ID and Document Verification

How Digital Identity Verification Works and Why Data Is Important

November 14, 2023
How Digital Identity Verification Works and Why Data Is Important

The reputational losses of inaccurate identity verification data can devastate a business and affect victims for years after the incident. According to a Javelin Strategy & Research report, losses due to identity fraud totaled $43 billion in 2022, affecting 40 million US adults.

The demand for robust digital identity verification solutions grows as more businesses go online. Companies need technology that can identify customers remotely with near-perfect accuracy and without manual assistance. This necessitates advanced software coupled with access to real-time data for verification. 

In this article, we will explore the benefits of digital identity verification, how it works, and the critical importance of reliable data. Let’s dive right in.

What is digital identity verification?

Digital identity verification confirms an individual’s identity remotely using secure online methods. Examples include verifying personal information, checking identity documents, employing biometric authentication, and validating user credentials. 

It is crucial in today’s interconnected world for several reasons:

  • To validate the authenticity of individuals online
  • To promote trust amongst businesses and their clients/partners
  • To secure corporate networks and databases
  • For compliance with regulatory requirements

Why digital identity verification matters

Consider a company that issues loans via an online portal. We can easily imagine a situation where a bad actor tries to secure a loan using somebody else’s identity. 

If the company’s digital identity verification methods fail to spot the fraud and the loan gets approved, it could destroy the identity victim’s credit—not to mention the company’s reputation. To avoid this, businesses must adopt a robust digital identity verification solution.

What is identity verification used for?

Identity verification is crucial to confirm the identity of an individual. Let’s review where it can be applied, including processes and various industries. 

Customer onboarding

It’s common nowadays for companies to use digital tools for identity and document verification when onboarding new customers. This is particularly true for banks and financial institutions, which are at the highest risk from identity fraud. Additional identity verification procedures can benefit other functions like online transactions and fund transfers.

Age verification

Online retailers selling age-restricted products like alcohol or tobacco require automated ID verification to confirm the legal age of buyers. Similarly, online digital products like video streaming and games have age ratings that require identity verification before providing access.

Patient confidentiality

Digital identity verification is essential to ensure the privacy of a patient’s medical information. Strong verification methods such as two-factor authentication (2FA) or biometrics help healthcare providers confirm the identity of a person accessing medical records. It can also be used to verify the identity of patients filling prescriptions.

Government services

Government agencies use digital identity verification to enable citizens to access services such as tax filing, voting registration, and applying for official documents securely online. This helps to reduce instances of identity theft. At some borders and airports, immigration authorities also use biometrics to confirm travelers’ identities.

Travel and Hospitality

Many airlines now use digital identity verification to confirm passengers’ identities at self-check-in counters, and smart hotels request identity documents for verification before arrival. Platforms like Uber, Lyft, and Airbnb use digital identity verification to ensure the safety and security of users by confirming the identity of both operators and customers.

What are the benefits of digital identity verification?

With the rise of online fraud and identity theft, businesses must be more vigilant than ever. Digital identity verification offers a solution to this problem by providing a secure and efficient way to confirm the identity of individuals and prevent fraudulent activities. Here are some ways you can benefit from this type of software. 


Digital identity verification enhances security by verifying the authenticity of online service users. It utilizes multiple data points, such as biometrics, identity documents, and behavioral patterns, to ensure users are who they claim to be. Fraud detection mechanisms, like anomaly detection and risk scoring, are employed to identify suspicious activities and prevent unauthorized access. 

For example, if a user’s login behavior deviates from their usual pattern, the system may trigger additional verification steps as a fraud prevention method. In industries like banking and eCommerce, digital identity verification is crucial for protecting sensitive data from exploitation. It helps mitigate the risk of identity theft, account takeovers, and unauthorized transactions.

User experience

Digital identity verification can greatly improve the user experience by offering convenience and increasing trust. Users appreciate the ease of onboarding to online services without the need to visit a physical branch with their identity documents. Biometrics like fingerprint or facial recognition simplify the authentication process even further, making it quick and easy to log in and transact.

The inclusion of digital identity procedures increases trust among users who prioritize security. Users feel more confident in using online services because their personal information is safeguarded, and their accounts are less likely to be compromised. This increased trust can lead to higher user retention and greater customer satisfaction.

Diverse applications

Digital identity verification solutions have diverse applications across various industries:

  • Only authorized individuals can access sensitive medical records in healthcare, ensuring patient privacy and compliance with regulations. 
  • Government services enable citizens to securely access essential online services such as tax filing and voter registration.
  • Educational institutions use it to maintain academic integrity by verifying the identity of online learners during exams and assessments.
  • The travel and hospitality sector employs it to verify the identity of travelers in airports, hotels, and taxis.
  • Legal and notary services rely on digital identity verification to authenticate digital signatures, ensuring the legality of important documents and contracts.

In all these applications, digital identity verification data not only strengthens security and prevents fraud but also offers a more convenient and trustworthy user experience, making it a valuable tool across various industries.

How does digital Identity verification work?

Digital identity verification requires using identity verification APIs from a trusted third-party provider. These tools provide the secure framework necessary to complete each step in the identification process.

Image capture and extraction

In this step, the user scans images of their identity documents using an app on their mobile device. Document verification technology extracts the various data points and assesses the authenticity of the documents, much like how a bouncer at a nightclub scrutinizes an ID card. 

Facial recognition

Facial recognition techniques analyze the user’s live image via a mobile device and compare it to the photo on the ID, similar to unlocking a smartphone with facial recognition. Users may be asked to blink or smile to confirm their live presence in this step.

Data verification

Machine learning algorithms analyze all the various data points that have been extracted, including user behavior, to validate identity. This is akin to how a bank teller might detect erratic behavior in a customer or unusual spending patterns on their account. 

Understanding the role of data in digital identity verification

While digital identity verification is becoming increasingly important, the accuracy and reliability of these methods rely heavily on the data used. That said, let’s explore data’s critical role in digital identity verification and how it impacts the overall process. We’ll also delve into the different types of data used for verification purposes and their significance in ensuring a secure and trustworthy verification process.

Data sources

Government-issued identity documents, databases, and user-provided information confirm an individual’s identity, and we must ensure this data is current and updated in real time. A bad actor could exploit even a few minutes of delay between updates to gain unauthorized access to a system.

In 2017, major credit reporting agency Equifax suffered a massive data breach that exposed sensitive personal information, including Social Security numbers, credit card details, and birthdates, of approximately 147 million Americans. The breach occurred because Equifax failed to patch a known vulnerability in its software in a timely manner, highlighting the critical importance of real-time updates.

Data privacy and security

Earlier this year, a cybersecurity researcher discovered an unprotected database on the website of the Indian medical diagnostics firm Redcliffe Labs. The database contained over 12 million sensitive documents, including diagnostic scans, test results, and other medical records. 

It’s unclear how long it was unprotected, but anybody could have accessed the information during this time. The incident highlights the importance of securing user data. 

Companies that collect personal data are responsible for its security and are liable to identity verification regulations. Examples include the General Data Protection Regulation (GDPR) in the EU, the California Consumer Privacy Act (CCPA), and the Virginia Consumer Data Protection Act (CDPA) in the US. Businesses that process identity-related data should adhere to established best practices in digital identity verification to ensure their data is adequately secured.

The future of identity verification data

Identity verification tools have become a fundamental element of today’s digital environment, playing a vital role in securing online interactions and protecting personal information. Accurate and reliable identity verification data cannot be overstated, serving as the backbone of secure online transactions.

Businesses that store and process personal information have a legal and ethical responsibility to safeguard their customers’ sensitive data and their shareholders’ business interests. Without robust digital identity verification procedures and strong data protection policies, companies put themselves at significant risk of reputational and financial damage. Keeping abreast of developments in this area is key to ensuring your business remains secure and compliant.

Microblink’s fully integrated digital identity verification solution is trusted by companies worldwide. Using an AI-first approach, our BlinkID product can capture and extract data from diverse ID documents, utilizing advanced machine-learning algorithms to verify data with unprecedented accuracy. Optimize conversions and minimize false negatives with our easy-to-integrate APIs and developer-friendly mobile or browser SDK.

Speak to a Microblink representative today and find out how we can help you achieve your digital identity verification goals.

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