Are you managing a product or service that captured a niche in your home market and now moving out, expanding into new markets? Is your existing identity verification solution not working outside your home market? Or are you managing something born global, and require a scalable solution for identity verification or meeting new compliance demands, for example with respect to anti money laundering? In this article we outline the five major types of solutions that can be used for global identity verification.
Local Identity Verification Solutions - a Barrier to International Expansion
For businesses that need to do some kind of identity verification to prevent fraud when onboarding new customers, going cross-border is often a real pain. In most countries there is at least one type of established local service for identity verification. It can be a private service with high adoption (like BankID in Sweden), a public service with high adoption rate (like MitID in Denmark) or a process that is commonly used (like showing an identity document in an online video meeting in Germany). In practice, none of these services work well when you go beyond the legal borders of the market.
Identity Fraud and Increasing Regulatory Compliance Demands on Global Firms
Even for firms born global, identity verification and fraud prevention might be a challenge. Is the person on the other side of the screen who they pretend to be? Threats from identity fraud are increasing, as well as regulatory requirements on anti-money laundering (AML) measures and control of politically exposed persons.
This contributes to an increased need to verify the identity of users of global products and services. Previously the may have been well off with two-factor or other authentication solutions with lower levels of assurance, but achieving AML compliance may force you to be more certain who you are dealing with.
So what to do for a business that is expanding? Continue to read to learn the 5 most common approaches.
5 Common Approaches for Your Expanding Business
Solution 1: Continue to Verify Identity Documents Manually
Many companies will try to solve this problem manually when they’re first getting started, hoping to go under the radar of authorities and legal requirements and/or setting up onboarding staff that manages new users. There are also large, global e-commerce actors who still rely on manual verification of the identity of sellers. You can take the risk with an internal application process, where you verify identity documents manually. For example you can have customers email scanned copies or present identity documents on the screen in web meetings. This can work for a while when starting in a new market but does not scale, will cost more money, and is very difficult to manage from a compliance perspective.
Solution 2: Use Local Verification Services and Integrate Market by Market
If you have built an integration to an identity verification service in your home market, you might continue doing the same in each new market you enter. The challenge is that most local services differ in terms of technical architecture and process, data delivered etc. This means that the business will need to build and manage an ever-increasing complexity of local solutions, with high maintenance cost and high risk.
The adoption rate of local solutions also vary a lot, with countries in Northern Europe presenting high adoption rates for local solutions, whereas in the rest of Europe and other parts of the worlds, you cannot rely on finding a well-established local solution for identity verification.
Solution 3: Orchestrated Identity Verification Solutions
To avoid building internal, costly maintenance, you may opt for integrating with platform companies that offer orchestration (Khan, 2022) of several identity verification services from different vendors. These actors have partnerships and offer a platform with a range of local products and services for different markets. Doing this, you reduce the complexity in your IT architecture, you only need to use one tool, and establish one interface towards the federated service.
However, costs are typically high and, because the local services will differ in terms of data access etc, coverage will vary between regions. Also, many countries don’t have a dominant identity verification service, meaning that many potential customers will still be at risk of being shut out of your service.
Solution 4: Use an ID-Selfie solution to Verify Identity
To get truly global coverage you can use a global “ID-selfie” solution for verifying the identity document of the customer, which might be e.g. international passports. There are several large players in this market and it has grown significantly during the last few years. All these services work as a SaaS solution that you implement in your own onboarding flow.
They deliver a workflow for customer interaction where users photograph an identity document of choice, take a photo of themselves and the service then does a matching. Good services use an automated matching algorithm and add a liveness check. This is a fraud prevention technique to avoid spoofing, i.e. a type of identity theft when a malignant actor holds up fake photograph of the user, in combination with stolen id documents.
The advantage is the ability to provide a seamless customer experience, but there are also challenges with respect to cost, compliance and that the identity verification is a one-off that is disconnected from later user authentication.
The typical fully loaded price per transaction is around €1.5 for a basic identity document verification, and higher if more data is required. ID-selfie solutions act as data processors for their customers, which means that all fraud and compliance risk stays with the business. And since it is a stand-alone SaaS that is run separately from other authentication processes, re-verifying identity with a substantial assurance level is complicated.
Solution 5: Digital ID Wallets - The Future of ID Verification?
A fifth option is to use what is commonly referred to as a digital ID wallet. These make it possible for users to build a digital, globally transferable customer identities in a user-held app and freely share it with businesses. The idea is described by identity experts in Web3 as Decentralized Identity, and more generally it has been formulated as the concept of Self-Sovereign Identity.
The advantages for businesses of a digital ID wallet are many: A company can onboard a user who holds such a digital identity in seconds, radically improving customer experience compared to e.g. ID-selfie solutions. The same solution can then be used for any user authentication, e.g. login and signing, with the same assurance level as the identity verification, since the identity is already verified.
The main cost of identity verification occurs when different evidence processors are run, meaning that the transaction cost per business onboarding can be much lower and still be economically viable. And since the user is only sharing data through active consent, all typical data compliance requirements will be managed automatically when using the service. Another advantage is the opportunity to load the ID wallet with additional points of data, and documents, such as proof of address, power of attorney, or other forms of information that are used combined with the identity.
Identity Verification: A Choice Between Local Standard and Global Coverage
Out of the different ways that businesses can grow cross-border when identity verification is important, the first-best solution is still not an established standard. This implies that you have the choice between either trying a rather new solution in the market, such as an ID Wallet, or settle for second-best solutions that are associated with disadvantages such as coverage, cost or compliance.
Among the second-best alternatives, going for an orchestrator service is the choice if your business is only going to be present in a few markets, and accepting the cost. Going with and ID-selfie provider is your choice if global reach is important, but you need to accept higher costs as well as compliance issues.
Read More About how to Choose Between Identity Verification Solutions!
Curious on which criteria can be used to evaluate and choose among these solutions? Read our next article and get access to a free pdf table for evaluating these 5 different solutions!
A. Khan, “Innovation Insight: Journey-Time Orchestration Mitigates Fraud Risk and Delivers Better UX,” Gartner.com, 10-Jun-2022.