Businesses face a choice between local standards and global coverage, with digital ID wallets emerging as a promising solution for efficient and compliant identity verification across borders.
TL;DR
Navigating global identity verification is complex due to regulatory differences and fraud risks. Explore these five strategies for expanding businesses:
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Manual Verification: Basic method at startup stage but lacks scalability and compliance.
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Local Verification Services: Integrating with local providers is complex and varies widely in adoption and reliability.
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Orchestrated Identity Verification: Platforms offering multiple services reduce IT complexity but may not cover all regions adequately.
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ID-Selfie Solutions: Utilizing global SaaS for identity verification; seamless user experience but high costs and compliance challenges.
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Digital ID Wallets: Future-focused approach with user-held digital identities; enhances user experience, reduces costs, and ensures compliance through consent-based data sharing.
The global identity verification challenge
Global identity verification faces several key challenges:
- Lack of Standardization: There's no one-size-fits-all approach. Different countries have varying regulations and rely on diverse verification methods.
- Combating Fraud: Identity theft and other fraudulent activities pose a constant threat. Businesses need robust solutions to mitigate these risks.
- Regulatory Compliance: Navigating the regulatory landscape of different countries can be daunting. Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations mandate specific verification protocols.
- Balancing Cost and User Experience: Finding the right balance between cost-effective verification and a seamless user experience is crucial.
5 solutions for global identity verification
Here's a breakdown of the five major approaches businesses can leverage for global identity verification:
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.