What is identity verification?

Identity verification is the process of confirming that an individual is who they claim to be. This typically involves verifying the accuracy of various pieces of information, including:

• Documentation (e.g. passport, driving licence)
• Answers to security questions
• Biometric data such as fingerprints and facial recognition
• Customer address details
• Right-to-work documentation

If a customer or new employee’s response to a verification check is suspicious, then the digital identification tool may request additional information from them in order to verify their identity. If they fail to provide this then they may be barred from using the service or fail their vetting process.

There are several different business use-cases for identity verification which we’ll explore below.

Identity verification for employee vetting

Even before digital identity verification tools, businesses in the UK usually had to verify the identity of new employees through Disclosure and Barring Service (DBS), right to work and other background checks. However, with more businesses moving online and hiring remotely, conducting an identity verification check can be made simpler with digital identity verification tools. 

Identity verification for e-Commerce and financial services

For e-Commerce and financial service businesses, identity verification usually means checking a customer is who they claim to be. With individuals known to hide their identity to complete fraudulent transactions and money laundering schemes, identity verification is crucial. Some businesses in financial services and banking may need to have implemented identity verification in order to comply with anti-money laundering (AML) and know your customer (KYC) regulations.

Why is identity verification important?

Identity verification plays a critical role across various business functions. Its importance depends on its use case, but common reasons include:

• Protects against account takeovers and identity theft, including financial and employment-related fraud
• Helps businesses comply with KYC and AML regulations in the UK
• Helps to protect confidential customer or patient data
• Speeds up the onboarding process for customers and new recruits
• Helps businesses comply with international trade regulations
• Can strengthen a business’s consumer and employer brand by fostering trust

In our guide to remote onboarding best practices, we explain how digital tools simplify legal onboarding tasks like contracts, confidentiality agreements and financial information. Incorporating identity verification into your digital onboarding software stack can enhance security while integrating verification smoothly into your workflow. This approach ensures confidential data is stored safely and verification processes are efficient and user-friendly.

Identity verification best practices

Below, we explore some key considerations for ensuring an optimal identity verification process.

User-friendliness

Converting and retaining customers is key to any business’s customer acquisition strategy. A slow or unintuitive verification process can lead to customers abandoning their purchases, costing your business valuable sales. Conversely, a smooth and reliable identity verification experience can enhance customer satisfaction and improve the overall user journey.

While some friction is expected in financial services to comply with KYC and AML regulations, it’s important to avoid unnecessary delays that could deter customers.

Businesses should choose identity verification tools that prioritise:

• Minimal steps for customers to complete the process
• An intuitive and user-friendly interface
• Accessibility for users with disabilities
• Reliable biometric data verification, including fingerprints or facial recognition
• Efficient document verification for scanning or uploading relevant documentation
• Adaptive capabilities to trigger additional checks for suspicious or high-risk users

Minimising friction

While banks and financial institutions may need to introduce some friction to meet regulatory requirements, e-commerce businesses should look for a balance and ensure minimal interference. Too much friction in the customer journey could impact conversion rates, while insufficient checks may compromise security.

High-quality verification tools

Selecting a high-quality identity verification tool is key to achieving this balance. Consider tools that integrate smoothly with your systems, ensure accuracy and provide flexibility to scale as your business grows.

The key is to optimise the identity verification processes to protect against fraud and maintain compliance without compromising the overall customer experience.

Keeping employee and customer data safe

An essential consideration in identity verification is ensuring that the personal and sensitive data collected from employees and customers is stored securely. This is particularly important as identity verification often involves handling data that falls under strict data protection regulations.

Personal data includes identifiers such as:

• Name
• Location
• Identifying number (e.g., national insurance or employee ID numbers)

Sensitive data includes:

• Records of criminal legal system involvement
• Protected characteristics (e.g., gender, race, or disability)
• Genetic data
• Biometric data

Given the sensitivity of this information, businesses must take proactive steps to ensure it is stored and handled securely after collection.

Adhering to GDPR and data security regulations

Our guide to HR GDPR compliance highlights the importance of safe data storage as a cornerstone of regulatory adherence. To protect identity verification data, businesses should consider the following steps as part of their HR action plan:

• Assess current data systems: evaluate the security and efficiency of your existing data storage systems.
• Review data usage practices: ensure the business uses sensitive personal data responsibly and in compliance with regulations.
• Monitor GDPR compliance regularly: conduct ongoing audits of HR and company-wide GDPR compliance efforts.
• Secure international data transfers: verify the security of any international transfers of data to prevent breaches.
• Review data handling policies: update and refine policies related to personal references and communication channels, such as email, phone, or postal services.
• Train HR teams: improve data literacy among HR staff and train them in best practices for protecting sensitive information.

Automating identity verification checks

As outlined in our guide on using AI in business, machine learning can help you to automate workflows, including identity verification processes. Digital identity verification tools that integrate machine learning can speed up checks and improve efficiency. However, automation should complement – not replace – human intervention. HR teams still play a central role in overseeing identity verification processes to ensure they are completed successfully and adhere to compliance standards.

Our guide to AI employee onboarding highlights the importance of HR involvement in securing sensitive data, such as biometric information and verified documents. Beyond data management, HR teams provide a personal touch to the onboarding process. For example, welcoming new employees in person or via remote meetings can help establish a human connection from day one.

Here are some best practices for using automated identity verification tools in the recruitment and customer onboarding process:

• Ensure reliability and accuracy: choose tools that deliver consistent and dependable results
• Balance parameters for checks: set conditions that are neither too strict (which could lead to false negatives) nor too lenient (which could allow suspicious or high-risk users to pass).
• Maintain high data quality: ensure that the data captured during automated checks is accurate and usable for decision-making.
• Provide real-time support: choose tools that offer customer support to address any queries or concerns promptly.

Identity verification checks are important for e-Commerce sites and financial institutions as well as businesses who need to onboard new employees remotely. In addition to speeding up the verification process, they can also help promote consumer trust and protect the reputation of the company brand. Finally, ensure that sensitive identity data is stored safely in compliance with UK data protection and GDPR regulations.