Digital identity verification tools must respond quickly and accurately, even as fraudsters change their methods. Sumsub is one company meeting the challenge.
It offers an all-in-one verification platform that secures every step of the user’s life cycle with customizable KYC, KYB, AML, and transaction monitoring solutions.
Sumsub’s 1Click Verification uses government databases to accelerate onboarding from an average of 50 seconds to 4.5, which improves pass rates by 35%.
Chief legal officer Tony Petrov said Sumsub was founded in the mid-2010s to detect anti-fraud measures such as image tampering. It was a different world back then, as face-to-face digital identifications weren’t a trend.
Emerging markets often drive new verification technologies
Petrov said emerging markets are often the pioneers of new fraud detection technologies out of necessity.
India led the way in biometrics with its Aadhaar system. As the country sought to register citizens in its national identity strategy, it needed a way to include people with low literacy skills. Facial recognition was the way; 95% of the country is registered.
Indonesia’s KTP cards utilize fingerprints, irises, and facial recognition. More than 95% of Indonesians have e-KTP cards linked to the government.
That should help its digital economy reach $130 billion by 2025. The country is negotiating $250 million in funds from the World Bank Group’s International Bank for Reconstruction and Development to increase access to biometric digital identification before citizens can access many government and private services.
According to its 2022 Identity Fraud Study, Sumsub found that Nigeria’s fraud rate is among the world’s highest. It accounts for 5.4% of all cases worldwide.
The Nigerian government combats this by encouraging folks to register for its National Identity Number. It helps verify people without resorting to potentially forged documents.
How verification laggards can catch up
Other countries need to catch up on their journeys. Low-quality cameras and photos hamper Argentina’s KYC systems. This leads to higher verification failure rates. More than half of Brazil’s documents do not include machine-readable zones. This makes them easier to fabricate.
How will the laggards catch up as technological growth moves faster than governments’ ability to react?
Petrov said COVID-19 brought a boost. It forced many, for example, Greece, to quickly deploy non-face-to-face technologies and consider digital currencies.
Petrov said others stubbornly stick to the old ways. Germany still conducts video interviews for some processes. It’s slow and expensive.
“You can consider that Germany is one of the most developed countries, but it is some of their approaches,” Petrov said. “They are quite outdated.”
Government database sharing is driving gains
Petrov noted many countries have become more willing to use their databases for verifications. Input, say, name, surname, date of birth, and perhaps a document number, and the system confirms this person exists. It’s combined with liveness detection as an additional safeguard.
Why are governments more willing to share? Petrov said there are several factors. Government databases are becoming increasingly digitized. They can be easily integrated with commercial entities.
The pandemic saw more state services migrate online. Fintechs forced incumbent hands. Finance is increasingly international, with more linkages to social networks.
“They have to have some kind of way to onboard clients remotely, and they didn’t have the office as the main way to attract clients,” Petrov said.
“So it’s all becoming digital. You see states becoming digital and financial organizations becoming digital. The only way to serve their clients is through digital means.”
Challenges to improved verification techniques
Petrov admitted society’s growing awareness of how their data is being generated and used, along with privacy desires, made verification more challenging. GDPR brought confusion when it was first introduced. Participants have adjusted and know they need legal grounds to collect data.
Petrov said the main issue is organizing the process in a compliant way. Countries like the United States still require consent even when the information is gathered legally. It is easier in the European Union.
Petrov said the paramount issue today is where the data is stored. Some countries require it to be held locally. Large data generators like Amazon don’t have bases in every country.
Companies contending with different national regulations on data collection is another topic. FinCEN fines companies in the US for not collecting enough information. Some were nailed for not collecting IP addresses and geolocations.
“You need to collect other information that can help the show that the person is not from Iran, North Korea, or Russia,” Petrov said. “This means that they will collect more information than now. On the other hand, customers would not be happy about this. I guess we will see clashes around this in the future.”
Passports and increased digital screening: Where verification may be headed
The developments raise a question. Do we need passports? Some countries already use electronic IDs for internal purposes. There will be growing pressure for international electronic documents too.
“A good question to be raised by someone is, do we need passports? I think we will come very soon, maybe in five or 10 years, to the moment when we will see some nations not issuing real paper passports,” Petrov said. “Then the question would be, what will happen with a passport as the instrument for traveling?”
We’re already seeing biometric processes replacing border guards for some tasks. Why does the state need to identify you as a person when corporations have already done that? Could Meta issue IDs?
“I think these will be the most spectacular developments that we will see quite soon,” Petrov said.
Tony is a long-time contributor in the fintech and alt-fi spaces. A two-time LendIt Journalist of the Year nominee and winner in 2018, Tony has written more than 2,000 original articles on the blockchain, peer-to-peer lending, crowdfunding, and emerging technologies over the past seven years. He has hosted panels at LendIt, the CfPA Summit, and DECENT's Unchained, a blockchain exposition in Hong Kong. Email Tony here.