AI-powered identity verification: what businesses need to know in 2023

Even if you don’t want to admit it, doing business online in today’s environment poses a greater risk. Criminals are constantly on the lookout for vulnerabilities to exploit, including hacking, data breaches, and other types of fraud. So it’s clear that organizations need to invest their resources into training and effective security measures.

And that’s not an exaggeration. Security threats can compromise a company’s sensitive information and put their customers at risk, not to mention lead to various fines or revenue loss. Consequently, by prioritizing fraud prevention, businesses can avoid disastrous consequences and protect their reputation.

But one of the biggest challenges of doing business online as opposed to in-person remains the difficulty in determining the legitimacy of the user and their intentions. It can be especially challenging to identify whether a user is being truthful about their identity. This lack of face-to-face interaction makes it harder to ensure trust, sometimes leading to potential fraud or misuse of the digital platform.

So what should businesses do? In this article, we explore the modern challenges of balancing security and user experience with AI-powered identity verification.

What is identity verification?

Identity verification is a crucial process that involves confirming an individual’s identity to ensure they are who they claim to be. This process occurs during the customer onboarding phase when a new user first registers for a service or platform and may also be required periodically as an ongoing measure to maintain the user’s identity.

In terms of compliance, the process of identity verification is commonly referred to as the Know Your Customer (KYC) check. This term can also be known as electronic KYC or eKYC, which refers to using electronic verification methods, typically artificial intelligence, machine learning, biometrics, and all that jazz that makes up a typical third-party provider’s list of services that compile a robust identity verification system.

How does AI-powered identity verification work?

Block Chain

AI-powered identity verification gathers and verifies personal information when a new customer is onboarded to a platform. This data is often cross-referenced against trusted sources to ensure its accuracy. It’s important to note that the verification process may involve various data types, such as official documents like government-issued IDs or biometric data like facial recognition.

So once the customer’s data is collected, AI algorithms compare it against multiple datasets, including government records or credit references. This process ensures that the customer’s provided verification data is genuine, thus establishing trust between the organization and the customer. Consequently, that’s partly why manual KYC checks become the less popular choice for online businesses.

How did artificial intelligence transform verification measures?

Artificial intelligence has revolutionized how verification is carried out across various industries. Businesses have forgotten time-consuming, complex, and error-prone manual ID verification checks with automation. AI-powered solutions can quickly analyze large amounts of data and identify patterns and suspicious red flags that would take hours for compliance officers to detect.

That’s why integrating AI-enabled identity verification can offer various advantages to any business and its onboarding processes. Modern solutions automatically fill in form fields, minimizing the likelihood of entry errors and false negatives. For the end-user, the process is simple, usually lasting a few minutes.

What information needs to be reviewed during identity verification?

While providing a seamless customer experience is one of the top priorities, businesses must comply with rules and regulations when building their identity verification process.  With the increasing amount of personal data being shared online, it’s more crucial than ever to safeguard this information and prevent fraud.

That said, the basic requirements for identity verification differ depending on the measures used in the company’s verification process. However, most IDV solutions typically require customers to provide personal information as a minimum. That includes:

  • Name
  • Date of birth
  • Address
  • ID, passport, driver’s license
  • Social Security Number (SSN)
  • Taxpayer Identification Number (TIN)

The stigma around identity verification remains, especially when users are overwhelmed by the not-so-straightforward verification process. For instance, when opening a bank account, customers might be required to provide multiple forms of identification, such as the mentioned driver’s license, passport, or utility bills, which can take time to gather. If the business does not use AI or any form of automation, it can lead to delays in accessing services or products, which can be frustrating for users.

How to determine the level of verification a business might need?

Determining the most appropriate form of identity verification for a specific business is not a simple answer because it depends on various factors. They illustrate industry specifics, regulations that apply to that specific business, the level of risk associated with the business, user expectations, location, implemented solutions, and more.

Logically speaking, the verification process required for a financial platform will be more advanced and extensive than that for a standard online retail store. That’s because of the industry’s sensitive nature, the inherent risk of financial fraud, and stricter compliance requirements. Regulations such as KYC and AML require additional steps in the verification process, such as collecting, verifying, and reporting specific data.

Where is identity verification required?

Several industries must integrate identity verification to ensure the safety of their operations and comply with regulations. Some examples where IDV is mandatory include healthcare, education, travel, or blockchain.

Financial institutions, such as banks, lenders, insurance companies, or brokerage firms, must conduct identity verification during onboarding and ongoing customer monitoring. This helps businesses prevent fraud, including identity theft and money laundering. Companies that deal with age-restricted services or operate in e-commerce also require identity verification. This is necessary to prevent unauthorized access to restricted products or services.

Other points business owners must know about ID verification

Even though modern onboarding processes consist of a few steps, some users are not happy about the mandatory KYC checks, especially in specific industries, such as crypto. There, users value their privacy and anonymity, which is one of the core features of blockchain technology. And since identity verification requires users to disclose personal data, it makes some users feel uncomfortable.

Additionally, for some crypto users, the decentralized nature of cryptocurrency is a key feature, and they may view identity verification processes as contrary to the principles of decentralized finance (DeFi). That’s not all. Let’s imagine online gamers and gamblers who might not want to share personal information, especially if they feel like the platform isn’t doing the best job security-wise.

So if you’re operating in a KYC-compliant environment, you must stick to the rules and make a great first impression on the users, some of who are being onboarded and verified for the first time on your platform. There are several key points to remember when choosing the right  identity verification software:

Look for scalable, global IDV solutions

Consider whether the AI-powered solution can scale with your business as you grow globally and your needs change. Also, ensure that the verification software supports a wide range of documents to help your business comply with global and local regulations. This will help you handle a growing volume of verifications without sacrificing accuracy or speed, no matter the user’s location.

Research integration methods

Check how the potential verification service will integrate with your existing security systems and processes. Look for a solution that can easily integrate into your customer onboarding workflow with minimal disruption. By customizing the ID verification solution to fit your business’s needs and specific requirements, you can determine who meets the criteria for accessing your platform.

Choose high data security standards

As with any system that handles sensitive personal information, security is the key priority. Make sure that the ID verification service adheres to the latest security standards, such as encryption of data, and is ensured against potential fraudulent attacks. This way, you’ll build a secure and efficient onboarding process while minimizing the risk of fraud or non-compliance with regulations.


To verify an individual’s identity, various identifiers such as names, dates of birth, and addresses are cross-referenced with a trusted digital dataset and other third-party databases. Businesses that use manual verification measures struggle to onboard their customers on time, especially when discussing financial institutions and high-risk customers who need additional checks. To enhance the accuracy of the verification process, negative various data sets, companies can use AI-powered ID verification software and build a seamless experience for their customers.

By Gary Bernstein