machine-learning based approach, which minimizes the risk to customer onboarding processes by removing the need for complex liveness instructions. A streamlined ‘passive’ approach to facial authentication only requires a simple, fast selfie video.

How to drive efficiency for your business:

The key to success is combining these three key methods in a secure and fully automated digital identity verification process. A solution that combines those methodes, such as the identiy verification solution from PXL Vision, can drive significant efficiencies, such as: reducing the cost of customer onboarding, minimizing fraud and driving sales conversion. After all, our fully automated digital identity verification can also help opening new channels for businesses to serve customers.
Our AI driven software solution is flexible, customizable and can be implemented directly into your existing customer onboarding process. Thus, you can accurately onboard customers without the dropout rates found in traditional identity verification methods.

You want to learn more about what to consider in the buying process of an identity verification solution? Download our Buyer's Guide here for a full in-depth overview. This 40-page guide was researched and written by our experienced identity experts.