The rise of online transactions has increased the need for businesses to implement know-your-customer (KYC) and anti-money laundering compliance procedures. Traditional identity verification methods, such as physical documentation and face-to-face interactions, are time-consuming, costly, and often unreliable.
To address these challenges and meet the growing demand for digital identity verification, businesses are turning to solutions that use advanced technologies to quickly and accurately authenticate customer identities. These digital solutions can overcome the limitations of traditional methods and will play an increasingly vital role in fraud prevention. According to forecasts, digital identity verification will be more important than ever in 2023.
This article explores why more businesses are adopting digital identity verification and the key benefits it offers.
What is Digital Identity Verification?
Digital identity verification allows people to prove their identity remotely using a phone or laptop. This innovation helps businesses comply with KYC/AML regulations by ensuring accurate customer verification.
By verifying identities digitally, businesses can mitigate fraud and confirm customer identity quickly and accurately. Banks, fintech companies, crypto exchanges, and lenders require robust digital verification to meet regulatory requirements.
How Does Digital Identity Verification Work?
Digital identity verification begins by collecting a user's identifying information. This data is then analyzed by an algorithm and compared to trusted identity databases to confirm a match.
Information is usually collected via online forms and documents such as passports, national ID numbers, and facial photos or videos. Businesses typically perform digital identity verification when onboarding new customers.
What Are the Differences Between Digital and Manual Identity Verification Methods
Methods for verifying identity have improved with technology. Manual verification has been replaced by digital methods like liveness detection and biometric verification.
Here are some key differences between the two approaches:
Manual verification processes are costly and inefficient. Companies that use manual verification employ at least one full-time employee to conduct checks. Often, entire departments with multiple employees are dedicated to these tedious, repetitive tasks.
This results in underutilized employees and lower job satisfaction. Employees may leave for more engaging work. Automating verification can reduce costs and improve morale by freeing up employees to focus on more meaningful work.
Digital verification offers convenience and ease for customers compared to manual verification. With digital verification, customers can verify themselves without physically going to a location or showing physical documents. They receive results quickly and in real-time, rather than waiting days or weeks. This streamlined process reduces friction for customers.
Manual systems impede growth in two ways. Firstly, the reliance on a human workforce means that you would always have to hire more employees as the number of users you want to onboard a verify increases. The higher hiring costs could eventually impede the growth of your business.
Secondly, manual systems restrict growth by making it difficult to achieve international expansion. However, with digital verification, you get access to the identity database of multiple countries and support for hundreds of ID documents. This means you can easily verify and onboard your users no matter where they live.
There are multiple points through which errors can occur in traditional verification systems. A mistake, like a typo, could occur during manual data entry, or an employee could mix up different user documents due to fatigue.
With digital systems, you can rest easy knowing that these errors are eliminated and that the results of every verification process are more accurate.
What are the Benefits of Digital Identity Verification?
Digital identity verification provides you with higher levels of security. These systems have direct access to identity databases that are regularly and automatically updated. This means you don’t have to worry about working with inaccurate or stale customer data.
Not only that, but they are more secure because they reduce the risk of human error. For example, an AI-powered OCR data extraction system can extract data from documents more accurately than the human eye. In cases of forged documents, AI technology can easily spot more forgeries and is less likely to be fooled than the human eye.
Also, since the customer data you extract is stored in a secure database, there is little risk of data theft, meaning that your customer’s information is safe.
Digitizing your identity verification processes brings greater speed and efficiency to your customer onboarding and verification workflow.
Digital processes enable you to do more in less time and with fewer resources than before.
For example, a team of workers could take hours to weeks to manually extract data from 1000 documents. This same feat can easily be achieved in seconds with the aid of OCR technology, which will scan the documents and extract the data.
Leveraging technology means that you can achieve such repetitive tasks in the shortest time possible. This allows you to redirect precious human, time, and financial resources to the more critical and valuable aspects of your business operations.
Digitizing your verification process means that what took weeks can now take seconds.
- Improves Customer Experience
By leveraging digital verification methods, you can balance digital security and compliance with providing a stellar customer experience.
Verifying customers remotely and quickly from the comfort of their homes allows you to provide them with a pleasant and low-friction experience while ensuring you stay protected and know who they are.
Customers need to trust that businesses are doing their best to prevent identity theft and fraud. Digital identity verification helps build trust and form a solid and long-term relationship with customers. Having these verification systems in place allows customers to feel safe and secure, which encourages them to return.
- Protects and Improves Brand Reputation
What customers think about your business can make or mar it.
Showing customers that your processes are secure during and after onboarding goes a long way in building long-term trust.
Customers who have seen that you deploy the necessary safety measures to protect them from fraud will speak highly of your business in a positive light. This word-of-mouth communication will significantly affect how your target market feels about your products and services.
There are also businesses that operate in regulated industries that face fines if they fail to comply with regulations. Customers will feel unsafe transacting with a business that flaunts regulations, and this will cause them to move to your direct competitor instead.
Use Cases of Digital Identity Verification in 2023
Some of the most common identity verification use cases in 2023 include:
- Business and customer onboarding
- Business and customer verification
- Fraud detection and mitigation
- KYC and AML compliance
- New account onboarding
Industries and Businesses that Need Identity Verification Services in 2023
Identity verification services are vital for a wide range of businesses and industries, including:
- Retail and ecommerce platforms
- Ride-sharing and transport
- Travel and hospitality
- Financial institutions like banks, fintech payment platforms, investment platforms, insurers, lending platforms, and crypto exchanges
By deploying digital verification methods, you can protect your business from fraud while improving customer satisfaction and meeting compliance regulations.
Dojah is the all-in-one identity verification, customer onboarding, and fraud detection platform that can help you meet all these needs in one go.
Start verifying your users with ease today. Contact us if you have any questions or schedule a demo session.
Explore our website and documentation to learn more about our product offerings.