What is identity verification (IDV)?

Learn what IDV is, explore how it works, and take a look at the different types of identity verification you may choose to leverage in your business.

A flowchart of identity verification steps.
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⚡ Key takeaways
  • Identity verification is the process of confirming that somebody is who they say they are. It typically occurs during the onboarding process, and then in an ongoing fashion as necessary.
  • Not all businesses are required to verify their customers, but any business that operates online can benefit from implementing IDV processes.
  • Identity verification methods include documentary verification, digital ID verification, database verification, and selfie verification.

Doing business in what has become an increasingly online-first world comes with its challenges.

One such challenge is the fact that when you do business online vs in person, it can be difficult to know if and when your customer is telling the truth — about who they are, as well as about their intentions for making a purchase, opening an account, or otherwise leveraging your platform.

This challenge unfortunately creates the possibility for a range of criminal activities, such as identity theft, money laundering, and fraud.

The good news, however, is that there are ways you can protect your business — and your customers — from this threat. Implementing robust and thorough identity verification processes is one of those ways.

Below, we define identity verification, explore how it works, and discuss its role in the digital economy. We also take a look at the different types of identity verification you may choose to leverage in your business and answer other commonly asked questions.

What is identity verification?

At its heart, identity verification is the process of confirming that somebody is who they say they are. In other words, it’s the act of quite literally verifying an individual’s identity. Identity verification typically occurs during the onboarding process, and then in an ongoing fashion as necessary.

Businesses can approach identity verification in a variety of ways. This includes in-person identity verification, remote identity verification that requires the individual to submit hard-copy documents, and digital identity verification.

When most people think about identity verification, they’re thinking about digital identity verification (also sometimes called electronic KYC or eKYC). As such, we’ll focus primarily on digital identity verification in the remainder of this article.

Identity verification vs identity authentication

Identity verification and identity authentication are two related, but distinct, concepts.

While identity verification is concerned with determining whether somebody is who they say they are, identity authentication is concerned with determining whether a user should have access to specific actions, information, or services. While identity authentication may leverage some of the same technologies as identity verification, it largely depends on measures such as:

As a general rule of thumb, identity verification occurs during user onboarding and then in an ongoing manner as necessary. On the other hand, identity authentication usually occurs after the user has created an account, such as when they want to sign in again, wish to initiate a specific action or service, or need to access protected information.

How does identity verification work?

Identity verification comes in many different forms, which we’ll discuss in greater detail below.

That being said, virtually all forms of identity verification work by comparing user-supplied information (such as the individual’s name, address, date of birth, Social Security number, etc.) against a verified dataset, such as a government-issued ID or third-party database.

Identity verification can leverage active signals, which are provided directly by the individual; passive signals, which are provided by the user’s device; behavioral signals, which look at how the user interacts with an online form or application; and third-party data, which is provided by government entities, private businesses, and other authoritative issuing databases.

Identity verification methods

As mentioned above, a user’s identity can be verified using a variety of different methods. Because each of these methods has its own strengths and weaknesses, it’s often prudent to leverage more than one method. Documentary verification, digital ID verification, database verification, and selfie verification are amongst the most common forms of identity verification today.

Documentary verification

Documentary verification requires the user to take and submit a photo or upload a digital scan of documents.

Many businesses require their users to submit a government-issued photo ID, such as a driver’s license or passport. However, additional documents can also be leveraged for verification, including but not limited to:

  • Birth certificates
  • Social Security cards
  • Permanent Resident Card
  • Certificate of Citizenship or Naturalization
  • Utility bills/mail (for proof of address)
  • Employment records (like a W-2 or pay stub)
  • Business documents

Digital ID verification

Digital ID verification is a form of electronic identification that verifies digital copies of official IDs, such as mobile driver’s licenses (mDLs), which are stored in a digital wallet on the user’s smartphone or mobile device.

Digital ID verification can bring a number of benefits to your verification processes. First, it can be used to automatically populate form fields, which can reduce the instance of entry errors and false negatives. Second, because the digital ID has already been verified by the digital wallet app in which it is stored (and typically protected via security measures such as FaceID or a fingerprint scan), allowing users to submit digital IDs can streamline your verification processes and reduce friction.

Database verification

Database verification involves checking user-supplied information against trusted third-party databases to ensure that it is accurate.

Exactly what database(s) you choose to leverage as a part of your verification processes will depend on the information you have chosen to collect. That being said, databases are typically grouped in two main buckets:

  • Issuing databases: These databases are maintained by the organizations that issue a form of identification, such as a Social Security number or driver’s license. Examples of issuing databases that can be leveraged in identity verification include AAMVA (for DMV records) and TIN (for IRS records).
  • Authoritative databases: These are also trusted databases that store information about an individual. The key difference is they do not create the information, but instead aggregate it. Credit bureaus, financial institutions, and phone carriers are all examples of authoritative databases.

Selfie verification

Selfie verification is exactly what it sounds like: a verification process that requires the user to submit a real-time selfie or series of selfies, which are then analyzed for liveness and often compared against a government-issued photo ID.

Selfie verification is primarily used as a means to identify and prevent spoofing attempts.

Is identity verification required?

The answer to this question will depend on the industry your business operates within.

Financial institutions — such as banks, insurance companies, lenders, brokers, and more — are subject to the tenets of the Bank Secrecy Act. As such, they must verify their customers’ identities during onboarding and continually monitor customer activity in order to mitigate the risk of identity theft, money laundering, and other financial crimes.

Identity verification is also required for businesses that deal in age- or location-restricted e-commerce, such as iGaming platforms and alcohol delivery apps.

But the reality is that virtually any business that operates online can potentially benefit from implementing identity verification processes. Social media and dating apps can, for example, leverage identity verification to promote the safety of their users and mitigate fraud. Likewise, online marketplaces that don’t deal in restricted commerce can use identity verification to protect both buyers and sellers that leverage their platforms. And online learning platforms can build legitimacy and trust by implementing verification processes that ensure the person holding a degree or certificate is the person who actually completed the coursework.

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Identity verification and your business

Whether you need to comply with AML and KYC regulations, build trust with your users to strengthen the appeal of your platform, or simply mitigate the risk of fraud and financial crime, identity verification solutions can help you meet your goals.

Here at Persona, we understand that identity verification isn’t one-size-fits-all. That’s why we allow our users to tailor their verification processes based upon their own unique needs. Our Verifications solution allows you to build the perfect process for your business by mixing and matching documentary verifications, selfie verifications, database verifications, and digital ID verifications as necessary.

Interested in learning more? Start for free or get a demo today.

Frequently asked questions

Are identity verification and KYC the same thing?

While the terms identity verification and Know Your Customer (KYC) are sometimes used interchangeably, they are in fact separate concepts related to anti-money laundering (AML) regulations.

A more accurate way of describing the relationship between identity verification and KYC is that identity verification is just one part of the KYC puzzle. Other important components of KYC include customer due diligence (CDD), which involves assessing customers for risk, and continuous monitoring, which involves monitoring individuals and their transactions over time and reporting anything suspicious.

What is needed for identity verification?

Exactly what is necessary for identity verification will depend on the verification methods you leverage as a part of your processes. That being said, most forms of identity verification will, at a minimum, require the user to provide their:

  • Name
  • Address
  • Phone number
  • Date of birth
  • Social Security number (SSN) / Taxpayer Identification Number (TIN)
  • Government-issued photo ID

Depending on the processes you use to verify this information, you may require the user to provide additional information or complete additional actions — for example, uploading a selfie or supplemental documentation, etc.

Where is identity verification used?

Identity verification is most commonly used by businesses operating within the financial industry — such as banks, lenders, insurers, etc. — which are subject to AML and KYC regulations. That being said, it is also increasingly being leveraged by e-commerce websites and platforms as well as forums, social networking platforms, i-Gaming providers, and other businesses that want to reduce instances of identity theft and fraud on their platforms.

Identity verification can be leveraged in a variety of ways by your business.

Most commonly, identity verification takes place during account creation and customer onboarding. Beyond this, however, identity verification techniques can be leveraged for your business’s ongoing authentication and reverification needs.

What is the best form of identity verification?

Unfortunately, there is no answer to this question that will apply to all businesses or use cases. The best form of identity verification for your business will depend on a variety of factors, including:

  • The industry your business operates within
  • The laws and regulations your business is subject to
  • The level of risk inherent to your business and industry
  • The expectations and willingness of your customers or users
  • Where your users reside and what technology they have access to
  • How much friction you are willing to introduce into your processes
  • The action the user wants to take (e.g. changing their password or withdrawing a large sum)
  • and more

That being said, in most cases, it is recommended that you build a robust verification process that pairs multiple types of identity verification together, as this can help to cover the “gaps” inherent in each specific type. Additionally, progressive risk segmentation allows you to tailor your verification processes in a case-by-case situation depending on the level of risk inherent in each case.

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