Digital Identity: All you need to know

Digital identity is the information or data that describes a person in the digital or cyberspace. This information is personal and cannot be transferred so only the owner can access it and use it. When this information is gathered together, it can be used to trace an individual or business footprint in the digital space. Also, by combining this information, businesses can create a digital profile that verifies a customer's identity and allows them to access services and goods.

In the last years, the world has continued to incline digitally creating better opportunities, but this has also given room for fraudsters to come up with more sophisticated fraudulent activities online. Hence the increasing need for digital identity verification solutions.

We will take you through everything you need to know about digital identity including the types, examples, why it is important, how to secure your digital identity and how to verify the identities of people (customers) and other businesses.

What are the Types of Digital Identity?

The types of digital identification people can use to identify themselves online include unchangeable attributes that can describe you such as (fingerprint, iris scan, date of birth) assigned attributes such as (social security number, ID card, passport) and accumulated attributes collected through an individual's online activities such as (browsing history, purchase history, and social media profiles).

There is also a type of digital identity that focuses on specific permissions rather than a complete picture of an individual. They use digital tokens or certificates to grant access to specific resources or services. This approach is often used for online transactions or access control within organizations. This brings us to digital identity examples.

What are the Examples of Digital Identity?

Examples of digital identification include personal information such as name, date of birth, email address, social security number, passport number, username and password. This personal ID information makes it possible for businesses and individuals to verify the identities of those they are transacting with.

Why Digital Identity is Important?

Digital identity is important because it allows you access to online banking and shopping, government services and social media. Without a verified digital identity, you might not be able to do these things

A strong digital identity is also important as it makes it difficult for fraudsters to impersonate you, protecting you from fraud and identity theft. With this, businesses and customers can be certain of who they are dealing with and prevent scams. 

What are the Benefits of Digital Identity?

Would you rather go physically to a place to verify your identity when you have the option of doing that in the comfort of your home? 

1. Convenience:

Digital identity offers convenience when compared to the traditional method of offering physical ID items as the only means of identification. 

2. Security Against Fraud:

Increased security and fraud detection that can be done digitally is another benefit of digital identity over traditional identities. The improvement in technology has allowed verifying identities to be more secure and faster. An automated AI-powered digital identity verification eliminates the need for manual verification, such that your employees can not only face other important things, but you also get to onboard customers faster. This also eliminates the possibility of error during customer onboarding. This is why businesses should automate their customer onboarding process. Our article on the digital onboarding process explains the steps involved in the digital onboarding process.

Read on how AI-powered ID verification can help you fight digital fraud.
 

What is the Impact of Digital Identity?

Digital identity has a big impact on our lives in both positive and negative ways. See what we mean:

Positive Impacts: 

1. Convenience: Digital identities make it easier to access all sorts of online services, from banking and shopping to government stuff and social media. No more carrying around tons of paperwork or waiting in long lines.
2. Security: When done right, digital identity verification helps prevent fraud and identity theft. It makes it harder for bad actors to impersonate you online.
3. Economic Benefits: Studies suggest digital IDs can boost economies by making financial transactions smoother and increasing access to services for everyone. This can be especially helpful in developing countries.

Negative Impacts:

1. Privacy Concerns: There's always a risk that digital identity information could be misused or hacked. It's important to be careful about what data you share online and who you share it with.
2. Exclusion: Not everyone has access to the technology or resources needed to create and manage a digital identity. This could leave some people behind in the increasingly digital world.
3. Government Control: There's a worry that governments could use digital IDs to track and control their citizens. It's important to have strong regulations in place to protect privacy rights.

Read Also: Trends in Digital Identity Verification in Nigeria, South Africa, Europe, UK, and Canada.

What are the Common uses for Digital Identity?

The common use cases for digital identity include:

1. Opening Bank Account

For online banking and other financial services, verifying your identity is practically a non-negotiable step. Banks now leverage digital identity verification. This technology allows new customers to open accounts by simply snapping a picture of their valid ID, followed by a quick facial scan to confirm it's the rightful owner presenting it.

2. Age Verification:

From driving licenses to alcohol purchases, many services have age restrictions. Digital identity verification ensures businesses can confidently serve customers while complying with age verification laws.

3. High-risk Transactions

For high-value transactions, such as large money transfers, an extra layer of security might be required. This could involve re-verifying your digital identity.

How to verify Digital Identity?

Since digital identity is a multifaceted concept, businesses have a toolbox of methods to verify customer identities online. Each method offers varying levels of assurance in answering the crucial question: "Is this person truly who they claim to be online? Does their digital presence accurately reflect their real-world identity?"

Relying solely on a single element for verification presents a low assurance level. Usernames and passwords, for instance, are no longer sufficient to definitively confirm someone's identity

The best ways of verifying digital identity include a combination of:

1. ID Record Check: 

ID Record Checks leverage background databases to confirm user information. These checks tap into extensive resources like voter rolls, consumer databases, credit bureaus, and utility records, all while providing a smooth experience for your customers.

2. Address Verification: 

When onboarding new customers, businesses need to verify their address as part of Anti-Money Laundering (AML) checks.

3. Document Verification: 

While database checks are a valuable tool, they may not always provide the level of assurance needed. This can be due to regulations, the risk of fraud, or limitations in the data itself. Document verification steps in to offer a higher level of confidence by confirming a customer's identity against a legal document.

4. Biometric Verification:

Facial biometrics verification adds an extra layer of security by ensuring the person presenting the ID is its rightful owner. This not only strengthens protection against fraud but also fulfills compliance regulations. Additionally, it paves the way for seamless biometric authentication methods in the future.

5. Watchlist Screening: 

Safeguard your business and your customers with a comprehensive screening process that verifies identities and monitors for potential risks, including sanctions, Politically Exposed Persons (PEPs), and other relevant data sources.

Our post about digital identity verification provides a full view and an easy way on how to verify digital identity online 

Digital Identity for Banks 

In this digital age, customers want convenience and instant access. This translates to a demand for seamless online banking services in the financial world. However, simply moving money management online is not enough. Digital banking presents unique challenges for financial institutions such as combating fraudsters, and protecting customers' privacy as customers expect their data to be secure during onboarding and beyond. It is known that up to 43%  abandon account creation due to privacy concerns.

By prioritizing digital identity verification, banks can address these challenges and meet modern customer expectations. Improved User Experience and robust verification help prevent fraud and protect the bank and its customers.

How to Verify the Digital Identities of your Customers Faster.

While digital identity offers convenience for consumers, verifying their identities online presents a greater challenge compared to the physical world. In-person interactions allow for direct comparison of documents and visual cues to detect fraud attempts more readily.

Physical documents also offer more security features for analysis, making it harder to create convincing forgeries. In the digital realm, however, fraudsters can easily launch numerous automated attacks, bombarding systems with attempts until one succeeds.

See more on what is digital identity verification process and how it works.

Business Considerations for Digital Identity Verification

When evaluating digital identity verification services, businesses must consider these challenges alongside the potential benefits. Key questions to ask include:

• Security Effectiveness: How effectively does the service prevent fraudulent access?
• Scalability: Can it handle potential attack volumes?
• User Experience: Does it create a smooth and frictionless experience for legitimate users?
• Cost-Effectiveness: Does the value it brings outweigh the implementation and ongoing costs?

Factors to Consider when Choosing  the Best Digital Identity Verification Service/ Partner

Choosing the best digital identity verification solution provider can save your business from fraud, help you simplify compliance and streamline your customer onboarding process. Before choosing any digital identity verification company, here are 5 factors you should consider. These will ensure that you get maximum security for your business.

1. Proven Track Record: 

Look for a provider with experience serving established businesses that comply with KYC and AML requirements. This ensures they understand the needs of heavily regulated industries like financial services, where striking a balance between compliance and customer experience is crucial.

2. Scalability and Flexibility: 

Choose a solution that can grow with your business. It should offer a range of identity checks that support global expansion and accommodate new document types. This ensures you're prepared for future needs and market entries.

3. Advanced Fraud Detection:

Select a provider with robust fraud detection capabilities to identify and flag suspicious activity, including document forgery and synthetic identity creation.

4. Future-Proof Technology: 

The ideal partner prioritizes innovation. Look for a solution that leverages emerging technologies like NFC (Near Field Communication) to enhance security while streamlining the verification process. A forward-thinking provider stays ahead of evolving fraudster tactics by continually updating its offerings.

By prioritizing these factors, you can choose a digital identity verification partner that empowers your business to thrive with confidence.

Youverify takes the complexity out of digital identity verification. Our Identity verification solution empowers businesses to tailor document checks, biometrics, and trusted data sources to your specific needs. With YVOS, you get to experience a seamless, end-to-end process powered by AI solutions while making smarter decisions faster. Book a demo to see how this works.