What is Identity Verification? Process, Methods, and Benefits

Identity verification is the process of determining whether a person truly is who they say they are. With so much of our daily business activities and personal life happening online, no wonder identity verification has become a routine security measure But have you ever wondered how it works? Or which methods are the most secure? Let’s take a closer look so you can decide for yourself.

What is identity verification?

It's likely that you engage in the identity verification process regularly, whether by presenting your government ID at a grocery store to purchase wine or by submitting a photo of your ID to open a bank account online.

Both government agencies and private businesses employ comparable identity verification methods to combat identity theft, fraud, the creation of fake or multiple accounts, and data breaches. But how exactly is this achieved?

How does the identity verification process work?

The simplest method to establish someone's identity is by requesting their passport, driver’s license, or another government-issued ID. Upon presentation of a valid ID bearing their photo, identity verification is achieved.

Yet, in instances where physical presence is not possible—such as when individuals aim to open a social media account—digital identity verification becomes necessary. Service providers employ diverse digital identity verification methods, each varying in its level of security.

What is digital identity verification?

Digital identity verification entails utilizing digital solutions to acquire evidence confirming the user's claimed identity. Various methods of digital identity verification are employed to compare user-provided information (such as a government-issued ID, a photo ID, a password, etc.) with verified data stored in the service provider's database (such as an ID document, a photo of the document holder, or a password).

Online service providers employ diverse methods to substantiate their users' identities and authenticate the information provided. So, what precisely are these methods?

How do you digitally verify identity?

Every company selects particular verification methods to bolster the security of its online platform. The primary digital ID verification methods are outlined below.

ID document verification

Financial institutions utilize this approach during the client onboarding process to authenticate whether the individual submitting government-issued identity documents (such as a passport, ID card, or driver’s license) is indeed the depicted person and if the documents are genuine. This involves capturing a photo of the ID document and a selfie, which are then uploaded to the institution's website. Artificial intelligence software, sometimes supplemented by designated staff members, scrutinizes the uploaded images to validate the authenticity of the ID document and ensure that the selfie matches the photo on the document.

Knowledge-based authentication (KBA)

KBA entails responding to security questions, often encountered when creating a new email account. These questions typically pertain to personal details, with the email provider presuming that only the account owner knows the answers. If the email password is forgotten, these questions serve to ascertain the identity of the individual initiating password recovery.

Biometric authentication

Biometric authentication relies on unique physical features, or biometric identifiers, to recognize individuals. This method is deployed in various personal devices and highly restricted areas. The five most commonly used biometric identifiers are face, fingerprints, voice, eyes, and palm. For instance, fingerprint scanning on smartphones involves storing the initial fingerprint scan and comparing it with subsequent scans for unlocking purposes. If an unauthorized individual attempts to unlock the device, access is denied due to mismatched fingerprints. Similar principles apply to facial identification, speech recognition, and iris identification.

Database methods

Database methods involve verifying submitted information against authoritative databases to validate identity. Common database methods include email and phone verification, mobile app authentication, social verification, and digital signatures.

Email verification

Service providers, such as banks, typically employ email verification by sending a test email containing a verification code for account setup. Additionally, users receive emails with codes for password resets, account modifications, or deletion.

Phone verification

Similar to email verification, phone verification entails receiving an SMS with a verification code, which users submit to verify ownership of the phone number.

Mobile app authentication

This method relies on authentication apps like Google Authenticator or Authy, generating time-sensitive codes for login authorization. Users input these codes to access various platforms, such as password manager applications.

Social verification

If users have previously verified their identity with a social media platform provider and obtained a verification badge, this verification may suffice for creating or accessing accounts with other service providers. Integration with platforms like Nord Account, Google, or Facebook streamlines the verification process for users.

Digital signature

A digital signature serves as a modern counterpart to handwritten signatures, utilizing cryptographic keys to bind your identity to a document during a transaction. Each key is unique to the signer and highly resistant to forgery. Moreover, prior identity verification is required before receiving the key, enhancing the overall security of the process. Once a document is signed, any alteration renders the signature invalid, safeguarding all parties involved from potential document forgery.

It's important not to confuse digital signatures with electronic signatures, which encompass any electronic data conveying the intent of a signature, such as a typed name at the end of an email. While electronic signature technologies offer some level of security, they represent an outdated and vulnerable verification method due to the ease with which electronic signatures can be duplicated and falsified. Therefore, opting for a digital signature is advisable for enhanced security.

Trusted Identity Network

A trusted identity network constitutes a secure digital ecosystem where reliable entities, including banks, government agencies, and healthcare providers, collaborate to exchange verified identity information, streamlining and expediting the identity verification process.

For instance, when applying for a loan, your bank could leverage the trusted identity network to authenticate your identity using data sourced from your government digital ID, eliminating the need for physical document submission.

Liveness Authentication

Liveness authentication, also referred to as liveness detection, serves as a security measure to ensure that the individual presenting their identity is physically present during the verification process and not utilizing a spoof or a prerecorded image. Essentially, liveness authentication verifies the authenticity of a selfie.

This method employs biometrics to detect spoofing attempts, where cybercriminals utilize face masks or photographs of photographs. For instance, during account setup, a digital bank may prompt you to blink or nod your head while capturing a selfie to verify your presence and deter fraudulent activity.

One-Time Passcode (OTP) Verification

The one-time passcode (OTP) verification process entails dispatching a time-sensitive, single-use passcode to your registered mobile phone or email address, which you must input to validate your identity or finalize a transaction.

If you engage in online banking activities, you likely encounter OTP verification when logging into your account or executing a payment. In this scenario, your bank dispatches an OTP to your designated device, and you must enter this code on their website to authenticate the transaction.

Digital identity verification services are integral to the online operations of financial institutions and government bodies. Even private enterprises and corporations employ verification methods to bolster fraud prevention and account security. However, certain techniques are more resilient against hacking attempts than others.

The importance of identity verification

By confirming the identities of their users, organizations and businesses can substantially mitigate the risks associated with impersonation and unauthorized access. Authentication procedures and fraud prevention measures foster trust and provide reassurance to users that their identities and personal data are safeguarded by the service provider.

Identity verification serves as a foundational element in adhering to regulatory mandates such as Know Your Customer (KYC) standards and Anti-Money Laundering (AML) laws. These regulations mandate that financial sector entities conduct thorough due diligence to authenticate the identities of their clients, mitigating the risks of fraud, corruption, money laundering, and terrorist financing.

When executed effectively, digital identity verification rivals physical verification and often surpasses it in terms of speed.

  • Enhanced security, particularly evident with methods like two-factor authentication (2FA) or multi-factor authentication (MFA).
  • Elimination of the need for physical presence, streamlining the process by conducting it online.
  • Reduced risk of human error, as identity verification software is less prone to oversight compared to human operators.
  • Improved customer experience, aimed at minimizing abandonment rates and simplifying the account opening process through quick and user-friendly digital identity verification services.

Which digital identity verification methods are the most reliable?

The most dependable digital identity verification methods include:

  • Biometric verification: Leveraging machine learning, biometric verification offers robust security features like liveness detection, thwarting attempts by criminals to exploit static images or recorded voices.
  • Authentication apps: These apps generate temporary authentication codes unique to each user, enhancing security by adding an extra layer of verification.
  • Digital signature: Encrypting transaction data, digital signatures serve as an additional safeguard, ensuring the integrity and authenticity of online documents.
  • Combining secure methods: Employing a combination of methods, such as two-factor authentication or multi-factor authentication, provides the highest level of identity verification, offering enhanced protection against unauthorized access.

Two-factor authentication

Two-factor authentication, also known as 2FA or two-step verification, serves as an additional layer of security for your resources and data.

To access your account, you need to provide two forms of identification, such as a password combined with a security code, or a password along with some form of biometric authentication, like a photo. This dual authentication process ensures enhanced security; if one form of identification is compromised, the second serves as a backup.

Multi-factor authentication

Multi-factor authentication (MFA) functions similarly to 2FA but requires a minimum of two types of authentication instead of just two. For optimal security in your online endeavors, NordVPN recommends utilizing reliable authentication apps and security keys for your multi-factor authentication needs.

Which digital identity verification methods are the least reliable?

The most vulnerable methods for identity verification include:

  • Password. Relying solely on a password leaves you susceptible to hacking, especially if it's weak or reused across multiple accounts.
  • Knowledge-based authentication (KBA). Security questions can be compromised if someone else knows or easily discovers the answers.
  • Phone verification. Text messages containing security codes can be intercepted by hackers, compromising the verification process.
  • One-time passcode (OTP) verification. This method is vulnerable to various attacks, such as SIM swap fraud, phishing, and interception of communication channels.
  • For enhanced security, consider utilizing more reliable methods like two-factor authentication (TFA), multi-factor authentication (MFA), email verification, or social verification. Alternatively, explore the top methods mentioned above to bolster your account security. To learn more about safeguarding your personal data, refer to our article on detecting and preventing identity theft.

The future of identity verification

The digital identity verification sector is increasingly embracing biometrics as the primary method of authentication, offering heightened security and reducing reliance on physical identification.

With advancements in digital identity verification technology, concepts like traveling without a physical passport, making payments without a credit card, or renting a car without presenting a physical driver’s license could become commonplace. Instead, verification might rely on smartphones and biometric characteristics alone.

While the exact trajectory of digital identity verification remains uncertain, it's evident that digital identity verification is poised to shape the future of authentication.