Category: Identity

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Importance of ID Verification for Buy Now Pay Later Providers

Buy Now Pay Later companies

The Buy Now Pay Later (BNPL) sector has seen tremendous growth in the last couple of years. Especially because it is giving customers an option to pay for things later that they buy right now. But the service providers and the sector itself have faced some criticism from consumer interest groups and Financial Conduct Authority (FCA).

There are huge concerns that consumers could build up large debts by spending more than they can afford to pay back. There’s also a worry that fraudsters could target companies that offer these services to do some fraud.

With the help of stolen identity data, fraudsters can open up accounts and make purchases with no intention of paying back. Moreover, if an organization doesn’t have enough security measures in place, fraudsters can easily rack up huge debts.

With ID theft cases on the rise, customers who have done no harm may be liable to pay amounts that they haven’t used. Having a dark spot on their resume also impacts a user’s ability to secure a loan or mortgage in the future. Even if their identities were stolen, they didn’t go into debt themselves.

FCA’s Review of the BNPL Industry

With this growing concern, FCA evaluated the unsecured credit market in 2022 and is now coming up with regulations that will protect customers and businesses from fraud. 

Unregulated providers will have to comply with regulations set by FCA to continue working. For Buy Now Pay Later startups, protecting themselves and their customers is now one of the biggest concerns. 

That’s not the only thing that BNPL providers have to protect, they also have to protect their reputation. In a new and growing sector, winning the trust of customers is crucial for growth.

To minimize the risk of ID fraud, many companies have to review their operations and make changes to comply with the strict requirements of AML and KYC. This will also mean making greater use of ID verification services. Businesses also need to carry out sophisticated checks every time a user chooses to use the services.

ID verification checks also help Buy Now Pay Later companies to successfully verify customers who may be spending more than they should or customers who may have trouble paying back.

BNPL companies should also look forward to protecting customers, verifying affordability, and other factors.

What BNPL Companies Need to Know About ID Verification?

BNPL companies can use ID verification services to check if their customers are who they claim to be. Know your customer checks have to validate a customer’s personal information.

While onboarding a new customer, BNPL companies should conduct KYC checks. The same level of due diligence must be applied when a customer is making a high-value purchase or making changes in their delivery address. 

In these cases, a customer may be asked to provide valid ID proof or to enter a unique code sent to the customer’s email ID. 

Why Identity Verification for BNPL Services is Important?

ID fraud makes up around 61% of all fraud cases reported to the UK’s National Fraud Database. ID fraud cases have grown by 32% in the last 5 years. Online banks and sellers are common targets for fraudsters. BNPL companies are also increasingly being targeted by fraudsters.

Common attacks include phishing attacks to obtain users’ log-in details, creating new accounts with stolen payment cards, and account takeover fraud.

This in turn destroys trust in Buy Now Pay Later companies and hurts the growth of the industry. To be able to establish trust in the industry, businesses need to verify ID verification services.

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Identity Identification vs Identity Verification

Identity Identification vs Identity Verification

Fraudsters love to come up with new methods to commit fraud, launder money, or steal money. A growing number of fraudsters also impersonate real customers for getting access to their accounts.

As more and more transactions happen online today, businesses are facing a number of threats such as card fraud, phishing attacks, and electronic transfer fraud. This constant wave of fraud impacts business growth, and impacts the level of trust customers have in businesses.

To fight against fraud, Identity verification and identity identification services need to be implemented. Moreover, these services help businesses comply with regulatory guidelines. But, there are some key differences between identity verification and identity identification.

In this blog, we’ll cover identity verification vs identity identification. Let’s go over them and what they mean for businesses.

What is Identity Identification?

Identity identification is the process of checking if the person actually is who they claim to be. It’s the act of identifying individuals by checking their photographs, and personal information in ID documents.

This can be as simple and quick as showing an ID badge when visiting a government office, or showing identity documents when buying something age-restricted.

In online environments, the identity identification process is a bit different. Customers are asked to prove their identity by entering personal information alongside their payment details. All this information helps organizations verify if the information presented is correct or not.

For low-value transactions or organizations that are comfortable with a higher level of risk, this is enough due diligence. But, with the level of ID theft fraud growing every year, normal identification methods aren’t enough. More sophisticated methods of verifying identity should be in place to deter fraudsters. 

To ensure a higher level of security and to comply with ID regulations, it’s not enough to make decisions using user-submitted information. In simple words, it means that the information provided by customers needs to be verified against another source. This will help organizations understand if a real person is submitting the information, or if a fraudster trying to trick the organization.

What is Identity Verification?

Digital identity verification services help organizations to verify identity information available in the ID documents that are submitted by customers. This data is compared from an issuing source, like the DMV. Comparing information available from a third party, or verified data sets can reduce the risk of identity theft taking place.

In this increasingly digital environment, organizations may need to verify a customer’s identity almost every day. Especially when it comes to onboarding new customers. Verifying a customer’s identity is crucial when they want to open a new account, make a high-value transaction, or access age restricted-services. Identity verification is often used by organizations that have stricter security standards. Banking and financial industries have higher security standards. 

With more than 1.2 billion personally identifiable information records available on the dark web, it’s a major risk to allow customers to onboard without verifying their information. Onboarding people without verifying their identities can lead to huge losses for banks, can put other customers at risk of exposure, and break the existing trust value of an organization.

To minimize the risk of ID fraud and money laundering, most identity verification solutions require users to verify their ID documents in additional ways.

In doing so, the level of security increases in line with the number of checks performed. Every security check needs to be done with a particular target in mind. This is one of the best ways to reduce the risks of fraud and build a certain level of trust in the industry.

Customer ID identification and ID verification methods should have the perfect balance between stringent, and easy-to-follow. Ensuring perfect fraud prevention and customer experience.

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How Identity Proofing Prevents Fraud?

digital identity proofing

Building trust online requires proof in today’s time. After the pandemic, it has become harder for businesses operating in the growing digital world needs to ensure that a customer is a real person. This is also known as “identity verification or Know your Customer” for businesses in regulated industries.

There are several technologies that involve verifying name, date of birth and address information to reputable data sources such as credit references. But, all of these steps are worthless if identity proofing is not done beforehand.

What is Identity Proofing?

Identity proofing is the process of making sure that the person who’s signing up is actually real. This is one of the most important parts of an identity verification journey. If a business is unable to verify the identity of a customer, any verification step afterward is in vain.

Not having a proper due diligence process for vetting your customers can lead to financial and reputational losses.

Document Verification in Identity Proofing

During physical customer onboarding, businesses can rely on physical identity data to verify if a customer is real or not. In physical settings, companies can check for ID documents.

After Covid, we’ve moved to a digital onboarding process. Businesses have to go through a digital identity verification process. So, what is the approach businesses can take to verify the identities of customers?

Knowledge-Based Authentication

A lot of new technologies have come to the market to accommodate this. Knowledge-based authentication questions are one method of identity proofing. KBA is a set of questions that only a real person would know. Common questions include:

  • Amount of money spent on mortgage
  • Color of the first car
  • Name of the first pet
  • Your favorite teacher

There are legitimate questions, but a spouse can also answer them. Bad actors try to guess answers to these questions. In case there has been a major data breach, fraudsters tend to use this data to answer questions. But knowledge-based questions aren’t really a secure method of identity proofing.

Businesses need to use solutions that replicate face-to-face interactions. There need to be solutions that can be legitimate, and secure.

Step-by-Step Process to Digital Identity Proofing

1. Document Verification

To verify identity, a customer is asked to provide copies of their government-issued ID documents. Robust document verification solutions such as DIRO can verify the legitimacy of the document by cross-referencing information from the issuing sources.

2. Face Match

In the next step, businesses need to verify that the person presenting the documents is legit. The right way to do this is to match the face on the document with the person who presented the document.

Some companies ask the customer to verify themselves by submitting a selfie. Face-matching is an important part of identity proofing.

3. Liveness Check

The problem with face match is that a fraudster can submit the selfie of the original person that they can download online. So Liveness check is crucial to make sure it’s a legit person submitting the application, not a fake person. 

Liveness check is the process where a person has to record a video and say a code in the video. This prevents the use of any impersonation tools or the use of fake photos.

4. Digital Identity Data Layering

All the Identity verification experts that no one size fits all digital ID proofing works for all businesses. With any system, there are outliers and exceptions. Having a multi-layered approach to digital identity verification is wise.

Relying on trusted third-party data is a crucial part of the identity-proofing process. Taking a data-centric approach to ID verification makes it easier for businesses.

5. Secure and Smooth Customer Experience

A great customer onboarding experience is crucial for both businesses and customers. Customers who have a poor onboarding experience tend to never use the services.

For businesses to scale up, you need to provide a secure yet smooth customer onboarding experience. Fraudsters, tend to find the path of least resistance, and by avoiding detection and prevention steps between bad actors.

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Basic Mistakes in ID Verification Process

flaws in manual id verification process

Now that the financial industry is on the wave of digitization, the lives of consumers are changing. With the rise of digital banking, and cloud-based financial services, the number of data breaches also grew. 2016 reached a record of 35 breaches every second. 64% of these data breaches were successful, and they stole users’ personal information like social security numbers, banking information, date of birth, and even medical records. 

The threat of Identity fraud is at an all-time high and it causes major financial losses. The biggest identity theft scam of recent times included Alberto Companioni and Patricia Perez-Gonzalez. Together, they ran a 2-year long credit card and ID theft scheme all across the United States. This scheme resulted in a loss of about $2 million in fraud.

In April 2016, 48 people were accused of setting up fraudulent bank accounts, and withdrawing over $500,000 in stolen cash at Atlantic City Casinos.”

Based on these two situations, and countless others it’s safe to assume that the situation of ID theft is becoming more serious. More and more people are becoming the target of ID theft and how it can harm them if they’re not careful. The numbers revolving around Identity theft are rising, and fraudsters are using newer technologies to trick financial institutions.

Financial institutions have to protect themselves and their customers from these situations. This is why it’s essential to follow through on identity verification methods.

Why are Manual ID Checks Failing?

Advising your customers to follow basic safety practices to protect their identities is useful, but it’s not enough. Let’s say a customer faces an ID theft issue, by the time they face this problem, it’s too late. The fraud has happened already, and the customer has already lost the money. Customers have to sit through the time-consuming processes of reporting. Customers who face a lot of trouble end up switching banks or companies for better security.

To fight this problem of Identity theft with a high success rate, the problem needs to be stopped at its root cause. Banks of all kinds rely on employees to manually verify customer identities, and then they conduct background checks using the ID data. 

The first step of the manual ID verification process isn’t effective in fraud prevention. As there’s a human element involved, it is highly susceptible to human error.

Flaws of Manual ID Verification Processes

Fraudsters of today love the technologies. They leverage endless technologies to their benefit. The manual ID verification process can’t find the flaw in fraudster-generated information. The manual ID verification process is flawed in this digitally fueled environment. Here are the 6 main weaknesses of the manual ID verification process:

1. Prone to Error

Every state has its type of ID proof, and every government tends to make some changes in the ID proof as well. These small changes and the number of ID proofs already make it challenging to find a fake document among 10 real ones. So, manually verifying identities is already a tough challenge. 

On top of that, changing rules and regulations have a lot of states reissuing their ID documents in 2017. It’s almost impossible for bank employees to keep up with all the latest changes. This makes it easier for fraudsters to pass a fake document as the original.

2. Inconvenient

As banks are working around the clock to offer more and more services digitally, the manual ID verification process is becoming inconvenient. New operations and new technologies are taking time to be fully integrated into the processes.

3. Susceptible to Fraud

As branch employees gather personal information directly from the consumers during the ID verification process. It opens them up to situations where branch employees can exploit this data for their gain.

4. Time-Consuming

The current method of manual onboarding makes customers frustrated. We live in an age where customers demand instant results, and they end up dropping the whole process. Having to wait for the information to be entered into the system, and then waiting for the information to be verified gets annoying.

5. Inconsistent

Banks cannot implement a manual ID verification process across all branches at the same level. The overhead cost of documentation and filing the paperwork is exhausting. Plus, it’s hard to keep track of old information, as employees have to shuffle through a deck of information. 

6. Outdated

Most important of all, the manual ID verification process is outdated. Digital driver’s licenses are a new technology that can change the need for manual verification. In manual ID verification, there’s no way to verify if the information is outdated or up-to-date.

Conclusion: Manual ID Verification Process

Financial institutions with an inadequate identity verification process may have to suffer hefty losses. Identity theft and data breaches can happen frequently if a bank isn’t careful about who they onboard. Most importantly, banks with lacking processes can end up paying huge fines for non-compliance with KYC and KYB laws. All in all, the need for technological advancement in the identity verification process is crucial for banks.

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A Deeper Insight Into Digital Identity – Transforming the Future of Digital Identity

digital identity

The world has gone digital. Work, food, education, entertainment, or everything else you can think of has become completely digital. Your digital identity plays a vital role in how your experiences will be online. If you don’t follow the right measures, hackers can get access to your digital identity. Your digital ID can be sold on the dark web for a couple of dollars. So, what can you do to stay safe online? Before we dive deeper into the concept of digital ID, and how it is slowly changing the way we operate online, let’s try to understand Digital identities.

What is a Digital Identity?

A digital identity is online data that’s connected to an individual, a business, or any entity. This information can be anything ranging from social media posts, banking information, usernames, passwords, or more. Hackers work around the clock to get access to this sensitive information.

Traditionally, proof of identity is something all of us provide to prove we are who we claim to be. Proof of identity is required for a number of reasons. However, when it comes to digital identity, the term is used for digital data or digital interactions.

In both versions of identity, one factor is common. Any version of identity uses credentials and data to identify ourselves, and access products and services. Both traditional identity and digital identity allow users to prove who they are and then access resources. 

At its core, your digital identity is a web of information. Your Digital ID information can include aspects, information, and credentials. Any information that helps you verify your identity, is part of your Digital identity.

For a social media user, their digital identity would include:

  • Personal information (Name, DOB, and more as asked by the platform)
  • Login credentials (usernames, passwords, and biometric data)
  • Any additional information related to user behavior on-site (user permission, subscriptions, connections, settings, etc)

Components of Digital Identity

If you want, you can easily break down digital identities into two primary components:

  • Attributes: Attribute is the information that’s related to your representation in the system. This information includes personally identifiable information (PII) such as ID number, payment details, login credentials, and more
  • Activities: Activities are a record of what you’re doing as a user. All the activities you do become a part of your identity. It can be something as simple as reading comments or posting online. In government environments, these activities include digital signatures, search queries, or legal activities. 

As the world is continuously evolving about digital identity, it makes sense that digital identity data is leveraged to verify identity data.

Challenges and Risk Revolving Around Digital Identity

While there are endless benefits of having a digital identity, they’re also at most risk of getting hacked or stolen. If you’re also concerned about the risk of digital identity verification.

Businesses and other institutions face a lot of challenges while managing digital identities. Here are all the risks of digital identities:

1. Security and Privacy

The biggest question around digital identity data is security. If you have any kind of business, you have to rely on identification and authentication services to protect your systems and the identifying information of your customers and employees. 

2. Regulatory Compliance

Many forms of digital ID also include some type of sensitive data. A user in a healthcare portal will have a corresponding ID that includes protected information under HIPAA. 

3. Ownership and Ethical Handling

Recent data collection processes, especially in the United States, haven’t emphasized user ownership of digital identities. Companies can collect and sell user data as per their preference.

The question of ownership of data and ethical management and use of digital ID is a huge question. Modern compliance frameworks like GDPR and CCPA are attempting to improve the data handling for users. 

4. Fraud

Proving who a user claims to be is crucial for businesses. Without proper measures in place, businesses can end up onboarding fraudsters that look like real users. A hacker can easily use a digital identity for harmful purposes if they want.

Global Impact of the Use of Digital Identities

The above-mentioned challenges are ever-present in the modern digital ID landscape. Digital identities are becoming more crucial for having a proper online experience. Here are some of the recent trends that have come from the use of digital Identity:

  • Modern smartphones have made using digital forms of payment much easier. There is a push in the UK, and the United States to expand the use of this technology. 
  • A major discussion point during the ID2020 summit in New York was for the UN to start considering the potential of blockchain technology. The reliance on digital marketing technology can support universal forms of digital ID verification. 
  • Germany has been circulating E-versions of ID cards for their citizens. While these don’t replace physical IDs, they are used in multiple locations and provide a better online experience. 
  • Canada is also making plans to roll out its digital ID scheme known as the Pan-Canadian Trust Framework to provide national digital IDs and unified logins. 

Conclusion – Understanding Digital Identity

Now that digital identity is about to become an industry standard, verification and authentication of digital identity are becoming crucial. ID management solutions are helping in reducing the challenges in digital ID management. 

Proper adoption of Digital ID can lead to more innovation in several industries. Verifying and authenticating digital Identities is the need of the hour. This can be achieved via online document verification solutions.

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Identity Verification Process for Crypto Exchanges

crypto exchanges

Since the beginning of 2021, cryptocurrency exchanges have been growing at an alarming pace. And there are over 100 million crypto users in January 2022 itself. While the market has slowed down, the crypto industry is still growing, and chances are there will be another huge spike in the number of customers. 

To handle these increases in trading consumers, crypto companies need to have infrastructure and technology. Compared to stock markets, and other exchanges that have had several years to build a proper infrastructure, these companies don’t have the infrastructure to handle customer transactions. Even though there has been a crypto downturn, the market is expected to turn back again.

This is why crypto exchanges need to have an identity verification process. Most of the time, this makes the onboarding process tough for customers. These ID procedures, if not completely automated, slow down the customer onboarding process, which leads to an enhanced customer drop-off rate. 

In this article, we will mention how some of the best crypto exchanges handle the ID verification process. What steps are they using, and how easy it is to sign up for the customers.

Best Crypto Platforms with Identity Verification

1. Coinbase Verification

Coinbase was founded in 2012, and it’s a US-based digital currency and wallet platform. It has over 56 million users and has traded over $335 billion worth of digital currencies in the first quarter of 2021. In late 2021, the company went public, which is the first platform to do so. 

While Coinbase has some account limitations, these limits are determined based on the level of verification that’s added to the account. These include account age, purchase history, payment methods, and other factors. 

The type of verification that Coinbase offers includes phone number, personal details, and photo ID. If you live in the USA, then you’ll also be asked to provide your SSN. 

2. Kraken Verification

Kraken is a US-based crypto exchange platform, and it was founded in 2011 and has over 50 currencies. Kraken claims that they’re one of the largest Bitcoin exchanges in Euro volume. The exchange has four levels of accounts with each one of them offering a different type of verification requirements. The levels are:

  • Starter
  • Express
  • Intermediate
  • Pro

The account levels depend on the level of access your account will have. Each level offers more funding options and higher limits with Pro being the highest level. 

A user must be at least 18 years old to register and use an account. All the accounts need an email address, full name, date of birth, phone number, and postal address for verification purposes. Except for starter accounts, they also need to provide employment information and SSN.

The intermediate and Pro accounts need to provide a valid ID, proof of address, and a face photo. Pro accounts need to fill in the KYC questionnaire. 

3. Binance Verification

Binance is a famous crypto exchange platform that combines digital technology and finance. According to Yahoo Finance, Binance is the world’s biggest crypto exchange when it comes to trading volume. 

Binance has three levels of verification with respective deposit and withdrawal limits:

  • Basic: Requires name, address, date of birth, and nationality, and has a lifetime limit of USD 300.
  • Intermediate: Requires an uploaded picture of ID documentation such as passport, ID card, or driver’s license.
  • Advanced: Requires proof of address documentation such as bank statements and utility bills.

4. Bitfinex Verification

Bitfinex is another crypto exchange that came into existence in 2012. They state that they’re one of the largest exchanges by volume for trading Bitcoin against the US dollar. It offers exchange trading for 38 currencies/tokens and also provides margin trading, margin funding, and an over-the-counter market for large trades. To withdraw or add fiat currencies to an account, ID and document verification are needed. Most of the time, this verification process takes up to 2-3 days. 

Although, a user can easily deposit, trade, and withdraw cryptocurrencies immediately upon account opening with a basic account that only requires a valid email address. Individual account requirements tend to differ on the type of account you’re choosing:

  • Age: you have to be at least 18 years old to have an account
  • Personal Information: A user’s telephone number, email address, and residential address
  • Identification: Two types of government-issued ID with photo, such as passport, national ID card, driver’s license, residency card, employment permit card

5. OKEx Verification

OKEx was founded in 2014, and it’s one of the biggest digital currency exchanges by trading volume. It serves millions of users in over 100 countries and it operates out of Hong Kong. At OKEx, the identity verification process contains a couple of rules and procedures that facilitate a secure trading environment for our users, who need to perform ID verification for the following activities:

  • Buying currencies on OKEx with fiat currencies, for which users may need to perform ID verification
  • Making daily crypto withdrawals of more than 10 BTC

OKEx doesn’t require identity verification for users to deposit or trade crypto on OKEx. For individuals, there are several levels of ID verification:

  • Level 1: In level one, the users are needed to enter their nationality, name, and document identification number
  • Level 2: In level two, users are required to verify themselves with photo identification, and they’re also needed to perform facial verification.
  • Level 3: After completing the first two levels, users have to read the disclaimer on OKEx’s mobile app or web page to complete the third level of ID verification.
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ID Verification and Optical Character Recognition

Optical Character Recognition

There’s a major change going on in the industry, DIY online identification, and efforts by companies to combine OCR technology, facial recognition software, and low-cost manual review teams. On its face, using DIY online identity verification makes sense, but it’s vital to understand the major limitations of ID verification solutions. Optical character recognition is a commonly used method for online identity verification. OCR extracts important data from ID documents such as driver’s license or passport. This will generally include a person’s name, address, date of birth, and ID number. The data extraction process is incredibly fast and removes the need for manual data input.

OCR is a great method to verify customer ID but it does have its fair share of challenges. OCR technology was first intended for reading black text against a white background using a flatbread scanner, not for extracting key data fields from ID documents using small fonts and different colored backgrounds that may include holograms, watermarks, and printing on glossy surfaces.

Common Limitations of OCR

1. Structuring Data Involves More than Just OCR

Whenever users take a picture of their ID document with their smartphone or webcam, several steps are required to extract the information. The first is to recognize the type of ID document that the user is submitting. This allows the technology to properly structure the information to read the OCR, which requires figuring out the first name, last name, DOB, and other important data. Straight OCR without AI or any technology built to specifically recognize ID types will lack the required accuracy you need to fight fraud and deliver a good user experience. 

2. OCR Have to be Combined with Image Rectification

When a user clicks a photo of their ID documents, the image needs to be de-skewed if the image wasn’t aligned properly and reoriented for the OCR technology to properly authenticate the ID data for online ID data. 

3. Colored Background ID Documents Can Be Challenging for OCR

OCR usually takes color/grayscale photos and converts them to plain black and white to reduce blurred texts and better separate black and white texts from their background. 

4. Glare & Blur Leads to Mistake

It’s extremely common for customers to click photos of ID documents with glare and blur. Whenever there’s a glare or blurriness in the ID image, the probability of data extraction and authentication mistakes becomes significantly higher. 

5. Webcams are a Challenge for Traditional OCR 

OCR poses another challenge for businesses operating in the financial industry and trying to offer an Omnichannel experience by allowing customers to click the photo of ID documents using a couple of technologies. While most smartphone cameras right now offer high picture quality, the same can’t be said for webcams built into laptops and tablets. If a business allows customers to click photos for customer onboarding using webcams, then it can impact the picture quality of the document. This can increase the risk of mistakes caused by OCR technologies.

6. OCR May be Challenged by Some ID Subtypes

Optical Character Recognition (OCR) is based on extensive learning of the patterns that characterize a specific ID type, and this can make it challenging for solutions based on numerous ID subtypes. OCR is only usable if the ID data is collected and authenticated correctly as it requires the software to understand all nuances and minor features of different ID types around the globe.

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5 Biggest Challenges of Digital ID Verification

digital id

Now that everything is going digital, businesses need to verify more and more consumers who they say they are. Digital ID verification is the process of verifying a customer’s identity electronically. This includes authenticating the attributes of a person and then verifying that these attributes belong to a real person. This allows the company to create a digital credential for a person, thus allowing them access to anything from banking apps to borrowing institutions, and more.

ID verification has three different types:

  • Biographical information: User’s name or age
  • A trusted ID document: a user’s passport or driver’s license
  • Biometric data: User’s fingerprint or facial image

Online ID verification services use a combination of these services to build a legit user profile for a person. The number of people who want and are currently using digital services is increasing rapidly. So, it makes sense that businesses need to invest in online ID verification technologies. 

Challenges Faced in Digital ID Verification

1. Variety of Documents

On average, there are over 6,000 types of documents globally that can be used for ID verification. Each document type has its own unique protection against fraud, but some documents are easier to forge than other documents. 

To verify an ID document and authenticate a user’s identity, an image of the ID, the visible data on the ID, and any additional information stored within the document. Once the data is extracted, it is analyzed for authenticity.

Even if you limit the type of ID documents a student can use to verify themselves, complex algorithms are required to identify which document type the ID is. 

2. Evolving Biometric Forgery

Once the ID document has been verified, the next step is to confirm the validity of the applicant, but are the customers who they say they are. This is done by comparing the facial image with the photo on the ID document. Some companies can even choose to ask for face liveness detection.

This step of ID validation also has its issues. It is more than common for a legit user to fail a facial matching exercise due to bad lighting conditions. Additionally, instances of biometric data forging are becoming common. 

3. Building for Everyone

According to some reports, over 1.1 billion people globally don’t have any sort of official ID document. It is impossible for a business to verify a person with ID documents if they don’t have any documents, to begin with. When developing a digital identity verification service for the public, it is important to think about the potential users who:

  • Are not digitally literate
  • Don’t have clear migration status
  • Cannot provide biometrics due to physical appearances or features
  • Have opposing religious or personal beliefs to the capture of biometrics.

4. Finding Balance between Compliance and User Experience

Financial institutions, banks, and other firms have to follow through on strict regulations. These regulations differ company by company. For these businesses, they need to have a strong online ID verification process. Additionally, they need to focus on seamless customer experience. Most customers care more about a smooth experience while onboarding instead of a strict, and secure process. 

When developing ID verification services, businesses need to carefully plan acceptable thresholds for rejection, which balances out the risk of potentially accepting fraudulent identities.

5. Privacy, Data Security & Trust

Privacy controls are essential for services that rely completely on personal, biographic, or biometric data. Legally, users need to stay informed about how their data is being managed, stored, and maintained. Banks and financial institutions should also provide a certain degree of control over the consumer’s data. 

The introduction of the European GDPR has helped in protecting the data of the consumers, but governments and businesses need to build their frameworks for data management. This can include providing control over data. 

Reducing the risk of security breaches and improving how a business handles the data is crucial for all kinds of business. 

Final Take: Challenges for Digital ID Verification

It doesn’t matter how big or small the business is, every step in digitization needs some challenges to be addressed. The key to building a successful digital ID verification is finding the perfect mid-point between the user’s experience and security. Companies should also focus on handling all the privacy and security needs. Maintaining all this, and still keeping a high customer onboarding rate is the perfect strategy for fraud deterring.

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How Digital ID Verification Can Mitigate Crypto Fraud

ID Verification in Reducing Crypto Fraud

Cryptocurrencies have seen incredible growth in the last decade and they are emerging as a mainstream market and a viable investment choice. The digital currency has become more famous since the Covid-19 pandemic. While the pandemic has ruined the growth of many industries, it has advanced and expanded the use of online banking and digital payment services, and digital assets like cryptocurrencies.

While the growth is good news, the bad news is that cybercriminals love the use of digital money. The use of digital currency is like a magnet for criminals because of two primary reasons.

  1. Global online access to money
  2. Complex and confusing systems make money laundering easier

With an unregulated market, cryptocurrencies are loved by fraudsters all over the world. Identity verification solutions assist in making cryptocurrencies safe for users. As the cryptocurrency markets are growing, the need for robust ID verification solutions is needed even more.

Exchanges Need to Enhance their Rules & Regulations

One of the major reasons why money laundering and other cybercrimes are growing in the cryptocurrency market is that not all exchanges have weak ID verification methods in place. According to a study, 56% of cryptocurrency exchanges have weak or nonexistent KYC policies that do no good to prevent money laundering.

To make things worse, some exchanges intentionally hide their country of origin to avoid complying with any type of KYC guidelines. This only plays a helping hand in the global money-laundering problem.

Compare this with banks and financial institutions, which are using groundbreaking ID verification technology using AI, Machine Learning & massive data sets to manage increasingly strict regulations.

Some major cryptocurrency players keep up with the demand for improved AML/KYC compliance. Using third-party solutions is a more effective solution to onboard the customers.

Banks and Regulatory Bodies Want Crypto Verified

Tons of banks still consider crypto as a volatile currency and full of risk. A reputation that is upheld by constant cases of fraud and poor crypto exchanges. These behaviors don’t foster the atmosphere of trust that is vital for the future of cryptocurrencies.

Digital currencies need to create trust among users and make them a part of mainstream financial services. Better monitoring and analysis capabilities will help mitigate the opportunities for bad actors to hide illicit financial activities among legal transactions. Also, the compliance regulations must not hinder the user experience.

One way for crypto exchanges to smoothen the frictions associated with AML/KYC compliances is by using Machine learning technology.

A survey showed that 80% of compliance professionals believe that machine learning could potentially improve the reduced compliance risk. Machine learning solutions are already in place at multiple banks, with a majority of $1 million annually for building strong ID verification solutions.

DIRO Online Document Verification for Secure Crypto Transactions

Cryptocurrency exchange needs to employ strong robust KYC/AML procedures to reduce the risk of increased fraud. DIRO’s online document verification solution verifies documents like bank statements, utility bills, driver’s licenses, and so on. Verifying documents is one of the primary methods of eliminating fraudsters using cryptocurrency for money laundering.

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Identity Verification in The Financial Services Industry

id verification need

Identity verification is becoming more and more essential in the growing digital financial landscape. It has two different benefits, helps in preventing fraud and prevents fines for non-compliance with KYC and AML regulations.

The new and improved financial industry that we experience today has taken so much time and effort to happen. While the concept of finance existed since ancient times, the use of the term “financial services” became widely popular in the late 1990s.

Today, we have a completely different financial industry compared to a decade ago. Customer demands and technological advancements have changed the financial industry into a seamless experience. 

Though things are more comfortable for consumers now, the risk of digital financial fraud has gone through the roof. Regulatory bodies, authorities, banks, and businesses need to take strict steps in order to maintain the integrity of the financial workflow. Technological solutions such as online document verification software, and online KYC verification software can improve financial technologies.

Problems in The Financial Services Industry

The financial industry includes banks, credit unions, insurance firms, credit card providers, and others. Digitization is helping businesses improve their overall customer experience and productivity. Fraudsters are also leveraging technologies to break into the internal systems of the financial institution. 

1. Cybercrime

In 2019, 62% of all data breaches came from the financial services industry. Hacking and malware attacks for the primary source for data breaches. As of right now, fraudsters are focusing all their attention on the online financial service platform. 

2. Regulations

Online investment and financial platforms such as crypto exchange, online banking, and other platforms are being used for money laundering and tax evasion. That’s why, regulatory bodies keep evolving and amending the KYC, KYB, and AML regulations. Unfortunately, most businesses fail to comply with these regulations by using ineffective technologies.

3. ID Theft

Identity theft is one of the biggest challenges faced by the financial industry. Fraudsters use various methods to steal or create fake ID to trick banks and financial institutions. One of the most common types of ID theft is fraudsters stealing credit card information and buying things without user consent. There are instances where fraudsters steal “personally identifiable information (PII)” to open new accounts and apply for credit cards and loans. 

Need for ID Verification in the Financial Industry

ID verification plays a huge role in reducing the risk of financial fraud. Proper ID verification software can assist in preventing ID theft, money laundering, account takeover fraud, and other types of financial fraud. Combine ID verification with online document verification software and banks have a completely digital onboarding solution. 

The ID verification solutions make sure that a customer’s ID matches the physical person. ID verification is part of the KYC verification process during customer onboarding. As KYC has become obligatory for financial institutions, the need for ID verification in the financial industry has soared.

Here are some stats to signify the importance of ID verification solutions:

  • According to the FTC, around 9 million Americans report ID theft annually. 
  • Credit cards, loans and leases, and phone frauds are the three top types of ID theft fraud. 
  • The UK, Denmark, and Ireland had the highest rate of ID theft in 2018 and 2019.
  • In 2018 and 2019, more than 55% of Europeans experienced at least one type of ID fraud. 

How ID Verification Solutions Can Enhance the Financial Industry?

1. AML & KYC Compliance

Banks, credit unions, credit card providers, and other businesses operating in the financial industry are obligated to comply with AML & KYC regulations. To comply with ever-changing KYC and AML directives, firms have to know who they are doing business with. Robust ID verification procedures reduce the risks of businesses running into fraud, avoid huge fines and improve their brand reputation.

2. Reduce Fraud

Needless to say, the biggest use of having an ID verification procedure for your business is protection against fraud. During onboarding, banks can verify if a customer is who he/she claims to be. Moreover, ID verification improves user experience as users feel safer using your platform.

3. Minimizing Operational Costs

Manually verifying documents and cross-verifying customers with ID documents take too much time, effort, and resources. The worst part about all is that it is highly inefficient, most fraudsters tend to make documents that are too perfect to be determined as fake documents. Using online document verification software can enhance online ID verification and digital customer onboarding.