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Thanks to the blazingly fast adoption and development of fintech, businesses are in a constant arms race with bad actors. Now, more than ever, you need to be able to protect sensitive data and facilitate transactions for good customers without leaving any room for fraudulent activity.

This means facing increasingly complex security challenges and ensuring you have robust identity verification processes in place. But when it comes to combating digital identity theft, fraud, and unauthorized access, traditional methods often fall short.

Enter identity verification software, a set of tools that allows you to create risk mitigation strategies and controls to better understand customers’ risk beginning with onboarding and continuing to with risk-based checks with each customer interaction. Identity verification software includes documentary, non-documentary, and digital identity fraud as part of this toolset that establishes trust and safeguards sensitive information.

By streamlining the verification process, identity verification software enhances security and provides a seamless and user-friendly experience that satisfies your customers.

What is Identity Verification Software?

Identity verification software is a digital solution employing a combination of advanced algorithms, biometric data comparison, and document analysis to authenticate individuals engaged in business transactions.

It serves as a crucial line of defense against the myriad of potential threats in today’s digital landscape and plays a pivotal role in establishing trust and safety, fostering a secure environment for both businesses and users.

Identity verification helps answer the question, “Is this person real?” and confirms that a given individual exists in public source data. Taking it a step further, determining if the profile is real is only the first step in the process, identifying risk and tying the identity to the person on the other end of the transaction can help complete the process.

Its primary function is to prevent identity fraud and ensure compliance with Know Your Customer (KYC) and anti-money laundering (AML) requirements, such as Section 326 of the USA PATRIOT Act, while at the same time respecting relevant privacy regulations. Section 326 requires that the person you are doing business with is who they say they are. And while the regulation has not changed much in the past couple of decades, identity fraud and even the way we do business in a digital world has changed drastically.

The process is crucial to protecting sensitive information and valuable assets from unauthorized access, ensuring that only approved individuals can interact with critical resources.

Compliance with federal, state, and local regulations during these processes is imperative, and identity verification software aids organizations in adhering to these legal frameworks and mitigating the risks associated with non-compliance.

Beyond regulatory requirements, the software can also align with your specific organizational policies, providing a comprehensive and adaptable approach to identity verification.

Types of Identity Verification

There are two main ways identity verification software authenticates the identity of a user:

1. Documentary Verification: This type of digital ID verification involves the examination of digital identity documents and personal information, such as a selfie, to confirm the user matches the photo on the ID. Documentary verification can help tie the profile to the identity either for hard-to-locate consumers or as an additional authentication layer when there are risks found in an identity verification process.

2. Non-Documentary Verification: Passive digital identity verification systems do not require documents to be submitted by the customer. Instead, they use authoritative third-party data to look for evidence that the identity exists in public record data.

The Components and Process of Identity Verification

Identity verification process addresses three specific processes at the beginning of the customer journey. Each of these three create a critical role in creating a robust and aligned risk mitigation strategy for your organization and a good customer experience for your end users. The three processes in an identity verification process include:

1. Validation – Validation seeks to answer the question about each data element and their validity. Is that a real identification number? Does it follow a valid format? Is that a postal deliverable address? And so on. Determining the validity of data is a crucial first step in a solid identity verification process.

2. Verification – Do the various elements of the profile belong together? Do we have evidence that shows that this is a cohesive identity that is persistent in public records data. This identity resolution step is really the most critical component in the process. Past and legacy solutions used thousands of subroutines and rules based algorithms to make their determinations of verification. However, new technologies have created identity graphs, machine learning and even artificial intelligence (AI) capabilities that can compare data elements and create more accurate identity verification processes. Assure that your provider has these sophisticated capabilities as they are the difference between an answer and the RIGHT answer.

3. High Risk Detection – While validation and verification give you answers to if the profile is real, high risk detection is the third step in the process that will help identify potential risks associated with an identity. While a profile may be 100% verified, high risk detection looks at risks that any organization must know when they onboard an identity. Deceased status, high risk address and other more in-depth risk indicators are the final piece to a good identification process. These are also critical indicators that must align with your organization’s risk profile and appetite to help give you a comprehensive view of risk. Additional tools like indicators of synthetic identities, device risk and other detailed layers are also great tools to add to your arsenal of tools.

While identity verification provides the foundation for determining if the person on the other end of the application is real, documentary verification can create additional assurances and establish that the identity is tied to that person. Establishing the identity and tying the identity to the person can go a long way to a solid identity verification process. In addition, it can be a great addition to handle “hard to verify” identities such as new to country or emerging populations that are not always found in more “passive” solutions.

Given the complex, challenging nature of digital onboarding and identity verification, having a comprehensive set of tools that aligns to your risk profile and can be flexible in allowing you to manage your risk mitigation process is ideal.

Benefits of Identity Verification Software

Among the many advantages of effective identity verification software, the most important are enhanced security and reduced fraud. The best identity verification solutions capture 85-90% of attempted fraud among the riskiest 3% of applicants.

Socure Verify and Sigma Identity Fraud work together to amplify high-risk detection to better mitigate risk. With Socure’s Sigma Identity Fraud, you can improve fraud capture results by 35-45% over legacy solutions. This process works by validating that the data is real, verifying that all elements belong together, and detecting high-risk attributes.

Another positive impact is an improved user experience. Good customers hate hassle and detours during the customer journey. The right identity verification software can increase frictionless customer approval rates by 30-60% while reducing false positives by 13x.

A final key benefit is that by ensuring compliance with regulations and organizational policies, the best solutions can protect your business from legal repercussions and reputational damage. The use of effective identity verification software demonstrates a commitment to ethical practices, instills confidence among all stakeholders, and lays a sturdy foundation for growth.

The Role of Non-Documentary Verification

The role of non-documentary verification in determining the presence of identity in publicly available data is a cornerstone to the process. Where that step lives in your onboarding flow should be very aligned to your channel, customer, geographies and risk profile of your organization.

An option to consider is Socure Verify, a passive, non-documentary identity verification solution that offers a low-friction experience for your customers.

It uses patented artificial intelligence and machine learning technology and a triangulated data approach to verify an identity across more than 400 trusted sources.

The software can correlate thousands of online and offline identity data points to match any consumer to a single identity.

Socure Verify allows your company to:

  • Verify 99% of mainstream populations
  • Verify 94% of Gen Z consumers
  • Reduce manual reviews by 40%

Socure Verify also provides an intelligent risk assessment using contextual information such as transaction history, addresses, and relationship networks.

Feature and Roles of Documentary Identity Verification Software

As we have discussed, document verification software can be a critical component in establishing a strong identity verification by identifying hard to find populations, providing an automated exception process for identity discrepancies, an additional layer of identity assurance and tying an identity to the person.

Not all identity verification software is equally reliable and there are several important features you must look for before choosing a solution.

First, you want to make sure that your solution uses automated machine learning. This means an identity document verification process that provides a superior capture experience, powerful forensic engine, and hyper accurate data extraction.

You must also ensure that any software you choose conducts essential automated checks, including:

  • Face and orientation detection
  • Edge detection and cropping
  • Front-to-back ID data extraction and correlation
  • Barcode forensics
  • Alert list cross-check
  • Accessibility
  • Headshot integrity
  • Selfie-to-ID photo match and liveness detection

Biometric verification is also an important part of a solid identity verification solution.

This process confirms a claimed identity by evaluating distinguishing biological traits, such as fingerprints or facial features and matching them to a verified identifier or identifiers. Be careful to ensure that your chosen vendor has tested for bias in their biometrics system and has strict protections in place for storing and handling user data.

Sigma Identity and other Risk Scores

While creating a solid identity verification process is a great foundation for risk mitigation and solid customer relationships, identity risk mitigation tools can create a more detailed view of the risk of identity theft. Scores and risk indicators that allow you to create a risk based approach, identify detailed risks and expand the “high risk detection” step in the process significantly. Variations of these risk detection tools such as Sigma Identity look for deeper risk indicators. Only the name, address, SSN or ID number and date of birth are required by the regulations. Adding other tools such as Sigma Identity, Sigma Synthetic, Phone, Email and Address scores as well as Device and Behavioral tools can help align to your organization risks and provide a comprehensive onboarding strategy for your organization.

Choosing Identity Verification Software

Selecting the right identity verification software is a critical decision for businesses and several factors should be carefully considered in the decision-making process.

The comprehensiveness of the solution, including its ability to perform multi-layered verifications such as biometric data, document analysis, and behavioral monitoring, should align with the specific security needs of your organization. Ease of integration with existing systems and user-friendly interfaces are also crucial qualities to evaluate.

When comparing different providers, in addition to looking at their technology, you should investigate their track record in fraud prevention, their compliance with industry regulations, and the scalability of their solutions.

It’s also advisable to assess how flexibly the software will be able to accommodate future technological advancements.

Customer support, availability of training resources, and the overall cost-effectiveness of the solution over the long term should be factored into the decision-making process as well.

To make the right choice, businesses should consider conducting pilot tests and seeking feedback from other users in similar industries to ensure the selected identity verification software aligns with their unique requirements and provides a robust and reliable solution.

What is identity verification?

Who needs identity verification software?

Businesses and organizations across diverse sectors, such as financial services, healthcare, e-commerce, and telecommunications, or any other industries where safeguarding sensitive information and preventing fraud are crucial can benefit from identity verification.

Where can identity verification be used?

How much will an identity verification provider charge?

Virtually every identity verification solution provider uses transactional pricing models for identity verification software. Costs vary based on the specific verification conditions and types required. Factors influencing the cost include the complexity of verification processes, the level of security measures implemented, the volume of verifications, and the incorporation of additional features such as biometric authentication or document analysis.

How does identity verification work?