Evaluating the Potential of Digital ID Verification Systems in 2022
Identity fraud and synthetic identities are skyrocketing and collectively account for a loss of $721.3 billion in 2021. Cybersecurity is crucial for businesses and financial firms dealing with sensitive client data. With the growing number of high-profile data breaches and digital scams, millions of people are affected. However, digital ID verification has set a viable requirement for digital businesses.
“38% of online shopping crimes are the result of stolen identity. And with internet sales making up 34.5% of total retail sales in 2021, there is no shortage of opportunity.”
While the COVID-19 pandemic has transformed major business operations introducing remote processes, establishing trust among consumers and organizations is now inevitable. Be it a customer onboarding or business partnership, identity verification is vital for almost every operation.
The Current Digital ID Landscape
In this digitized world, an array of digital ID initiatives are emerging and the privacy challenges are ahead, yet not clear whether people are inspired, reticent or cautious. Digital ID is the movement to replace conventional identity documents with e-certificates and innovative infrastructures which provide seamless means of interaction with the digital economy. Particularly in Asia and Europe, efforts at public, as well as government levels, are underway. Other than that, Swedish financial institutions have also created digital identity cards that cover the majority of the population.
Despite numerous successful digital ID programs being introduced globally, yet there is inconsistency and a lack of mutual recognition between diverse approaches. Due to these reasons, it’s hard to forecast a time when one global digital identity system could be applicable in all or most nations.
Understanding The Risk of Digital ID
The concept of digital identity is more or less associated with technological innovations which could be used in both ways; either to benefit or to impose harm. However, a lack of regulatory control can push the criminals to fulfill their shady aims like breaching financial databases or taking over customers’ accounts. History is full of terrible examples of misusing conventional identification programs, mainly to track down ethnic and religious groups.
Thus, if the e-identity documents are created by stealing victims’ information can be used in targeted ways to either manipulate the digital ID verification systems or against the governments’ interests.
Conversely, some digital identity verification services are systematically designed with built-in privacy requirements like proportionality, data minimization, and well-defined processes together with regulatory standards, which are crucial to safeguard businesses from potential risks.
AI and ML are behind the initiative of Digital ID, which means it is inherently exposed to the risk already present in technologies that are utilized at a large scale. Whether data breaches at insurance companies or failure of technical systems, the regulatory bodies around the globe are grappling with a host of new risks related to the digital landscape. Technological mishaps could include problems in the functionality of hardware as well as software linked with Digital ID.
Cybersecurity threats also pose potential risks across the digital ID landscape and digitization programs. This means the data breaches will also significantly increase. In addition to this, changing regulations and constantly evolving business preferences are emphasizing data privacy for the digital ecosystem. Nonetheless, some risks linked with traditional ID programs also pour effects on digital identity. They include human intervention errors and unauthorized credential usage.
Some of the identity theft cases are as below;
California Paid Out $20 Billion in Fake Unemployment Claims
According to the pandemic relief fraud scheme investigations, around $20 billion have proceeded in bogus payments. The state prosecutors, Justice Department, and other regulatory bodies have found that large organized criminal groups are involved in these schemes to deceive the government as well as the identity verification systems.
However, due to fraudulent activities, federally-funded pandemic unemployment assistance programs that were created right after the Covid pandemic have been terminated. Scoot, a former US attorney, also stated that the fake payments won’t be recovered in any case.
Identity Fraud Skyrocketing in Australia Through BNPL Schemes
BNPL (buy-now-pay-later) schemes in Australia have given a spike to identity fraud and have increased the record of identity theft from 2020. Local police and regulatory bodies are called to check in this new emerging finance market. Australia is a pioneer in the BNPL scheme but it is facing growth in fraudulent complaints. An Australian NPO that works to aid the identity fraud victims and spread awareness regarding surging cases has seen 1600 identity theft through BNPL.
Capturing the Value of Digital ID Verification
Capturing the true value of digital ID verification has no certain means. Well-designed and effective regulatory requirements are needed to encourage the usage of digital ID. This automatically lessens the risk of customers’ data breaches and protects their online privacy rights.
To unlock the value of digital ID, various researches are conducted at individual and business level that proved, adopting digital identity verification solutions are worthwhile. But the ways of incorporating varies from nation to nation, however successful, as well as failed programs, render great lessons.
Discovering value while controlling risk depends on decisions made on the scope of use cases provided like system ownerships or program governance. Here are some of the crucial steps that companies or governments can go for to capture the value of digital identity;
- Governments must develop a legal framework to ensure worldwide acceptance of digital identities while protecting data privacy rights. By collaborating with global regulatory watchdogs, a standardized digital identity landscape can be developed.
- FinTech businesses can innovate the procedure by employing new technologies that could provide leverage in digital ID verification to enhance its effectiveness as well as increase customer experience.
How Can Shufti Help?
Digital identity verification is more than an approach to prevent online fraud. It is a regulatory obligation in most countries to comply with General Data Protection Regulation GDPR and California Consumer Privacy Act (CCPA) requirements.
Shufti’s AI-backed identity verification system verifies IDs of end-users while ensuring data protection according to GDPR, CCPA, and other regulations. Verification of government-issued identity documents, face authentication, and various other checks are performed in less than a second to ensure legitimate customer onboarding.
Shufti’s identity verification process involves the following steps:
- End-user uploads the government-issued ID document. This could be a passport, driver’s license, or ID card
- The document is verified for forgery or tampering
- The face of the end-user is matched with the image on the ID document
- Liveness detection checks are performed to prevent spoof attacks
- 98.67% accurate verification results are delivered in less than a second and stored in the back-office
Final Thoughts
2021 was exceptional for the digital ID verification systems as various solutions emerged as well as the government has also taken initiatives. However, 2022 will be a game-changer for digital identities as stricter customer rights will be legislated, companies will develop privacy-oriented system designs and several other opportunities will come up for businesses to counter identity fraud and various other crimes.
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