Biometrics, KBA and Beyond: 7 Online Identity Verification Methods to Help Your Business Soar


Identity theft is on the rise, and recent statistics show that many of these cases involve financial institutions. Fraud perpetrated by identity thieves is costly to organizations, consumers and regulatory agencies. A pattern of fraud, and a failure to guard against it, can even endanger the existence of your company. This is why the Federal Trade Commission enforces the Red Flags Rule that requires companies to take steps to prevent identity fraud. Learning how to verify identity online is critical for any bank or financial services company that wants to attract and sign up customers online in a safe, secure way.

Online Verification Remains a Challenge

Online sign-ups are the lifeblood of many banks and financial service companies. While some business still operate in-person, consumers and businesses alike prefer the convenience and speed of online customer onboarding. Identity verification, on the other hand, remains a challenge, especially when failing to integrate fraud management systems across multiple platforms and relying on outdated technology.

The problems with these drawbacks is that online identity verification method failures can allow the creation of fraudulent accounts. Failures have other consequences as well: When an account sign-up is flagged as fraudulent or in need of manual review, consumers may feel offended or lose interest and, in some cases, simply abandon the onboarding process. Both consequences harm your business, which is why it is important to choose your verification system carefully.

7 Online Identity Verification Methods

There are several different ways that financial institutions and businesses verify the identity of new and existing customers. The use and popularity of these methods have varied over the years. Below are some of the most common methods currently in use.

  1. Biometrics

    As its name suggests, users verify their identity using their physical body. Biometric systems establish positive identification using the consumer’s voice, a facial or iris scan, or their fingerprint. While this type of verification may seem to be a no-brainer (everyone has different fingerprints, right?), it has its issues.

    For one thing, it isn’t foolproof. It has become increasingly easy to get a scan of someone’s fingerprint, a picture of their face, or a recording of their voice via social media or security systems they already use. Another issue is that many consumers can be highly suspicious of systems that depend on such personal data and simply won’t complete the verification process. However, when used with the other verification methods, biometrics compliments the process and works strategically to verify user identities.

  2. Knowledge-Based Authentication

    Anyone who has been online for a while is well aware of this granddaddy of identity verification; knowledge-based authentication (KBA). Upon sign-up, new customers are asked to answer straightforward questions such as their mother’s maiden name, the name of their childhood pet, or the name of their favorite teacher. Should the customer return to change their password or regain access to an account, they will have to provide accurate answers.

  3. Credit-Bureau Verification

    Some financial institutions and government agencies now use credit bureau verification as a way of establishing someone’s financial identity. After filling out an application, the credit bureau verification system generates questions based on information included in the customer’s credit report. Typically, the answers required are fairly obscure. For example, the consumer may be asked to identify old addresses where they may have lived 20 years ago, a former employer, or even the name of a creditor.

    Credit bureau verification can be highly effective but does require that the consumer have an active credit file that has a significant amount of information with which to work. This means that credit file verification may not work for young people, recent immigrants, or those who have had to freeze their credit files due to identity theft or security concerns. In addition, credit bureau information can be inaccurate, which could cause the process to fail and require a manual review.

  4. Two-Factor Verification

    Two-factor verification is a popular alternative to methods that require a user’s personal information. Users sign up for an account, and a numeric code is sent to one or more of the user’s contact methods to verify the account and, hopefully, the identity of the user. While the system can be particularly effective at preventing scammers from accessing established accounts, it can be limited in verifying the identity of new customers. After all, an identity thief may only need to gain access to the cell phone or email address of their target to effectively use two-factor verification during a sign-up process. It can also be possible for sophisticated hackers to intercept messages between your systems and the customer’s device.

  5. Government ID Verification

    Government ID verification is shared between in-person and online account creation processes: the presentation of a government-issued photo ID. The online process typically requires a scan of the ID and, in some cases, a photograph of the customer holding the ID next to their own face. This is another effective method that many customers simply aren’t comfortable with. They’ve received enough warnings about sharing personal data that they simply aren’t willing to provide a full scan of a sensitive document to a private company.

  6. Document Verification

    Document verification allows organizations to assess the validity of documents that can prove a customer’s identity, address or financial situation using personally identifiable information (PII). These documents might include utility bills, leases, home titles or bank statements. Consumers can take a picture of these documents using a smartphone and then upload them securely to the company’s servers for analysis. While these supplemental documents can be very useful in confirming identity, many consumers can be hesitant to provide so much information to another company. Consumers may also be concerned about the risk of transmitting documents through networks that could be compromised.

  7. Geo-location

    Geo-location verification uses device and network verification, including IP addresses and botnets, to determine the location of a customer. This allows systems to identify behavioral patterns, relationships between the consumer and other people (such as family members), and can detect red flags showing that a consumer is not where he or she says they are or that the consumer is using software to conceal their identity or location. 

Instnt Accept™: The Ultimate Way To Verify Identities and Onboard Customers

Using just one online identity verification method alone is not enough to verify user identities. That’s why you need a managed provider who utilizes different measures to complete the onboarding process quickly and successfully, helping you gain new customers, reduce fraud and increase revenue

Instnt Accept™uses a combination of biometrics, user behavior verification, document verification, geo-location and other measures to verify your customer’s identities and sign them up safely. Not only do we provide a safe and secure process for verifying identity and reducing the need for manual review, but we also offer a guarantee that protects your business with fraud loss indemnification. Get in touch today to schedule a free demo.


About the Author

Instnt's fraud loss insurance platform offers comprehensive protection for businesses for the entire customer lifecycle, from account initiation, and onboarding to subsequent logins, transaction processing, and the broadened accessibility of additional products and services.