What is ID Verification?

ID verification has long been an important part of authenticating an individual’s claim to a certain identity. It’s a vital part of Know Your Customer (KYC) and Anti-Money Laundering (AML) measures. Now that more businesses are moving online, solutions that allow for instant and accurate electronic ID verification are proliferating. Read on to learn more about how ID verification works, and the different kinds available on the market today.

What Does ID Verification Mean?

ID verification is an authentication process that compares the identity a person claims to possess with data that proves it. There are many documents that can serve as providers of this objective truth: birth certificates, social security cards, driver’s licenses, and others. However, ID can be stolen or forged, requiring institutions such as banks to take additional measures to affirm that there truly is a match between who a person says they are, and who they actually are. To that end, institutions often employ secret password questions where the answers should only be known to the holder of that identity. In recent years, more technological means of confirming identity have become commonplace, such as single sign-on (SSO) and other technological capabilities that firmly establish the identity of the user or customer. Criminals and other bad actors are involved with increasingly complex schemes, leading to ever-more stringent Anti-Money Laundering (AML) and Know Your Customer (KYC) requirements that banks must abide by. This means that more sophisticated ID verification measures are required to prevent fraud and satisfy regulatory requirements.

What is Electronic ID Verification?

As businesses increase their online presence and more transactions take place virtually, it becomes especially important to ensure the legitimacy of online customers. Electronic ID verification allows an individual’s claimed identity to be authenticated by digital means. While different electronic tools accomplish this in different ways, there are two overarching processes that are involved: verification of documents, and customer data checks. Electronic ID verification uses a combination of personally and publicly available data to establish a person's identity. Computerized systems are able to compare these pieces of information and determine if there’s a full match, a partial match, or no match. Here’s what’s involved in the two stages of online identity verification:

1. Document verification

Photos of government-issued ID (e.g., passport, driver’s license, state ID card) are digitally checked to establish their authenticity. Details such as name, date of birth, and other identifying information is also checked. Many electronic ID verification processes compare a live photo of the customer to the photo on the ID through verification software. All of this can be completed remotely with full accuracy.

2. Customer data verification

Once the customer’s submitted data is in the system, it is compared to data from different sources including credit bureaus, utilities companies, watch lists, and government agencies. Electronic identity verification enables a mass sweep of databases in just a few minutes. This stage allows additional information about the customer to surface, including suspicious information that can help companies screen for fraud risks. Traditional ID verification requires manual processing of ID and related paperwork, increasing the probability of mistakes and prolonging turnaround time. In contrast, electronic methods eliminate human error while boosting efficiencies, which benefits both companies and the customers they serve.

How Does ID Verification Work?

ID verification can be either electronic/automated or traditional/manual, which makes the process look different depending on which method is used. With traditional ID verification, companies request that customers arrive with physical ID and documents, and then compare the photo in the ID to the person sitting in front of them. Information in the ID is then compared to information available in public databases. With electronic ID verification, companies request that customers send them a photo ID along with a real-time selfie, and compare the two. Then information in the ID is automatically cross-referenced with public databases. Lightico’s ID verification is fully electronic, and doesn’t require customers’ physical presence at a branch or location. It authenticates customers’ identities through entirely automated, remote processes. Rather than rely on human judgment, which introduces the possibility of error, it relies on advanced AI technology to do all the validation. Here’s how it works:

1. An agent sends the customer a text message containing a link that opens to a fully secure mobile session.
2. The customer uploads a picture of their ID as well as a real-time selfie taken from their smartphone camera.
3. The customer’s selfie and photo ID are automatically scanned for a match.
4. In addition to verifying customer ID, Lightico’s platform also enables customers to upload documents, fill out mobile-optimized forms, make secure payments, and provide an eSignature all from the same session.

How Can ID Verification Impact Your Business?

ID verification is a pivotal aspect of keeping banks and other organizations free from fraud and bad actors. It enables the identification and early prevention of nefarious individuals from using the institution to launder money or conceal the true nature of their activities. ID verification plays a role in broader Anti-Money Laundering initiatives, acting as a gatekeeper to ensure that only legitimate individuals and businesses can use the bank. In addition, ID verification ensures institutions stay compliant with stringent government regulations, and maintain the public trust. Banks stand to face severe reputational, financial, and legal repercussions for being used as havens for illicit businesses, even if they were unaware. This makes accurate ID verification a matter of great consequence. Of course, an outdated or inconvenient ID verification process can have a negative impact on institutions’ efficiency and bottom line — which is no less important than staying compliant. Fortunately, requiring customers to come to a physical location with photo ID and performing manual checks is no longer necessary or optimal in the digital era. It’s less accurate, more time consuming, and harms both the customer and agent experience. On the other hand, institutions that employee technologically advanced, AI-based ID verification can process more “good guys” in less time, while instantly flagging potential “bad guys.” Today, there is no need to choose between compliance and efficiency — electronic ID verification has us covered.

The Bottom Line

All financial institutions need to employ ID verification to protect themselves from money launderers and other bad actors. It’s simply a vital part of staying compliant. Yet the type of ID verification they choose to use can make all the difference between an efficient and precise process, and a cumbersome one. Lightico’s ID verification solution eliminates the need for in-person visits through mobile, instant ID collection and verification. The solution uses Knowledge-Based Authentication (KBA) and One-Time Password (OTP) to add additional security layers to customer sessions while ensuring verification is a quick and painless process. Learn more about Lightico’s ID verification and other customer interaction capabilities at Lightico.com.