Identity Verification

What is identity verification?

Identity verification is the important process of ensuring that a person is who they claim to be when opening a bank account, applying for a loan, or other financial processes. Though identity verification is an important security measure in combatting new account fraud, Identity verification also plays a role in Know Your Customer (KYC) and anti-money laundering (AML) efforts at financial institutions which assess and monitor customer risk.

What is digital identity verification?

Digital identity verification brings the identity verification concept to today’s remote world. With data breaches, account takeover attacks, and identity theft on the rise and an increased demand for remote processes due to the COVID-19 pandemic, businesses need to detect identity fraud and determine if someone is who they claim to be online.

Digital identity verification methods such as biometric verification, face recognition and digital ID document verification can help companies, governments, and financial institutions verify the identity of a person online.  

Digital identity verification can be used when the person and their ID document are not physically present. Digital identity verification can also be used to speed up ID verification, such as the use of e-gates to scan passports at airports.

Digital identity verification is a key step during the account opening and customer onboarding process. By verifying the identity of an applicant, financial institutions can run checks to ensure that the applicant is not a fraudster, criminal, bad actor, or attempting a scam.

How does an identity verification process work?

There are many different types of digital identity verification and identity verification solutions. Digital identity verification methods work by comparing something the person has (e.g. face biometric or ID document) with a verified data set (e.g. data held by governments such as passport data, or a biometric stored on a user’s registered mobile phone). Digital identity verification compares the presented data with the verified data set to verify whether a person is who they say they are.  

There are many different methods of digital identity verification, which all work in different ways. These methods include:

  • ID Document Verification: Checks that the ID (e.g., driver’s license, passport, government ID) is legitimate.
  • Biometric Verification: Uses selfies to establish that the person presenting the ID is the same individual whose portrait appears on the ID.
  • Liveness Detection: Determines whether a selfie is genuine by detecting spoofing attacks like face masks, or photos of photos.
  • Knowledge-based Authentication (KBA): Generates “out of wallet” questions based on information in the applicant’s personal credit file.
  • One-time Passcode (OTP) Verification: Transmits a single-use passcode via SMS or email to the applicant during the verification process.
  • Trusted Identity Network: Leverages the applicant’s existing credentials with another provider to verify their identity and reduce friction during theaccount opening and onboarding process.
  • Database methods: Database methods leverage data from social media, offline databases, and other sources to verify the information submitted by the applicant.

How does ID document verification work?

ID document verification plays an essential role in new bank account opening, onboarding, and financial agreement processes. Document verification is a digital identity verification method used to check whether an applicant’s ID document (e.g. passport, ID card, driver’s license, etc.) is legitimate.

The goal is to capture, extract, and analyze ID data in order to authenticate government-issued identity documents. This helps discern between what is real and what is fraudulent.  

Using automated ID document verification, identity documents can be authenticated in real-time and within seconds.  

Using the in-built camera on a mobile or hand-held device, the technology captures an image of the applicant’s ID document. Artificial intelligence and advanced authenticity algorithms are then used to analyze the image to produce an authenticity score to determine whether the ID document is fraudulent or genuine.

Advanced authenticators include:

  1. Visible Security Features: Embedded security features such as watermarks or holograms can be detected and their positioning and appearance analyzed.
  2. Font Usage and Consistency: Fonts are analyzed and compared to standard fonts for a particular document template. The spacing, shape, and consistency of letters is used to analyze authenticity.
  3. Rounded Corner Detection: Rounded corners can be checked to ensure they are aligned with templates.

What are the benefits of ID document verification?

ID document verification enables a customer’s ID documents to be authenticated digitally and in real-time, whether the user is in-branch or remote.  

For financial services providers, the technology speeds up bank account opening, the onboarding process, lending, and financing while protecting against fraud and reducing abandonment rates in their digital banking and online banking channels.

How can facial biometrics be used for digital Identity verification and fraud prevention? 

Facial comparison uses advanced algorithms to extract biometric data from a facial image — distilling facial features (such as the position and size of a person’s eyes relative to each other) into a standardized dataset. Comparing two datasets can determine whether two images are from the same individual. If one image is from a pre-verified source (e.g. a passport or ID card verified using document verification) and the second image is a real-time image taken from the applicant at the time of their application, facial comparison can be used to prove their presence.

It is also important to note that there is a distinct difference between facial recognition and facial comparison. The learn more, read our blog post "Biometric Identity Verification: The Difference Between Facial Recognition and Facial Comparison Technology".

What are the benefits of biometric verification?

Verifying an identity document alone is not enough when it comes to creating a trusted online identity profile. Biometric verification using facial comparison provides an additional layer of trust to determine that a remote user is the same person who has presented the ID document. Liveness detection, such as a smile, helps to detect spoofing attacks like videos, face masks, or photos of photos.

How does liveness detection work?

Critical to any facial biometric technique is the ability to detect spoofing and fraudulent behavior. The most common form of spoofing is to present a previously obtained static picture of an individual for comparison against the trusted source image. In order to counteract this and ensure the presence of the person, some form of liveness detection can be employed.   

Many different methods of liveness detection are available on the market today. The most common form of liveness detection instructs the user to carry out a series of head movements to prove liveness. More advanced techniques, such as 3D recognition and thermal imaging, require specialist hardware and are not suitable to everyday commercial applications.

What is identity verification used for?

Digital identity verification is used to enable remote onboarding for new account opening and lending, and to improve the customer experience

New customers expect to be able to open an account online. As a result, banks and other financial institutions need to offer digital account opening through online and mobile channels.  

Financial institutions that want to win new customers through digital channels must figure out how to fully onboard a customer in a fully remote way. For many financial institutions, this means adding digital identity verification to their online capabilities. The quicker they can achieve this goal, the better they will be able to compete with digitally-enabled competitors and new market entrants.

Digital identity verification is used to fight application fraud and detect fraudulent identity documents in real time

Given the scale and impact of fraud, it is vital that financial institutions detect application fraud during account opening.  Digital identity verification can be used to detect whether a person is genuinely who they say they are, or not. Financial institutions can use digital identity verification methods such as facial biometrics to help fight fraud by validating a user’s identity in real-time – whether that user is online or on their phone.  

If a user is unknown (e.g. in the case of a net-new customer applying remotely for a new account), then financial institutions can use facial comparison to compare a live image of the applicant with the image on a verified ID document to prove that a user is not fraudulently attempting to open an account.  

Here’s how facial comparison is used to verify the identity of an applicant and prove that an applicant is present during digital account opening:

  • Document verification is used to verify the authenticity of an applicant’s passport, ID card, or driver’s license.
  • Once the authenticity of that ID document is confirmed, the applicant is asked to take a selfie using their handheld device.
  • Facial comparison technology compares the selfie image with the image from the verified ID document to prove that the verified person is genuinely present during the account opening process.
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Digital identity verification is used for automated passport control

Another common use case for facial comparison is automated passport control (‘e-gates’). The process uses ID document verification and facial comparison together to verify the authenticity of the ID document and the presence of the genuine owner of the passport in real time. During this process a trusted source image of the passport holder is compared with the real-time photo of the person trying to get through the gate.

Here’s how facial comparison is used to prove that a person is present at passport control:

  • The user presents their passport for authentication.
  • An image of the user’s photograph is extracted from their passport.
  • The image is used as a trusted source image.
  • The automated gate takes a photo of the user.
  • Facial comparison compares the trusted source image (extracted from the passport) with the photograph.
  • If the trusted source image and the photograph match, the user is allowed through.

What are the benefits of digital identity verification?

  • A fully digital process delivers an excellent user experience and can increase growth in digital channels.
  • Digital identity verification can help financial institutions reduce fraud when an unknown applicant/potential customer is remote.  
  • Digital identity verification can assist financial institutions in meeting Know-You-Customer (KYC) requirements.
  • Facial biometric digital identity verification uses facial comparison to establish that the person presenting the ID matches the individual on the ID document
  • Mobile image capture is usable and accessible for everyone
  • Data extraction straight from the document removes manual data entry
  • Documents can be verified in seconds (from <5 minutes to <10 seconds depending on the provider)

Identity verification regulations and standards

Regulations in countries around the world set standards for the use of digital identity verification solutions. For example, AML5 and eIDAS provide guidance for countries in the European Union. AML5 focuses on anti-money laundering and terrorist financing while eIDAS governs essential functions of digital ID verification, such as electronic signature.

In the United States, banks are regulated by the Customer Identification Program (CIP) which requires financial institutions to have a reasonable belief that each customer who enters into a banking relationship is who they claim to be. This was implemented as part of the Bank Secrecy Act, amended by the Patriot Act. CIP became a requirement of the Patriot Act for financial institutions in 2003.

The future of identity verification services and digital identity verification

Organizations in the United States and around the world that fail to earn the trust of consumers risk losing that business. Unfortunately, inadequate ID verification services are often easily exploited by fraudsters and erode consumer trust. That’s why you need multi-layered identity and risk-based analytics and authentication solutions leveraging machine learning that can tell the difference between a customer and a bad actor, from account origination to ongoing maintenance – and every transaction in between to protect against financial crimes.

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