By Alain Meier on January 14, 2020
The identity verification market is heavily fragmented, which makes picking a solution for your business an increasingly difficult task. To help you find the right product, we’ve compiled a comprehensive guide to the ID verification market to help you get a quick grasp of the landscape so you can make an informed decision.
We provide our own ID verification service, but have done our best to remain as honest, transparent, and impartial as possible when writing this guide. Our solution is perfect for many businesses, but that doesn’t mean that it’s right for every business. Our hope is that this guide will help make you an expert to enable you to build a world-class on-boarding flow.
When people talk about “identity verification”, they’re typically referring to one of two means of verifying identity: electronic ID verification, or documentary ID verification.
Electronic ID verification usually involves a user typing their data into a form, typically information like a name, date of birth, address, and some form of identifier like a Social Security Number, passport number and then that information is compared against a centralized database of information to verify authenticity.
Documentary ID verification typically involves taking a photo of a government-issued document such as a passport or driver’s license, and sometimes a selfie of your customer holding the aforementioned document and verifying that the document appears to be authentic and not a forgery.
Variations of both of these types of IDV exist, which we will go into later in this guide, but that is broadly what those terms refer to.
A major point of confusion that we have seen among buyers is a misunderstanding of the difference between verification and authentication, and the role that each play in picking a solution.
Verification is the act of ensuring that information provided is factually correct. For example, to make sure that the name John Doe is real and associated with the SSN 555-55-5555 and address 123 Main St.
Authentication is the act of ensuring that the supplier of the verified information is actually the person referenced in the data. Did John Doe just submit that data, or was it really Peggy Sue who submitted it?
Though not every company needs both verification and authentication, the majority of use cases will mandate both.
Determining Match Rate
A “match rate” means “given a set of my customer data, what percentage of this data would be able to be verified by this solution?” Navigating match rates between vendors can be very difficult as every business measures them in a slightly different way, and some vendors use deceptive models in order to maximize the perceived match rate. In the real world, data is imperfect; people typo their name, they leave out apartment numbers for their address, offset a number in their Social Security Number, the list goes on. The important first step to comparing match rates is to thoroughly understand a vendor’s methodology and what they do to handle for edge cases. Ask what it means to be a match and what those similarity thresholds are.
Electronic ID verification solutions are typically based on some derivative of past credit history as one of the primary data sources, which means that they can struggle for specific demographics. That is not to say that no solutions can cover these demographics, but it means that the solution needs to be supplementing their information with more than typical credit bureau data in order to achieve the best results. If the following demographics are particularly common in your business, they should be a key area to test and enquire about when scouting a solution:
Understand Uptime and Outages
It is crucial for your identity verification solution to have a strong uptime, as that will directly affect your ability to onboard new users in real time. Ensure that a solution has an uptime of at least 99%, and that there is a clear and defined notification process in the event of an outage. Who will be notified, and how?
Support and SLAs
A good support team can make or break the integration of an identity verification solution, and ensure your ongoing ability to verify users. Fast response times, easy to follow instructions, and helpful insight along the way, can be instrumental. It is generally a good idea to ask the providers you are considering, how they handle support. SLAs (Service Level Agreements) are also an important consideration. If there is an outage, most providers will provide a Service Credit.
API and Documentation Availability
Always review API documentation thoroughly when evaluating an IDV provider. Strong documentation gives your team a deeper understanding of the API, its flexibility and how it will fit into your flow best. It will also help you determine the resources that each solution would require for you to build out an integration. If it is not transparently available on the website, you should ask for a copy of it.
User Conversion Rate
When selecting a provider, more should be considered than just their ability to verify an identity. What is their approach to identity verification? What is the impact on user experience?
Documentary style verification introduces a high amount of friction in your funnel, because users are generally uncomfortable taking a picture of their driver’s license, or do not have immediate access to it. The same applies to facial recognition.
KBA (Knowledge-Based Authentication) style verification also introduces a high amount of friction as it has been found that recollection of information is actually a major pain point for legitimate users looking to verify themselves, and can often result in incorrect inputs.
Any amount of friction introduced during the sign-up journey, will have a negative impact on your conversion rates.
Your use case, and legal requirements should carefully be reviewed in order to make the right choice. Although documentary and KBA style verification makes little sense for a modern business that has a focus on both user experience and security, they can be the right choice in some situations. Remote notarization services are required by law to employ KBA style verification for example.
Regulated vs Unregulated Data
Identity verification solutions will typically rely on either regulated data(from trusted sources, and can not easily be modified by the end user) or unregulated data(from alternative sources like social media scraping, and can easily be tampered with by the end user). Unregulated data can be leveraged when there is a need to verify identities in countries with a less robust identification and data system, but makes less sense when looking to verify residents of a more developed country like the US, as it can lead to false identification. Using a solution that relies on regulated data, will help ensure the validity of your decision-making, and give you confidence when choosing to do business with someone.
Electronic IDV solutions tend to have lower coverage outside of the United States than documentary solutions because they require access to country-specific information databases. Every country has its own set of data laws and information availability, which can make results highly variable. Not only is there variability in the depth of data, but there are also varying sets of information available. For instance, some countries will only be able to match against name and address, and not against date of birth or identifiers like passport or insurance number.
When trying to grasp what a vendor’s country coverage looks like, here are some important questions to think about and ask:
We’ve helped countless clients tweak their on-boarding flow to reduce fraud, increase conversion rates, and decrease manual reviews, and there’s one major lesson that we’ve learned that holds true regardless of which solution a customer lands on: stacking verification approaches will almost always yield the best results. Using one approach alone unfortunately requires compromising on one of 1) conversion rate / speed to verify, 2) pass rate, 3) cost, or 4) coverage.
Here are a few example scenarios and our suggested solutions in order to get the best results:
Scenario 1: Need to verify US-only customer base. Low friction electronic ID verification as the top of the funnel (like Cognito), followed by documentary verification as a fallback.
Scenario 2: Need to verify international customer base with US focus: Low friction electronic ID verification for the US (like Cognito), a standard international-focus electronic ID verification solution for non-US countries, and finally a documentary verification as a fallback for every country.
Scenario 3: Need to verify international customer base with no specific country focus: A standard international-focused electronic ID verification solution, followed by a documentary verification as a fallback.
If you enjoyed this guide but still have questions about the identity verification process, or want to learn more about our approach to ID verification, please reach out to our team!
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