Financial identity theft affected 47% of Americans in 2020 – that’s nearly half the population! One effective solution to prevent threats like identity theft is digital identity verification. Every business or brand now has a digital presence to sell its services or products and gain ROI. But with massive digitization comes digital risks; the cybercrime rate has risen at a staggering pace. The situation called for a specific cyber security mechanism to detect and prevent such threats as identity theft. Digital identity verification serves as the first line of defense for businesses during their first online interaction with probable clients.
The Switch To Digital Identification Verification
Since the pandemic, businesses and consumers have switched from paper-based and manual identity verification – showing passports, drivers licences and utility bills as proof of address to digital id verification processes, including biometric facial recognition, liveness detection, and document verification. Some industries that have made the switch include online gaming, betting, travel and healthcare, Government and eCommerce. In the USA, there’s the Improve The Digital Identity Act 2021 a bill to develop the law around digital identity theft protection.
The finance sector and online marketplaces are the most significant users of digital identity verification during customer onboarding. KYC (Know Your Customer) is an integral part of identity verification that helps banks determine if the customer is a potential threat or not.
Still not convinced why you need digital identity verification? Let us give you some detailed reasons.
Adopt Up-To-Date Technology
It’s not like there hasn’t been any other form of digital identity verification – in the recent past, companies have relied on two-factor authentication or MFA and knowledge-based authentication to determine their customer’s identity.
But as technology quickly advanced, these methods have become redundant today. Even the National Institute of Standards and Technology in the US does not recommend using these outdated customer authentication methods. One reason is that knowledge-based authentication questions are pretty straightforward, and the information required is readily available on social media and other public platforms. So, fraudsters have a freeroll through the verification process and can easily impersonate anyone. Two-factor authentication is not reliable either; fraudsters can easily find ways to intercept the messages.
Due to these vulnerabilities with both methods, organizations have put them out of use and adopted new, robust identity verification methods.
Better Customer Loyalty
The new-age consumers want the same treatment they received at physical stores now at the digital branches. It means providing seamless services, better customer treatment, and secure customer onboarding.
Customers today are pretty aggressive about their online safety, and they do not hesitate to go to a competitor if they do not trust a company with their data.
- The situation lays out clear-cut tasks for organizations
- To keep customer data safe all the time
- To give seamless customer service to increase conversions
- To make sure streamlined customer onboarding
To ensure companies can fulfill these tasks, authentication service providers like iDenfy offer sophisticated identity verification solutions. These identity verification solutions simplify companies to onboard new customers after a thorough verification every time. This helps organizations connect with their clients and bond with them better for a long relationship.
For organizations, digitization and online identity verification for new customer onboarding cost much less. The reason behind this is the elimination of manual verification costs and security risks. It also reduces the chances of human error in the process and thus, increases efficiency.
Contrary to popular belief, banks and financial institutions lose billions of dollars a year due to faulty KYC processes. Proficient automated identity verification avoids any error since document and ID verification happen in real-time.
Complying with regulations
Several countries around the world have put forth strict regulations for customer identity verification and record maintenance. All companies have to comply with national and international rules to stay in business or face penalties. The purpose of these regulations is to curb online fraud, identity theft, and data breaches.
Since various governments worldwide keep updating their regulations according to the situation to keep them relevant, companies are sometimes caught off guard. To ensure companies stay up-to-date with these regulation changes, they must work with service providers like iDenfy. Such companies develop their products according to the latest regulations and update them from time to time.
Decreasing Fraudulent Activity Exposure
The biggest reason for businesses to adopt digital identity verification is to decrease exposure to fraudulent activities. The number of data breaches each year globally has increased exponentially. One reason is that fraudsters have constantly evolved and are finding new ways to bypass security measures. Once through the security measures, they can target banks and financial institutions, steal sensitive information, and hijack accounts.
Accurate customer identification can enable other Customer Due Diligence (CDD) measures like real-time due diligence, transaction monitoring, etc. The long-term plan of digital identification is to gain the same level of trust earned by traditional identification. The whole idea of the verification process is to make it convenient and secure so people can trust digital identity solutions.