Fintech

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5 min read

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November 15, 2022

A Complete Guide on Identity Proofing

Identity Proofing is one of the methods used by businesses & government agencies to combat identity fraud. To know more about it's working and advantages, click here!

Identity fraud is a major problem in the financial world. In fact, it's one of the oldest and most common types of fraud. Every year, there are an estimated 15 million victims of identity theft in the United States alone. That's about one victim every two minutes. Identity fraud can be used to commit a variety of crimes, including credit card fraud, loan/lease fraud, bank fraud, and even terrorism. One of the methods used by businesses and government agencies to combat identity fraud is identity proofing.

In simple words, identity proofing is the process of verifying someone's identity. It is making sure that a user's claimed identity checks out with their real identity. This can be done in several ways but usually involves some combination of documents, personal information, and biometrics.

Identity proofing is usually the first line of defense against fraud. It is a critical security measure that helps ensure that customers are who they say they are and that their transactions are legitimate.

How Identity Proofing Works

Identity proofing enables businesses and organizations to verify an individual's identity based on various parameters, including:

  • Name
  • Address
  • Credit report
  • Bank account information
  • Biometrics

To verify an individual's identity, businesses and organizations will often require multiple forms of identification. For example, a bank may require a customer to provide a government-issued ID, a social security number, and a biometric scan.

When it comes to online identity proofing, the National Institute of Standards and Technology has defined three vital steps for the process. They are:

Identity Resolution

This step involves distinguishing an individual's identity in the system's context. For example, this would be determining that "John Smith" is the same person as "J. Smith" or "Jonathan Smith."

Identity Collection and Validation

This step involves collecting an individual's information, such as their name, security questions, password, and biometric data. The information is then checked to confirm whether it is genuine, valid, and authentic. For instance, the system would check to see if the password provided matches the one on file.

Identity Verification

This is the final stage, where the user is verified whether they are who they claim to be. The information provided by the individual is categorized as weak, fair, good, and strong. Based on this classification, the user is granted or denied access to the system.

For instance, an individual may be asked to provide a government-issued ID, which would be categorized as strong identity proofing. However, if the individual only provides a social security number, it would be categorized as weak identity proofing.

Similarly, if the facial recognition software partially matches the user's photo on the ID to a real-time scan, it would be categorized as fair identity proofing. It can then ask them to provide additional information to verify their identity.

Why Identity Proofing Matters

There are many advantages of identity proofing, which include the following:

Reduced fraud

One of the main advantages of identity proofing is that it can help reduce fraud. By verifying an individual's identity, businesses and organizations can make sure that transactions are legitimate and that the customer is who they say they are.

Improved customer experience

Identity proofing can also help improve the customer experience. By verifying an individual's identity upfront, businesses can save customers the hassle of going through multiple verification processes later.

Increased security

Another advantage of identity proofing is that it can help increase security. By verifying an individual's identity, businesses and organizations can make sure that only authorized people have access to sensitive information.

Improved compliance

By verifying an individual's identity, businesses and organizations can ensure that they meet all the necessary regulations and requirements.

When done correctly, identity proofing can effectively protect people's identities and personal information. However, it is important to remember that no system is perfect and that there are always ways for criminals to circumvent security measures.

Identity proofing is just one part of the fight against identity fraud. It is important to remember that other security measures, such as data encryption and two-factor authentication, are also necessary to keep people's information safe.

Online Identity Proofing

Online identity proofing is the process of verifying someone's identity online. This can be done in a number of ways, but the most common way is through biometric data, such as fingerprints or facial recognition.

These technologies are highly advanced and secure and provide a high level of accuracy. They are also difficult to spoof, which makes them an ideal solution for online identity proofing.

As the technology for online identity proofing advances, it is becoming more and more common for businesses and organizations to use it. This is because it is a fast, convenient, and secure way to verify someone's identity.

Conclusion

Identity proofing is a powerful tool that can be used to reduce fraud and improve security. It can also help businesses and organizations meet all the necessary regulations and requirements. Considering the benefits identity proofing provides, every business and organization should consider implementing it.

However, they should also remember that no system is perfect and that other security measures, such as data encryption and two-factor authentication, are also necessary to keep people's information safe.

FAQs

What is the difference between identity proofing and authentication?
Authentication must occur every time a verified person wants to access a system or resource. However, verification only happens once. Authentication is the process(es) a user goes through to confirm their identity.
What is digital identity proofing?
Digital identity proofing is the process of verifying someone's identity online. Almost all digital identity proofing today is done through biometrics, such as fingerprints or facial recognition.
What is in-person proofing?
In-person proofing is the process of verifying someone's identity in person. This can be done through a variety of methods, such as checking government-issued identification or requiring the individual to answer personal questions.
How can identity proofing be used to reduce fraud?
By verifying an individual's identity, businesses and organizations can make sure that only authorized people have access to sensitive information. This helps to reduce fraud because it prevents criminals from accessing information they should not have.
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