Top 5 Challenges in Online Identity Verification

  • Richard Marley
  • December 17, 2019
  • 6 minutes read
  • 6359

The online ecosystem of identity management is more dynamic than ever before. It’s a flexible and interactive system that makes it possible to establish and manage digital identities. These are critical in acting as authentic proofs of identity for accessing modern sharing systems such as in ecommerce platforms, digital banking, travel services and more. 

As AI-based technologies expand to reach larger audiences, serve more customers and secure businesses, hurdles in digital identity verification have become more serious. Maintaining high security standards and meeting strict regulations are by far the most common challenges that separate bad actors from legitimate vendors. 

Here are the top 5 challenges in online ID verification facing organisations and service providers while striving to perform efficient and secure online interactions.

1. Presence of inefficient and costly identity regimes

Defining online identity verification

As a digital service, online identity verification is still beginning to pick up steam, and there are several variants of the definition of IDs and how they are verified. The basic idea behind screening identities is relatively simple, but, as online transactions have increased in complexity and volume, the concept of digital identity verification has developed more than one connotation. 

For different sources and channels, users are often uncomfortable in providing details for screening purposes. Often basic credentials such as name, address and official ID number are not enough to recognise a person and develop relevant profiles. Therefore, in order to gather relevant data, service providers need to act responsibly and make identity verification processes more transparent. 

Changes in online verification processes 

With a rising number of entrants into the identity verification market, as well as the nascent nature of the industry, processes in digital identity are not wholly linear. This subsequently creates market irregularities in terms of serviceability and reliability of identity services. Companies are constantly updating procedures in order to comply with state laws and regulations which are also evolving to meet growing data privacy needs across countries and industries. 

In order to mitigate security and compliance risks, companies will have to stay ahead of industry trends, and try to understand how best to manage identities in the digital economy. 

2. Hurdles in determining accuracy of identity verification

Repeated digital identity verifications

Performing accurate, efficient and customer-friendly verifications is central to maintaining a solid customer base, and establishing a brand as a trusted service provider. This points to the integration of a dynamic identity verification solution to perform repeated verifications and engaging large audiences. Fraud prevention through KYC processes are extremely relevant in this regard. Ongoing monitoring checks also involves vetting existing customers repeatedly for authenticity and reliability.

Technology and back-end support must therefore be updated, reflecting tangible resource investments in maintaining secure platforms. Not only does this secure new and existing customers, it saves lengthy efforts in fixing static solutions of identity verification. 


3. Solving data availability and management issues

Collection of Personally Identifiable Information (PII)

Tracing individual identity is an essential part of the verification process, requiring data points to be matched and cross-checked for high accuracy. This entails collecting personally identifiable information (PII), which is essential for firms to collect, but often make customers uneasy. Giving out basic credentials and data on credit history opens up a wide range of security risks, exposing personal data to the very real threat of digital hacks. 

Assuring the maximum level of security and enabling risk management will require identity experts to weigh in on the various data collection methods employed for online ID verification. Users must have control over data collection methods and the use of crucial personal details for online validations. 

Unavailability of data 

For high security and service standards to be accomplished, companies will need to look into solutions for online database development. Personal credentials and documents need to be cross-checked with official databases developed by state authorities. In the absence of such data sources, identity verification checks cannot be performed for the purpose of authentication or, for that matter, to refuse access. 

In the end, determining that someone is really who they say they are will require scores of data points, all verified against a reliable source, before it can be applied to the provision of digital services. 

4. Catering to data protection and privacy regulations

Strict identity verification regulatory requirements

With a steep increase in the application of online identity verification, regulatory requirements are also shaping up. Privacy evangelists are questioning the way personal data is collected, stored and screened in a variety of settings. This means that firms have to keep up with changing tides of policies and regulations. 

While digital technologies are huge enablers of customer friendly services, concerns around data security are also gaining momentum. International standards and regulations catching up with technological advancements and adding complexity to the equation. The GDPR, for instance, came into effect in 2018, and has been a central guiding source for regulated companies, especially to provide users with greater control over data. Similarly,  AMLD6 provides a framework to combat money laundering and terrorist financing, rolling out tougher penalties and liabilities for all entities. 

This is especially true for maintaining strict controls in the case of online gaming, dating, and gambling sites that house age-restricted content. Digital identity screening seeks to protect minors from all such services and from the threat of identity theft

High levels of diligence in identity systems is mandatory for firms to manage services effectively and ensure digital business growth. Security standards also need to be compliant and must reflect data sensitivities where necessary. 

5. Enhancing digital trust and customer experience

Working towards an industry competitive edge

Customers can bank on a number of digital service providers in the current online ecosystem. High risk transactions, suspicious data collection mechanisms and unfriendly interfaces are factors that easily put off both existing and prospective customers. Establishing trust in the market, and ensuring that a high degree of trust is tantamount to achieving long term business success. 

Opportunities in digital identity management rely on finding the right solution for the right user, and extending a helpful hand in dispute management. Services must be developed with a customer-centric approach in mind, and be standardised according to security standards. In the long run, online identity verification tools must deliver usability in the following areas:

  • Quickly and accurately screen digital identities
  • Provide users with data security and ownership
  • Perform repeated verifications for consistency
  • Safeguard against potential cybersecurity threats
  • Risk and compliance management for business growth

It all boils down to striking a balance between data management and identity needs, while keeping in mind customer sensitivities with regards to data privacy.