Ritesh Arora

Ritesh Arora

February 27, 2023

Given the accelerated pace of digitalization fed by increasing demand for speed and 24/7 online convenience, financial institutions (FIs) are faced with the need to move a greater number of activities online. Some FIs may do so at the expense of increasing risk of fraud, while others may do so with greater inconvenience to account holders, but fortunately, technology is making it easier to get the balance just right.

What is identity proofing?

Simply put, Identity Proofing confirms that a person or the non-natural entity is who they say they are at the time of application. To do this, you must match an entity’s claimed identity with their actual identity as proven using data and/or documentation.  

According to the National Institute of Standards and Technology (NIST), identity proofing should consist of three steps:

  • Resolution: Collect the individual’s personal information (name, address, date of birth, etc.) and identity evidence (such as a passport or driver’s license).
  • Validation: Determine the authenticity, validity and accuracy of the information and documentation provided.
  • Verification: Confirm and establish a link between the claimed identity and the actual identity of the subject presenting the evidence.

There are currently two approaches to identity proofing: Data-centric and Document-centric.


Data-centric vs. Document centric approaches

A data-centric approach relies on consumers’ self-reported PII (name, SSN, address) corroborated against a third-party database to confirm whether or not the information reported by the named consumer matches against what he or she claims. 

With document-centric identity proofing, as defined by Gartner, a consumer uploads a photo of their government-issued ID and then takes a selfie via a live session with the organization in a process known as liveness detection, or presentation attack detection.

Using a document-centric approach, FIs can verify static information, such as name, address and SSN and then check the validity of documents. In the final step of a comprehensive document-centric approach, the FI would confirm the applicant’s or account holder’s face from the live selfie matches that of the uploaded government-issued ID. 

While Gartner predicts that most organizations will adopt a document-centric method of identity proofing over data-centric, each method comes with its own set of pros and cons.


Data-Centric Document-Centric

  • Low cost of entry
  • Network intelligence mitigates known fraud risks
  • Low consumer friction
  • Reliable indicator for positive matches

  • Difficult and cumbersome integrations
  • Multiple data sources needed for good risk mitigation
  • More sources = more points of failure
  • A negative result is not always an indicator of fraud (false positives)

  • Typically validates against government-issued ID
  • Can be a more reliable source of identity reducing risk of first-party and synthetic identity fraud
  • Relies on state-of-the-art ML to accurately detect altered documents

  • Generative AI can be used to forge documents that are getting harder to detect
  • Methods like bureau checks are not a reliable source of fraud detection
  • Heavy reliance on ML/AI is a black box related to why certain transactions are denied or flagged for review
  • Requires regular tweaking to ensure the review workload is manageable


Achieving a perfect balance

Fortunately, existing and forthcoming technologies promise to combine the best of both methods—the Effectiv Platform already allows organizations to use both methods in parallel, seamlessly, without any additional engineering and development effort. 

Effectiv enables the perfect union of frictionless experiences and a very high degree of fraud detection and prevention, delivering best-in-class risk decisioning. 

This means financial institutions benefit from:

  • Simpler and higher-volume account acquisition
  • Easy comparisons
  • Faster and less-risky onboarding
  • Greater account holder satisfaction
  • Reduced fraud losses

For more information on this topic or to learn more about Effectiv’s identity proofing solutions, visit effectiv.ai or start a free trial today.

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