Identity verification: What makes it an asset and why It matters

By Henry Patishman, Executive Vice President Identity Verification Solutions, Regula

It is safe to say that a steady majority of businesses have transferred their crucial operations into the online, including customer onboarding. Due to this, even those who considered themselves to have nothing to do with identity verification (IDV) were forced to adopt specialized software solutions to enable secure remote onboarding and user authentication.

Still being new in the IDV world, they sometimes perceive IDV solutions as commodities rather than assets. We consulted industry representatives to determine whether an IDV solution is a commodity or a valuable asset and why it deserves consideration. The findings were remarkable.

Commodity vs asset

First, let’s clarify the terms. In economics, commodities and assets are two sides of the same coin. A commodity is  a raw material that can be either used up in production or consumed as is. Oil, steel, or even everyday fruit are all classic examples of commodities.

On the flip side, there’s an asset that retains value through use. An asset is designed to deliver more value to the consumer than just the raw material it’s made of. All sorts of equipment are assets. So is intellectual property or business secrets.

With software, we unanimously agree to consider IT resources, such as servers, cloud, data storage, AI, and open-source solutions (although not all of them) to be commodities, i.e. those blocks onto which a company can build any solution it requires. This implies that the software deployed with the help of these resources has all the attributes to be a true asset. But does it really?

Not every IDV solution is the same

Depending on its essence and purpose, any software can be both a commodity and an asset. This also used to be true of IDV. However, the situation is starting to change.

“Businesses are increasingly viewing IDV solutions as vital assets rather than mere commodities. This shift is driven by the seamless integration of IDV with customer authentication processes, enabling smooth account access and secure payment approvals. The integration ensures a streamlined and customer-centric experience, while also supporting revenue-generating activities such as product upsells and new product adoption. Additionally, IDV’s versatility – from onboarding new customers to refreshing existing customer information and updating credentials – highlights its strategic importance in various business operations,” says Clive Bourke, President of EMEA and APAC for Daon. “As companies navigate the digital age, the strategic importance of IDV is set to grow, cementing its status as an essential corporate asset.”

To better understand how and why specific IDV solutions become valuable assets, let’s explore their main features in detail.

Optical character recognition (OCR)

This is probably a starting point when we speak about identity document verification. To be able to check the authenticity of a document and tell a genuine one from a forgery, an IDV solution should recognize it and read the data it contains. So, OCR is rather one of those “building blocks”, inherent to any IDV solution.

Still, the task stops seeming that easy when we deal with language nuances (like in Japanese documents) or some peculiar data fields (like dates in Thai IDs). Improper technology will not only create friction but might easily result in the potential loss of business opportunities in certain markets.

Document type recognition

This is supposed to be done by default. However, to speed up the verification process and eliminate errors in manual data entry, let alone the primary task of accurate document type recognition, an IDV solution should perform it automatically. The survey conducted by Regula in 2023 showed that the speed of document processing is highly important for every third business (33%) globally, and automatic document type recognition contributes a lot to this.

Alas, the reality is different: many solutions on the market cannot get the ID type recognition done without human involvement.

MRZ, barcode, and NFC verification

Machine-readable zones (MRZ), all sorts of barcodes, and RFID chips read with NFC technology are widely used throughout the majority of identity documents in various countries. Given that, IDV solutions should read and verify their data as well as in visual zones. In some documents, MRZs and barcodes are standardized and thus easy to check, which also sounds like a basic feature. But let’s not forget there are numerous IDs with their own formats, and they shall be verified properly too.

As for the chips, they can be read with a simple smartphone equipped with NFC technology, but how trustworthy is such a check? The answer is: barely, since mobile verification cannot prove that the chip data is not altered or substituted by fraudsters. As a result, the security of the whole IDV process is dubious, and thus it disrupts one of the main expectations of IDV implementation (according to Regula’s survey)–reduced security risks and fraud prevention.

Face matching

This technology is the basics of biometric authentication. By matching people’s photos (selfies in remote scenarios) with their portraits in IDs and/or other databases a company may have, the technology helps ensure you are dealing with a real customer, not a fraudster. As simple as this, face matching can be considered a commodity.

But what if we need to compare a face with secondary or ghost portraits in the ID (which should be found first)? If the face matching technology is not sophisticated enough to handle complex scenarios, it may lead to false negatives (rejecting legitimate customers) or false positives (accepting fraudulent attempts), affecting the trustworthiness and security of the identity verification process.

Liveness detection

An advanced technology to streamline and secure identity verification in remote scenarios. It’s gaining momentum for banks, government services, and the sharing economy, to name a few. The implication is simple and imperative–to ensure it’s a real document or person on the other end, not a printed image, masked face, spoofed identity, or any other kind of document or biometric fraud. In today’s reality of overall digitalization, this feature looks pretty much like one of many instruments that compile a larger IDV process.

But it’s the expertise-based quality of the technology that distinguishes between a real customer and a presentation attack that turns liveness detection into an asset. With 57% of businesses worldwide relying on biometric verification to detect and prevent fraud during customer onboarding (according to Regula’s survey “Identity Verification in a Globalized World”) the stakes are really high to accede to technology compromise.

“IDV is most definitely an asset we assemble from a broad range of software engineering commodities – data handling, image recognition, optical character recognition and encryption, to name just a few – that together make the whole much greater than the sum of its parts,” says Hal Lonas, Chief Technology Officer at Trulioo. “Just as there is tremendous value in getting IDV right, there are also reputational, financial and inconvenience consequences when it’s done poorly or viewed as a check-the-box step. It’s critical that we treat a person’s identity – and whatever we use to represent that identity – with the utmost care and regard in every interaction.”

What makes IDV an asset?

I dare to say that software, and IDV software especially, is much more than just impeccable code and intelligent algorithms. Its core differentiator and advantage lie in the expertise of the developer: its own assets, know-how, technical and human resources, experience. This makes IDV solutions either commodities or assets right at the moment of purchase. Let’s look at the examples in the IDV.

For instance, quite often fraudsters employ such a popular trick as replacing a photo in an ID. To detect this fraud with the help of an IDV solution (in remote onboarding, for example), the latter should “know” where exactly to search for inconsistencies. In this particular case, there is a strong necessity to compare all the portraits in the document, including the ones encoded in a chip and barcode, or added to a hologram. These portraits are called secondary or “ghost”, and fraudsters usually ignore them (because it’s not that easy to replace a picture there). The truth is not all IDV solutions can check secondary and “ghost” portraits and verify them for image consistency. One may ask, if this seems to be a must-have feature, why is it not performed by default by any IDV solution? The answer is: not all IDV developers have the required expertise.

In fact, certain IDV tasks can only be tackled by a small number of developers worldwide. For example, to build an algorithm that searches and compares all the portraits in an ID, a developer needs to know how these portraits are created and in which document zones are placed. Often, this information isn’t publicly available and can only be obtained from the authorities of a particular country.

“For me personally, the dilemma of buying a ready-made IDV solution or building your own from scratch has always been solved in favor of the first option. Even though financial service institutions are usually not budget-restricted, says Pascal Tavernier, Identity & Access Management Architect, Executive Director, UBS. “The journey toward creating a robust IDV system is not solely constrained by budgetary considerations; it delves much deeper into the realm of expertise. The knowledge required for such intricate tasks encompasses niche skills that are rare and extremely hard to find in the market. So, when you buy an IDV solution, it’s not only the technology you choose, it’s the expertise that makes this technology perform well.”

Surely, there are international standards, and vendors are definitely familiar with them. That is why the majority of IDV solutions will perform the verification of MRZ data in a passport. But there are a significant number of countries that issue documents in accordance with their own standards, and to be able to verify such IDs, it’s crucial to be able to recognize a standard first.

So, it’s all about the knowledge a developer has gained through the years on the market. It translates into unique technical expertise that makes IDV highly efficient and ready to use with minimum customization. In other words, it makes it an asset. For instance, knowing all about various types of IDs around the world allows a vendor to enable robust checks within its IDV solution and support a great majority of widely used and rather rare documents, so a customer will only have to “tag” the required checks in required IDs–with zero own development or complex data integration.

In the words of Gordon Wilson, VP of Identity Verification at Entrust: “Identity verification for us is the foundation of digital trust and security, serving as a crucial asset that forms the backbone of every digital transaction and interaction. Our commitment to investing and innovating in the IDV sector helps us equip our clients with sophisticated, state-of-the-art solutions that facilitate seamless, secure and user-centric experiences. We aim to ensure interoperability, choice, and flexibility for all customers, without operational disruption.”

To sum it up

Identity verification is a highly intricate process that varies significantly from company to company. Factors such as geography, target audience, existing software architecture, and security policies all contribute to a unique set of requirements. However, the days of treating IDV as a mere commodity due to its need for customization are long gone. Businesses worldwide are realizing that this mindset risks overlooking the complexity involved in selecting an IDV solution, potentially missing out on a truly valuable asset.

About the author

Henry Patishman is Executive Vice President of Identity Verification Solutions at Regula.

Article Topics

biometrics  |  digital identity  |  document verification  |  identity verification  |  Regula  |  selfie biometrics