Online Identity Authentication Methods: Compare Top 4 Methods

Are your users who they say they are? Robust online identity proofing protocols boost cybersecurity, prevent fraud, and ensure regulatory compliance. Here’s what online identity proofing, including both identity verification and authentication, really means and how your organization can verify or authenticate a person’s identity online.

What Is Online Identity Verification and Authentication?

Online identity verification is the process of verifying an online user’s identity and ensuring they are who they say they are before a firm creates an account for a person. In contrast to traditional, in-person identity verification methods, online identity verification can be carried out remotely by collecting proof of identity, such as an official identity document or capturing biometric information from a user.

Online identity authentication takes place after a firm verifies an identity and creates an account for a person. Authentication ensures that only the correct person is using the account.

The primary purpose of online identity verification and authentication is to prevent illegal activities like money laundering and fraud by ensuring the person behind an online activity or transaction is who they say they are. 

How Does Online Identity Verification Work?

The online identity verification process usually occurs when a user or customer is first onboarded. The user will be required to present proof of identity, which is typically presented in the form of a photographic ID like a passport or driver’s license. This document will be analyzed for authenticity and stored in a secure database once verified. The user will then be prompted to provide a biometric sample, such as a fingerprint, selfie, or retina scan, that can later be used for ongoing user authentication. This entire process is made possible through identity proofing platforms like Incode, which makes identity proofing accessible to any user with a camera-enabled personal device. 

Why Use an Identity Proofing Platform?

Identity proofing is vital to get right. Identity proofing processes keep user data secure, comply with legal obligations, and prevent fraud when done well. But a poor identity proofing process exposes customers and businesses to fraud, other crimes and legal challenges. 

Traditional proofing methods, like physically checking identification, have significant disadvantages. For starters, they often require customers to make in-person visits, creating considerable friction for online transactions and digital services. 

But more importantly, these methods of proving identity are no longer adequate. Online marketplaces for ID documents, like social security numbers, driver’s licenses, and passports, mean that these pieces of information are vulnerable. The same goes for email addresses, security questions, and passwords. 

Using software specifically designed to verify and authenticate identities ensures that businesses get it right. The benefits of using software for identification include:

• Automatically embedding best practices for identity verification and authentication into your process 
• Avoiding asking for identity proofing for every transaction
• Complying with privacy and anti-fraud obligations
• Creating frictionless customer experiences
• Generating trust among your users

Because online proofing methods are becoming safer than physical identification processes, we predict a world without physical IDs in the near future. 

Online Identity Misconceptions

While online proofing software has many benefits, some uncertainty about its use remains. Common misconceptions about identity proofing  include the following.

1. Identity software is always watching

Some people are worried about companies storing biometric data like fingerprints and data related to facial analysis and that it could be used for surveillance. Data is carefully regulated, and governments do not access the private databases held by companies. 

2. Personal information is less secure when it’s digital 

Think about how vulnerable your personal information is when it’s in your wallet or backpack. A driver’s license, credit card, or passport can be easily stolen. When digital data is stored behind several layers of security, it can be safer than your physical cards. 

3. Authentication means accessing and saving all associated data 

Some people worry that authentication software will show all their data. When your information is verified, the relevant apps only see information relevant to the interaction. Digital identity authentication software makes it easier to control what applications have access to which data. 

Online Identity Authentication Methods

There are several different ways to verify and authenticate identity. Standard online identity verification and authentication methods include knowledge-based authentication, two-factor authentication, credit bureau-based solutions, and ID document confirmation. Here is a description of these online identity authentication methods and the pros and cons of each. 

1. Knowledge-Based Authentication (KBA)

KBA uses information the user knows and remembers to authenticate their identity. KBA verifies users that can successfully input a password, a PIN, or a security question.

Pros:

• Users understand this method and are used to it
• Time limits on answers can help increase security

Cons:

• People do not always choose good passwords or remember them
• Hackers can break into accounts through weak passwords, by buying KBA answers on the dark web, or by attacks like keylogging
• It can be easy to find answers to security questions on social media or elsewhere online
• These can deliver a poor user experience and cause frustration
• Customers can find security questions intrusive

2. Two-Factor Authentication

To increase the security of knowledge-based authentication, many organizations now require users to authenticate on a second channel in addition to inputting a password. This secondary channel could be email, SMS messages, key fobs, or authentication apps. 

Pros:

• Using an independent channel significantly adds to security and creates a strong deterrent for criminals
• SMS and app authentication is practical because most people now have a smartphone
• Standards and regulations like PSD2 have spurred widespread adoption
• These are especially useful for opening new accounts or resetting passwords

Cons:

• These require that users always keep their authentication factor (e.g., smartphone) with them
• Don’t work if customers lose their authentication factor or change their phone number
• It can be slow and create friction in the customer experience
• Vulnerable to certain kinds of attacks like SMS-spoofing
• Rely on a third-party service like a telecom company
• Create an additional point of failure

3. Credit Bureau-Based Solutions

Some verification and authentication solutions, especially those involving financial transactions, now use services offered by credit bureaus. These bureaus, including Experian, Equifax, and TransUnion, have a wealth of information on individuals, and they allow companies to call out to their database to search for identity matches.

Pros:

• These companies are authoritative and already have databases of verified information
• It’s easy to build an API to connect an app with their database
• The verification and authentication process provides a definite match rather than a score
• These solutions are usually relatively low cost
• Provides an unintrusive customer experience

Cons:

• Credit databases exclude people who have rarely used financial services in that region—for example, young people and people who are new to the country
• Not as reliable for people with common names and can result in false-positive matches
• Breaches in data from credit bureaus increasingly make this method less reliable
• Requires companies to state in their terms that they will perform a credit check
• Some customers worry about the impact that queries could have on their credit score
• Only works in geographic areas covered by the particular credit bureaus

4. ID Document Confirmation

ID document confirmation is one of the most common methods to confirm identity. To do it, users take a high-quality image of the ID document. Then, the software can classify the type of ID document and compare it to a verified document image in a database. Increasingly, software companies like Incode offer advanced analytics driven by artificial intelligence and computer vision to determine whether an ID is authentic.

Pros:

• It’s quick and easy to do with the right software
• Advanced analysis can help spot fake documents

Cons:

• It’s possible to create fake ID documents, although more advanced software can often spot these
• Not all users may have access to standard ID documents like driver’s licenses or passports
• It may not work equally well for all geographic areas
• Manual reviews can take a long time

Incode’s Identity Proofing Method

Incode Omni is an identity proofing platform offering over 50 identity authentication components. That allows businesses to customize their identity verification and authentication flow to their own needs and verticals. The platform can validate ID documents, conduct credit bureau authentications, do facial recognition, authenticate fingerprints, and do liveness detection, among other tasks. 

The Omni platform then uses artificial intelligence to create risk scores. Or, you can make a decision automatically based on the results of each identity verification test and pre-set business rules.

The system is powerful because it can be adapted to any industry. For example, financial companies can use the platform to perform identity checks that meet Know Your Customer (KYC) regulations. Our platform not only prevents 99% of fraud, but it also provides a convenient experience for customers.

Benefits of Proving Identity Online

Proving identities online has three main advantages: preventing crime, improving customer experience, and building trust.

Prevent Crime and Fraud

The traditional methods of proving identity are increasingly vulnerable. Personal information is sold online, and authentic-looking identification can be faked. Robust online identity proofing options are more secure and more effectively prevent fraud.

Improved Customer Experience

Traditional proofing methods can be frustrating for consumers. With too much friction, users may find another service or product. Digital proofing methods allow a frictionless customer experience while still maintaining security.

Building Trust

Robust online proofing methods help users feel comfortable knowing their information is protected. That can foster retention and reduce churn due to privacy concerns.

Finding the Most Secure Online Identity Verification and Authentication Method For Your Company

Identity verification and authentication is increasingly done online. But not all software platforms are created equal. Some successfully prevent data breaches and create seamless customer experiences, and others provide less adequate protection. 

The top solutions offer advanced ID verification and authentication online and biometric identification capabilities, like facial recognition or fingerprints. And it’s also helpful to make sure the platform you choose can do credit bureau checks and liveness identification. 

The Incode Omni platform offers all those features and more. Incode Omni is an end-to-end platform solution that provides a seamless customer experience at every point of contact and across multiple channels. It’s enterprise-scale but still flexible enough that you can implement it for any solution. Just point and click to create your flows and implement them in a few hours.

Contact us to learn more or request a demo.