Why AI-based Digital Document Verification Is the Most Effective Way to Verify Identity and Impede Fraud

“Can you show some kind of ID?†is undoubtedly one of the most common questions businesses have to ask their customers, in one form or the other, online or offline. No matter what industry you are in – banking, insurance, healthcare, technology, travel, hospitality, education, eCommerce, or other online services – you are mandatorily required to verify that a customer is who she/he claims to be.

And it is not as easy as it sounds. For starters, you have to spend money, time, and human resources to put fail-free verification processes in place. Such processes, in turn, will make legitimate customers do more work, thereby affecting the customer experience. Here comes the most fascinating fact – even though verification processes put customers off, they are less likely to trust you if you do away with it. Sounds like a Catch-22 situation?

Well, the way out of this dilemma can strike a balance between your process and the customer experience. It is in this context that AI-based digital document verification emerges as a viable, efficient, and hassle-free solution.

Let’s look at digital identity verification in some detail – what is it? Why is it necessary? How does it prevent risks? And, what are the kind of analytics this method uses for fraud detection? Read on.

Why should you verify customer documents?

Before we go into the details of digital identity verification, it’s important to look at why businesses should verify documents in the first place, whether online and offline. To put it simply, it serves two main purposes – it prevents risks that might arise due to identity theft fraud, and secondly, it ensures legal compliance.

As per the latest statistics, identity theft ranks top in the list of cybercrimes. It takes many forms, from simple impersonation to counterfeiting credit cards to account takeovers. More often than not, fraudsters use false, illegitimate, or modified documents to fake the identity. Add to that a whole range of new malware and ransomware, imposters find it easy to pull off identity fraud and monetize from it.

According to Javelin’s 2020 Identity Fraud Study, the total financial loss due to identity fraud in the US alone is about $16.9 billion. The damages resulting from identity theft are not just financial. Identity fraud on social media platforms often involves sexual, racial, and other unpleasant remarks that can have larger personal and social impacts.

As online transactions have surged due to the pandemic, it is expected that the number of identity theft cases will increase, leading to more financial loss. That’s one of the reasons why companies are heavily investing in AI-powered identity fraud detection solutions.

What are the regulations and compliances to fight identity fraud?

Secondly, businesses cannot do away with document verification because it is also a matter of compliance. Countries all over the world, including the US, have compliance rules such as Know Your Customer procedure (KYC) and Anti Money Laundering (AML) guidelines for businesses to abide by. According to the Red Flag Rule by the Federal Trade Commission (FTC), documents can provide useful to potential identity theft.

Compliance with such guidelines is not just a legal requirement but an effective and appropriate measure that will help businesses of all sizes fight identity fraud and its ramifications.

How does digital document verification work?

Digital document verification verifies documents using tools and software powered by Artificial Intelligence. Just like a human officer examines an ID card/document and confirms the identity of customers by matching their face against the photo on the document, the AI-powered tool performs identity verification using the software.

So, how does the software work? The process is pretty simple and typically involves the following basic steps:

· Step 1: The digital documentation verification software is first integrated into your business website, mobile app, and online applications.

· Step 2: When a customer signs up on your website for the first time, she/he will be asked to upload a government-issued identity card in an image format (JPEG, PNG, etc.). The software will also have a live image capture feature for facial comparison.

· Step 3: Once uploaded, the software scans the document and extracts details using the Optical Character Recognition (OCR) technology.

· Step 4: The extracted information is then analyzed and verified against a trusted database. Simultaneously, the document is also checked for signs of authenticity and/or forgery, and the digital image of the face is verified through biometric cross-checks. This typically takes a few seconds.

· Step 5: If the document uploaded by the customer is original and the information therein is accurate, she/he will be allowed to access your website and services. Illegitimate, false, and modified documents are automatically rejected and the customer will be denied access to the website.

However, it is to be noted that the software accepts only documents issued by the government. These include passports, driving license, photo identity card, voter’s identification document, and the like.

What are the fraud detection techniques used by the software?

Most of the market-leading digital document verification solutions use three types of analytics to determine whether a document is authentic and spot signs for forgery. These are data integrity, visual authenticity, and facial biometrics.

· Integrity of data: As you might already know, identity documents issued by the government will typically have a set of built-in features. Encoded MRZ areas, embedded algorithms, data fields present in multiple locations and in specific formats, NFC chips, etc., are a few among them. Al-powered document verification tools check all such data features systematically to see if they match.

· Authenticity of the document: The software also checks for any kind of anomalies or signs of tampering in the document. These include pixel quality, holograms and rainbow prints, special paper and ink used for government documents, font anomalies, barcodes, microprints, and the like.

· Facial biometrics: It isn’t enough to verify the accuracy of data and authenticity of the document. You also need to make sure that the person who has uploaded the document is its authorized owner. For that, the photo on the identity document is matched against the live image using biometric analysis.

All these techniques make AI-based fraud detection solutions more accurate and reliable than physical verification by humans. And the best part? All these multiple verifications are done in a matter of seconds!

Advantages of AI-based document verification

Digital document verification comes with a set of advantages including ease of use and faster turnaround time. It can manage huge sets of identity documents from across the globe, each having specific sets of fraud detection rules and elements.

Moreover, when you use such solutions, errors owing to fatigue never occur. AI-based solutions are also known for detecting sophisticated frauds that human eyes might miss out on. They also boast of instant scalability and have low associated costs.

The bottom line

Traditional businesses have been going digital for quite some time, and the ongoing pandemic has given organizations an added impetus to take their operations fully digital. That said, the journey to digital is accompanied by several threats including identity theft and service misuse. In their attempt to reduce risks and comply with regulations, businesses often end up with cumbersome processes that tire their customers.

When you want to verify documents without
compromising on customer satisfaction, AI-based document verification solutions are the best bet. In addition to protecting your business against
identity fraud, it eliminates the need for in-person or in-store verifications.
In the times of the pandemic when people are trying to minimize interactions,
online identity verification solutions are lifesavers, quite literally!