Why Customer Verification Is So Important

The internet has really revolutionized how human society and culture operate, including how we do business. With businesses embracing social media and e-commerce, transactions without necessarily having to have any face-to-face interactions have been made possible.

Customers have also embraced this shift in business since they now have more power and flexibility when it comes to making purchases. They can now shop from the comfort of their homes, read up reviews about products they intend to buy, and also look up other competing brands.

While the internet has provided convenience to both businesses and clients, some risks have come along with its use. Increased online fraud and cybercrime have seen many businesses lose billions in revenue in recent times. For this reason, businesses are trying to embrace customer verification as part of their online business process.

Understanding the nature of your business and how customers interact with you online is necessary before adopting a customer verification process. You should also understand your country’s laws and regulatory bodies to set up authentication techniques that meet their requirements.

Let’s take an in-depth look into customer verification in the online era and why it’s so crucial.

What Is Customer Verification?

Whether you run a small or international business, you need to have some sort of customer identity so you can do business more effectively. Customer verification is a business process that a business can use to confirm that its clients are who they say they are and that the information they provide them with is true.

This process entails verifying your customers’ identity, assessing their risks, and reviewing their financial transactions to prevent any possible fraudulent financial activity.

How Well Do You Know Your Customer?

Knowing better about your customer by creating a customer profile is vital to establishing successful and sustainable business relations. With the risks involved in the online space, embracing multi-factor authentication is the safest way to verify and know your customer.

This system involves the use of more than one verification method. For instance, a business could ask their customer to provide their age and email address and combine these two to verify their identity.

This customer verification method is mostly useful in high-risk enterprises such as financial institutions. If you are operating a low-risk business, you can choose a single authentication method such as age, email, cell phone number, photo, or video authentication. Let’s break them down.

Verifying the Customer’s Age

Age verification allows you to know your customer’s age. This is useful in the purchase of age-sensitive goods and services to protect underage consumers.

When combined with email or cell phone authentication, you will be able to know your customer’s age and send a code to their email address or phone number, making it difficult for fraudsters to gain access.

However, while doing age verification, avoid sharing your customer’s information with third parties for confidentiality and data security purposes.

Email and Cell Phone Authentication

This method of verification works by sending a code to your customer’s cell phone or email address. Usually, the code is time-limited, and the customer should enter it before they can complete their purchase.

This time limit controls hacker access given that it is difficult for them to gain access to multiple devices of the real user.

Knowledge-Based Authentication

Knowledge-based authentication involves customers submitting some personal information to verify they are who they claim to be. Such information may include the customer’s name, age, email, phone number, and home address. This information is then run through a third-party data provider system to verify the record.

This way, any false information will raise an alarm, and access will be denied. Besides preventing fraud, this authentication helps verify customer information in case a customer enters a wrong address thus preventing deliveries to wrong addresses that may cost the company.

Photo and Video Verification

Photo/video verification involves the user providing a photo or video of themselves and the images are run against a previously submitted photo of the user. The system will verify the customer by checking the time and originality of the photo.

In video verification systems, businesses use webcams and cellphone cameras to verify the user’s identity.  If the system approves of the customer, then the transaction can take place successfully.

What Are the Benefits of Customer Verification?

Build Confidence With Your Customer

Trust is very key for any successful relationship, whether physical or virtual. To build a trustful business relationship with your customers, you need to assure them that their information will be safe from hackers.

This way, you will grow a personal connection with your customer who will not hesitate in recommending your business to other potential clients, resulting in your business’s overall growth. It is no wonder that many businesses are running to verifiers for customer verification tools for their businesses.

Avoid Penalties/Fines

With the increase of online business transactions, governments and business regulatory bodies are encouraging companies to safeguard their customers’ welfare by embracing customer verification. This is in an attempt to stop any criminal and fraudulent activity that results from individuals assuming different identities.

In some countries, this requirement is a laid down law, and non-compliance will result in hefty fines for the business. These fines can be so hefty that they affect business revenue, causing them to downscale their operations or even close down if it’s a small business.

Prevent Cases of Fraud

If a business handles numerous clients, it should identify those at a higher risk of fraudulent attacks and create strict authentication policies to better protect its customers

One of the ways a company can do this is by using two-factor authentication. In this model, customers should prove their identity across two levels of authentication. It could be a photo of their face along with an ID followed by an OTP.

Provide a Good Customer Experience

While businesses aim at providing seamless interactions to their customers, a poorly structured verification system can be annoying. This is because while you want to know as much as possible about your customer, you may find yourself asking for too many details about them, which may come out as an intrusion of their privacy.

For most businesses, customer verification collects information available on identification documents such as driving licenses, ID cards, and passports. The company will then verify the documents, authenticate the customer, and create a customer profile. Some businesses may even go a step further and audit the client in question.

While there is nothing wrong with this process, it can be a bit strenuous and time-consuming for customers. To avoid this, you can automate the data collection and verification process. This implies eliminating paperwork that may take longer to process.

Which Businesses Need Customer Verification?

Customer verification is vital for any company with digital services, given the potential risks of operating in the online space. For this reason, a business has to have certain information about their clients so they can better protect their interests and their own as well in the process.

If a business does not bother checking the information or identity of its customers, they risk selling a product to the wrong party which will expose them to losses, regulatory fines, and damage to their business reputation.

Some of the businesses that require customer verification include finance and accounting, social media, and e-commerce. Microfinance and banking institutions have over the years embraced the use of the internet for most of their transactions.

Today, you can create an account, transfer funds, apply and service your loans at the comfort of your living room. As such, banks should embrace customer verification to prevent fraudsters from creating fake accounts, or making unauthorized withdrawals and purchases.

Businesses such as eCommerce websites and companies with online stores also require some sort of customer verification. This process will help safeguard their customer accounts and minimize fraud.

For businesses selling age-restricted products such as alcohol, vaping products, and gambling services, customer verification is useful to ensure purchase by age-appropriate clients. Businesses selling adult content such as pornography also require customer verification to enable them to control who accesses their content.

Social media platforms also require customer verification to establish authentic celebrity pages as well as public figure accounts. This is due to the increasing number of parody accounts that open accounts under names of certain influential people and use them for comedy purposes or sending out false communication.

Customer Verification Is Becoming an Increasingly Important Feature for the Online Business Environment

Data fraud continues to scare customers and cost businesses significant losses. Knowing your customer is necessary for a company to do business effectively. In some situations, businesses do so to comply with the government rules and regulations and business guidelines set by the relevant regulatory bodies.

Customer verification also helps reduce the risk of theft and fraud and loss of revenue from data breaches. This enables companies to secure their customer base and establish a strong brand reputation which can be a marketable asset for the brand.

Therefore, businesses should understand the risks involved in their online operations and implement a smooth customer verification process that adheres to the set legal guidelines as well as boost customer confidence.

If a business cannot develop its own verification process, it can outsource the software from a service provider as long as they’re legitimate and guarantee close to 100% online security services.