Consumer interactions are evolving. With each passing year, innovations in convenience, security and cost-effectiveness revolve around transactions conducted online. But as the benefits of online transactions multiply, so do the risks taken by both business and consumer. Hackers, scammers and identity thieves develop new ways to exploit both parties just as quickly as they adapt to protect themselves from attack. It is critical in today’s market for those participating in online business to take action to protect themselves, their consumers and their investments with solid identity verification and authentication tools.
When searching for the proper system to enhanced customer due diligence protect your interests, the difference between these two components can become obscured, especially in terms of government regulation compliance. In fact, the recent delay of the Federal Trade Commission’s (FTC) Red Flags Rule implementation date from August 1 to November 1 was a direct result of confusion over for whom, and to what capacity, compliance procedures should be implemented. It’s important for all business owners to understand and agree to the level of identity protection that is suitable for their needs.
In this article, we will explore the difference between verification and authentication, and how both are critical to your business’s overall success.
What Is Identity Verification?
If you have ever been asked to display a driver’s licence, enter a Social Security number, or present other qualifying personal information before a transaction could proceed, you have experienced identity verification. In other words, identity verification is simply asking a consumer to present a form of identification out of his or her wallet to prove who they are.
While identity verification alone is required for some businesses and is simply an extra later of security for others, it is not foolproof. From fake IDs to intricately designed scams, those who would exploit businesses are quick to work around identity verification. And those workarounds mean that businesses, consumers and confidential information could be at serious risk. That’s where authentication comes in.
What Is Identity Authentication?
Identity authentication not only requires consumers to provide qualifying identity information, it also requires the individual to provide information that is not easily stolen or guessed. These are sometimes called “out-of-wallet” questions and can ask anything from the names of family members, to the amount and frequency of a past loan payment. Out-of-wallet questions pertain to information only the genuine person could know.
Why Are These Strategies Important?
Implementing both identity verification and authentication into your process protects your business from identity fraud and ensures compliance with the “Know Your Customer” portions of government security regulations. However, there is exceptional importance in how these plans are implemented into your transaction process. Simply put, if verification and identification procedures take too long, are too tedious or too scrutinizing, the customer may feel uncomfortable and take his or her business elsewhere. Therefore, it’s important to implement verification and authentication procedures that are thorough and accurate while still respecting the privacy of the consumer and maintaining transaction convenience.