ID Checks Aren’t Always Foolproof – What Other KYC Tools Can You Use?

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by Florian

In our recent fraud prevention webinar, we asked fastloan industry specialists which data points were the most important for them. ID verification was number one.

However, while ID checks are a fantastic tool, we’re also seeing an increase in the ways in which they can be fooled.

So what exactly is supposed to be done against the increase in fake signups that plagues many industries? According to Breach Level Index, identity theft accounted for 64% of all data breaches in early 2016, so clearly something must be done.

While ID verification can help battle fake signups, it does have downsides. Let’s examine its pros and see what alternative solutions are available.

Where ID Verification Works Best

KYC (Knowing Your Customer) processes are hard, but primordial. They help with core business functions such as budgeting, loss prevention, and improving services for legitimate users.

In some cases, it’s also a legal requirement. So compliancy is also covered by good KYC processes. Using a combination of name, address and photograph means that ID checks, on paper, are one of the safest ways to prove a user’s identity. It’s usually done via:

  • Government issued-documents: copy of passport, ID card, driving license, university card, etc…
  • Standard address proof: utility bill, credit card statement, house purchase deed, bank account statement, etc…

It is no wonder ID checks are therefore the preferred method of verification for businesses, particularly those in high-risk verticals such as the payday loan or gambling industries.

The Problem? ID Verification Creates Friction

Businesses are under increasing pressure to ensure a flawless user experience. For a user trying to register to a online poker platform, being forced to get up and find their wallet or electricity bill is a frustrating source of friction.

And as we all know, increased friction equals decreased conversions. Especially if users have to manually find, scan, and upload their documents.

The Technology Isn’t Always Effective

Another problem arises when companies try to implement innovative ID checks methods. When trying to submit ID documents via smartphones selfies, many users experience technical mishaps that render the the process frustrating.

For instance, a low light setting will often prompt ID companies to reject the image. Similarly, if the quality isn’t up to their standards, you will have to wait until they give you the ideal specs so you can upload the ID again.

This prolongs the user journey by hours – and sometimes days – pushing user towards competitors.

And Worse – It’s Not Foolproof

Last but not least, ID checks are increasingly easy to falsify. Fraudsters aren’t the kind of people who give up after facing one hurdle, and a growing number of solutions are available for those who want to bypass ID checks:

payday loan fraud buy photoshopped ID to bypass ID checks

Screenshot from a marketplace providing fake ID copies

What Other KYC Methods Can Businesses Use?

“Online users inevitably create a digital footprint. Acquiring, cross referencing, and particularly enriching multiple data points will give you strong idea of who your customers are.”

Online users inevitably create a digital footprint. Acquiring, cross referencing, and particularly enriching multiple data points will give you strong idea of who your customers are, and help implement your customised KYC processes.

Obviously, the more data is gathered, the more precise that user picture is. The bonus here, is that you can aggregate multiple screening layers, such as:

  • Email analysis: checking if the used email address has been used before on social media, if it has been newly created, and if the domain is trustworthy
  • Phone number analysis: checking the validity, the country of carrier, social media presence, etc.
  • IP analysis: understanding if the traffic comes from a VPN, TOR, and where the connection comes from.
  • Device fingerprinting: learning how users access your platform. Are they suspiciously switching browsers? Using emulators to spoof mobile devices?
  • And more…

While less traditional, these KYC processes can be implemented to be entirely frictionless. Good users can complete their journey towards signup, funds deposit (iGaming) or ecommerce purchases (ticketing, online store), without experiencing one obstacle in their way.

Suspicious users, who use emulators, VPNs or disposable email addresses, are redirected towards heavy KYC checks, where ID verification can be a last measure. And even if they manage to falsify their documents, the accumulated data will help fraud managers decide if the users are legitimate or not – with increased accuracy when fed through a machine learning model.

Key Takeaways

Online businesses are often at a crossroad when it comes to user identification. On the one hand, they want their customers’ journeys to be as frictionless as possible. On the other, they don’t want to open the door to fraudsters.

  • Businesses need to balance friction and risk
  • ID verification is now increasingly easy to fool

The good news, however, is that other KYC solutions exist. Working with multiple, frictionless security screening layers, businesses can paint an accurate picture of their users, which will work great in tandem with an ID check – only if it’s really needed to erase suspicions.

Click here to see how SEON can help you implement frictionless KYC processes that make sense for your industry.

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Communication Specialist

Florian helps tech startups and global leaders organise their thoughts, find their voices, and connect with customers worldwide.

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