Increasingly, fraudsters are attempting to commit crimes or launder money using false, stolen or synthetic identities, which combine both real and fake information. A growing number of fraudsters are also impersonating real customers for financial gain by gaining access to their accounts.
As more transactions take place online, organisations are facing a growing number of threats such as payment card fraud, phishing attacks and electronic transfer fraud. This, in turn, is damaging trust and impacting growth. According to the GBG State of Digital Identity 2020 report, about one in three consumers believe their personal information is available for sale, while two in five are concerned that their personal information could be exposed when transacting with organisations online.
In the fight against fraud, identity verification and identity identification services help organisations prevent fraud and ensure compliance with Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations. However, there are some key differences. In this blog, we’ll define both solutions and explore what those differences are and explain exactly what they mean for organisations.
What is Identity Identification?
In simple terms, identity identification helps with checking that a person is really who they say they are. It is the act of identifying individuals by checking photographs and personal information held within ID documents. This can be as quick and simple as flashing an ID badge when visiting a client’s office or showing a passport when buying an age-restricted product such as a packet of painkillers.
On the web, however, identity identification works a little bit differently. Typically, customers are asked to prove their identity by providing personal information alongside payment card details. This might include their full name, billing address, phone number or date of birth. All of this information helps organisations to check that customers and card details are genuine before taking payment.
For low-value transactions or organisations that are comfortable with a higher degree of risk, this approach may be sufficient. However, with the scale and sophistication of identity fraud growing year after year, it’s becoming increasingly clear that identity identification alone is not enough to prevent fraudsters from impersonating customers using stolen accounts or payment card details.
To ensure a higher degree of security and ensure compliance with identity-related regulations, it’s no longer enough to make decisions using user-submitted information alone. Customer identities should be verified. Put simply, that means that the information provided by customers needs to be checked against another source. Otherwise, it’s like asking someone wearing a balaclava over their face to prove their identity by showing a passport photo. Without having the full picture or being able to carry out any identity checks, you can’t be sure that a person is really who they claim to be.
Identity Verification: What Is It and How Is It Different?
Digital identity verification services help organisations verify identity data presented within identity documents or submitted by the customer. This data is compared to third-party data like voting registers or credit profiles to check that it’s genuine. By consulting multiple data sets, ID verification and document verification services significantly reduce the risk of identity fraud taking place.
There are several important moments when organisations may need to verify someone’s identity such as user onboarding. Some of the most common include when consumers are opening a new account, making a high-value purchase, or accessing age-restricted services like online gambling.
Identity verification is typically used by organisations with more stringent security standards, such as banks or financial organisations. But with more than 1.2 billion private information records available on the dark web, this has become less reliable. In turn, this has greatly impacted consumer trust.
To minimise the risk of identity fraud and money laundering, the most secure identity verification services require users to verify ID documents in additional ways, such as uploading a photo or short video to prove likeness. In doing so, the level of security increases in line with the number of checks performed as well as the robustness of those checks. However, it’s important to strike the balance right between reducing the risk of identity fraud and delivering a streamlined customer experience.