4 Identity Verification Methods Every Business Must Know About

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Business

Identity verification is the vital process of identifying and verifying the legitimate identity of an individual. Every person’s identity includes a set of distinct features and characteristics that can be used to accurately identify them before certain activities are carried out, particularly within the online ecosystem, where criminal acts such as account takeovers and identity theft are more common than we think.
From physically opening a bank account to filing for tax returns online, identity verification is a fundamental requirement for most business activities today.

In financial institutions such as banks, insurance firms, fintechs, or even other industries such as e-commerce or call center agencies, the process of customer identity verification is known as Know Your Customer or KYC.In this article, we will be looking at the basics of identity verification and discuss the different types of identity verification methods that exist today.

Understanding Identity Verification

With the help of identity verification, companies can ensure that there is in fact an actual person behind the process and not a bot or fraudster impersonating someone else for financial gains. By verifying that the customer is who they claim to be, firms can prevent fraudsters from carrying out unauthorized transactions and reduce the likelihood of other fraudulent activities such as account takeovers, false insurance claims, submission of forged ID documents, identity theft, etc.

Methods of Identity Verification

1. The KBA Method

KBA, short for Knowledge-based authentication, is the process of verification that requires an individual to respond to specific security questions. To put it simply, these questions are formulated in such a way that they can be answered easily by the legitimate person and prove to be difficult to answer by someone else. Questions asked are generally personal, such as “Do you have any pets?” or “What were your favorite cartoons as a child?”. To add an additional layer of security in the KBA process, a limited time is assigned within which the questions need to be answered.

The most notable advantage of KBA is that it is the most straightforward verification method for customers to understand. On the contrary, these questions are now considered highly vulnerable due to the increasing adoption of social media sites where personal information is easily available and accessible.

2. Two-factor Authentication

Multi-factor or Two-factor Authentication is the process that requires end-users to verify themselves through a code that is sent to their email ID or mobile number. As this method of identity verification is used by numerous companies today, the process is well-recognized and convenient for customers to understand. Using 2FA, businesses can authenticate a customer’s true identity via an email address or phone number within seconds.
Two-factor authentication is particularly beneficial for opening new accounts and resetting passwords. On the downside, this method has a major loophole in the form of recovery options. In case a customer is unable to access their account due to the unavailability of a mobile device for 2FA to work, a password recovery option can be used for gaining access. In the same way, hackers can enter the account without an access factor and use 2FA to their advantage.

3. Online ID Document Verification

The online ID document verification method consists of techniques that determine the true identity of an individual through an official ID document. This method is used by numerous industry giants today and involves the following simple steps:
● The customers take or upload an image of their ID document online in real-time via a mobile device or a webcam
● An AI-powered digital identity verification solution uses OCR technology to automatically extract the information present in the documents
● The information, type, and format of the ID document is verified against global databases and results are displayed on the screen
Examples of valid ID documents include:
● Government-issued ID cards
● Passport
● Recent utility bill
● Bank statement
● Rent agreement
● Driver’s license
● Credit or debit card, etc.

4. Biometric Verification

Biometric technology is used for identifying and authenticating individuals based on physical attributes, such as facial features or an iris pattern. Examples of biometric identity verification include face recognition, speech or voice recognition, retinal scans, fingerprint recognition, etc.
Biometric verification offers higher security and convenience than other methods of identity verification by eliminating the need for passwords or questions that may be stolen or forgotten.
Key Takeaways
– Identity verification is the vital process of identifying and verifying the legitimate identity of customers
– With the help of identity verification, companies can ensure that there is in fact an actual person behind the process and not a bot or fraudster
– Commonly used methods of identity verification include the KBA approach, 2FA, online identity verification, and biometics.

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