A Risk-Based Approach to Identity Verification

Regulators are increasingly turning toward a risk-based approach, as opposed to prescriptive measures, for many areas of compliance. For example, the Financial Action Task Force (FATF), an inter-governmental body that sets international goals for Anti-Money Laundering (AML), states that “the risk-based approach is central to the effective implementation of the FATF Recommendations.”

The risk-based approach is also essential for identity verification, creating a powerful model to deliver the right solution. The video above examines the risk-based approach as it relates to identity verification. It’s part of our video series, Buyer’s Guide Series to Digital Identity Verification Solutions, to help you navigate the identity verification landscape.

Varying risk profiles

Every identity verification is different. The business, use case and customer are all different, so the level of risk for a verification varies. By using a risk-based approach, the method you use to verify a customer matches the risk level.

Risk levels can change as technology, regulations, consumer behavior and criminal activities evolve. Optimizing the performance of your identity program by using flexible verification methods allows you to be agile –– and adjust your approach as business needs change.

If your business takes a risk-based approach to compliance, fraud, and trust and safety, you need an identity verification solution that’s flexible and able to adapt.

Multiple verification methods

Numerous techniques can help verify an identity such as:

• Digital identity verification – comparing identity data to reliable and independent data sources
• ID document verification – capturing, analyzing and authenticating identity documents
• Biometrics – comparing biometric information such as face, voice or fingerprint to records

Each verification method has its advantages. For example, digital identity verification allows consumers to quickly and easily apply online or on a mobile device. For service providers, this technique satisfies the regulatory compliance and fraud prevention measures necessary for financial services and payment companies. An organization’s bottom line also benefits from lower costs achieved through better processes and customer experiences by quicker, smoother onboarding.

ID document verification recognizes different identity documents and performs comprehensive algorithmic-based checks on thousands of global document types. When you get a positive match on an ID, you then can have confidence the document is genuine and not a forgery. An authentic document, however, doesn’t automatically imply identity verification. Someone could have a forged document with false identity information.

Combining these methods, or adding in biometrics or another authentication layer such as possession of a mobile device, enables you to check multiple facets of a customer’s identity to reduce risk.

In practice, matching the method to the risk level means creating custom verification workflows based on the type of customer and transaction.

Balancing risk and speed

Depending on the risk profile, it might be prudent to use numerous types of identity checks upon the initial onboarding. Or, perhaps a quick verification fits the specific profile better, allowing the customer to sign up and start transacting with a minimum of friction. As the profile changes due to customer activities or other signals, further identity checks can always be requested later.

Effective onboarding processes balance risk and speed. If the process is unreasonably slow, complex and invasive, abandonment rates can go through the roof. But if you water down your verification process, you could expose your business to fraud and non-compliance.

With a flexible, holistic identity verification solution, you can customize the verification workflow to fit the level of risk and minimize friction. Your new customer onboarding experience –– the first tangible touchpoint with your business –– can be a positive one, all while maintaining compliance, trust and safety.