What does digital identity mean?

Every day, your business has to verify your customers’ digital identities. Whether it’s enabling them to make a purchase, register for an account with your business, apply for financial services, or simply log in, you have a responsibility to make sure it’s really them doing so.

But what is a digital identity? How can you authenticate one seamlessly, and in a way that won’t have your customers abandoning their carts or shirking the process? And how can the right identity verification solution increase your business’s revenue, combat fraud, and help you convert one-time customers into returning customers of the most loyal variety?

Let’s take a look.

What is digital identity?

A digital identity is a set of measurable characteristics, or unique identifiers, that enable services, systems, and applications to verify that an individual is who they say they are.

In this way, a digital identity encompasses the information an individual can use to prove that their online presence corresponds – accurately and truthfully – to their real one.

These proof points can be things the person knows, things only they own or have access to, or things they are, and thus can’t be replicated or fabricated, such as unique biometric signatures of their facial, fingerprint, or voice patterns. They can also be less tangible factors, such as a collection of established patterns or behaviors specific to a certain individual when they search or shop on the internet.

The attributes of a person’s digital identity include the following:

• Email address or username
• PIN or password
• Date of birth
• Social Security Number (SSN)
• IP address and network
• Device or operating system
• Facial, fingerprint, iris, vein pattern, or voice patterns
• Purchase history and online activities or behavior

What is digital identity verification?

Digital identity verification is the process of confirming and validating a user’s identity in the online space. This could be to enable them to log in to or register for an account with your business to access the goods or services you provide or apply for products – such as loans – with a bank or other financial institution.

Through this lens, digital identity verification is a vital part of customer due diligence, and plays an integral role in fulfilling your business’s Know Your Customer (KYC) obligations. (KYC helps ensure all merchants do their bit to fight fraud and its damaging wider impacts, including money laundering and terrorism funding.)

If a digital identity is the cluster of attributes and behaviors we listed above, digital identity verification is the process of ensuring those details check out – and making sure the person attempting to log in or access services is the real-life reflection of that digital identity.

In terms of a real-world analogy, think of your customer’s digital identity as a driver’s license, and your customer as a partygoer attempting to enter the nightclub that is your business. The bouncer on your door checks the person’s license before glancing at their face to ensure a likeness, and that the person is old enough to enter.

If it’s a match, the reveler gains access to your business, and is free to purchase the products or services within – access which would otherwise be restricted or unavailable. In digital identity verification, many of the same principles apply – only instead of a bouncer, your business can benefit from a range of advanced verification techniques.

These include:

• Knowledge-based verification, in which a customer provides information only they should know: such as a PIN, password, username, or email address.
• Biometric verification, in which a customer – usually from their own device – authenticates their identity through a facial or thumbprint scan.
• Document verification, in which a customer must upload official, government-issued ID (such as a driver’s license, birth certificate, passport, or national ID).

Two-factor authentication (2FA) – in which a customer must verify their digital identity via two separate vectors – adds an extra layer of security. Behavioral analysis (which involves examining a user’s typing speed, device usage, or mouse movements to check for potential red flags) is an increasingly popular digital identity verification tool – as is the use of blockchain.

What is the difference between a digital identity and a user?

A digital identity is not the same as the user, but simply that user’s way of representing and authenticating themselves online.

The user is the real person attempting to log into or create an account with a business. Their digital identity is the measurable agglomeration of attributes representative of them, and which companies can use to verify the presence of the real person behind the keyboard.

How to use digital identity as a merchant to increase revenue

A a merchant, using digital identity can help you comply with regulations, personalize the customer experience, and – by understanding and preventing identity fraud – mitigate its impact on both legitimate consumers and your business’s reputation.

Of course, there’s also your revenue to think about.

So, how can digital identity help boost your bottom line? Let’s take a look.

Drive down cart abandonment by reducing friction at the checkout

For ecommerce businesses in particular, abandoned carts are a big issue. Almost eight in ten shoppers (79.53%), one source claims, place items in their basket before leaving an online store without completing their purchase.

The culprit? Long, laborious checkout flows that require too much information from their users, or that place a confusing, cumbersome cognitive load on the would-be customer.

A comprehensive identity verification solution can streamline and speed up the checkout process by reducing the time and effort required to complete it. Such systems can pre-fill form fields, enable mobile-optimized biometric verification, and provide immediate, real-time feedback to users to let them know the outcome of their digital identity check.

All this serves to decrease consumer frustration, increase satisfaction, and thus reduce your cart abandonment rate – not to mention the need for manual checks and reviews!

Reduce chargebacks to protect your reputation and revenue

‍Chargeback fraud – also known as first-party misuse or even “friendly fraud” – happens when a customer, either because of buyer’s remorse or simply fraudulent intent, raises a credit card dispute against your business.

If upheld by the customer’s bank (the issuing bank, which acts as the arbiter in these disputes), your business loses out. You’ll be out of pocket not only for the goods or services you legitimately provided, but for their price – plus a hefty chargeback fee on top. If you decide to dispute the case and still lose(in case you don’t provide evidence), you can add weeks of time and effort to that bonfire, too.

How do you fight chargeback fraud, then? You give your business the best chance of fighting the dispute by collecting as much relevant data at the time of purchase. Later, when the issuer rules on the case, you’ll be better able to prove the purchase was legitimate and that you satisfied your KYC obligations in full.

This is why a high-quality identity verification solution is so crucial. By strongly verifying your customers’ identity, you’ll be able to arm your business not only with a strong case should a customer dispute arise but do so in a way that minimizes friction – and maximizes user-friendliness – at the checkout.

Convert one-time customers into repeat business

It’s well-known that requiring customers to register for an account to make a purchase is bad practice – and that a guest checkout function is always preferable.

However, this makes it hard to upsell the casual customer to your business’s premium services. To rope them into your paid membership or loyalty program, for example, or get them into your email marketing list. Basically, you’re prioritizing the short-term – improving cart abandonment rates to boost conversions – but sacrificing the long-term benefits of engaged, loyal customers.

The solution? A strong digital identity verification tool.

By quickly, seamlessly authenticating your user’s identity, you can bridge that gap for the user: helping them go from browser to buyer to brand ambassador by signing up for an account with your online business. You can achieve this partly through tokenization.

Instead of filling out long forms and sitting through even longer verification processes, your customers can benefit from your premium membership and loyalty programs – while you benefit from the increased revenue they provide.

Protect your digital identity with Checkout.com

Here at Checkout.com, we’re dedicated to helping merchants like you prevent fraud, optimize revenue, and do business safely and securely in the knowledge that your customers are exactly who they profess to be. (From wherever you, and they, are in the world.)

Our Identity Verification solution works 24 hours a day, seven days a week, 365 days a year – authenticating an ever-expanding library of over 3,000 government–issued documents and IDs throughout 195 countries across the globe. Combining automated and human reviews, it arms your business against all forms of digital and physical counterfeiting and is equipped even to combat emerging, AI-enabled threat types, such as deep fakes.

Utilize video flows to increase your conversion rates by up to 30%. Guide and inform users in real-time with AI-powered prompts. Comply with every regulation – GDPR, ETSI, and FATF included – prevent identity theft with KYC, and reduce your operational costs by up to 50%.

With Checkout.com, protecting your business’s digital identity – and verifying that of your users’ – has never been so simple or secure. And finding out more about how your business can benefit from a compliant, AI-powered identity verification solution is as easy as getting in touch with our team of experts today – a straightforward, no-obligation conversation awaits.