ID Verification - KYC

A Deep Dive into Identity Authentication

January 20, 2023
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Table of Content

Identity authentication is the process of confirming the digital identity of a user before allowing them to continue on a platform’s digital journey. It verifies whether the user is actually who they claim to be, thus protecting critical business assets from unauthorized access.

Identity authentication adds an extra layer of scrutiny for digital businesses that helps mitigate the risk of fraud and build a trustworthy digital environment. It generally involves the use of additional data, such as passwords, security tokens, smart cards, or biometric factors, for authentication, which can only be produced by the legitimate user.

Learn more about Identity Authentication in this comprehensive guide:

What is Identity Authentication?

Identity Authentication is an exhaustive process where user-provided information is matched with that stored in databases to establish the true identity of a user. Authentication is different from verification in that authentication goes a step further than verifying identities, to grant further access only to authorized users.

The most common method of identity authentication is the use of passwords. However, with users creating easy-to-crack passwords or recycling and reusing passwords across digital accounts, it has become easy for bad actors to guess the passwords and use them to gain unauthorized access. Therefore, advanced identity authentication mechanisms are deployed which use:

  • Passwords
  • Two-factor authentication (2FA) using a one-time password (OTP) or code sent to the user through SMS.
  • Knowledge-based authentication (KBA) where users provide a response using information that only they know.
  • Biometric authentication using factors such as fingerprints, iris scan, or voice recognition, that the user is.


Why is Identity Authentication Important? 

Organizations are obliged to protect their business and consumer interests from evolving fraud tactics. Identity authentication plays a crucial role in maintaining a trustworthy digital platform by protecting users and digital assets from unauthorized access and identity fraud.

Identity authentication is an integral component of overall security apparatus of an organization as it helps improve:

  • Risk Management: Mitigate risks associated with unauthorized access by obstructing the path of bad actors through additional layers of security.
  • Security and Integrity: Prevent incidents of unauthorized access, data breaches, identity theft, and fraud by ensuring only legitimate users can access sensitive information, systems, or services. Protect digital assets and ensure integrity of business operations.
  • Data Protection: Protect user privacy and data integrity.
  • Account Protection: Protect user account security by placing barriers against unauthorized access.
  • User Trust: Foster trust and assurance among users that their digital accounts and information are secure by demonstrating a commitment towards protecting user data and privacy.
  • Consumer Satisfaction: Improve user experience by making it easier for consumers to access accounts with single sign on.
  • Compliance: Help organizations comply with regulatory and legal obligations.

Challenges Associated with Identity Authentication

As the number of users in the digital realm increase and fraudsters sharpen their attack tactics, identity authentication can be an onerous task. Evolving fraud tactics along with the use of sophisticated methods to compromise authentication systems is one of the significant challenges businesses face with identity authentication.

Traditional identity authentication methods, such as passwords, are prone to compromise through phishing and brute force attacks. Use of weak and recycled passwords add to the identity authentication challenge, as bad actors can guess them rather easily. Bad actors can use stolen consumer information to manipulate the authentication factor, set up at the time of registration, to deny legitimate users access to their own accounts.

Businesses also face difficulty balancing security with user convenience. Complex authentication processes may introduce friction, leading to user frustration and resistance. Although biometric authentication is considered more secure, it poses concerns about privacy and storage of sensitive biometric data, since attackers are trying novel means to steal this data.

As remote work becomes the norm, there has been a proliferation in the number of digital touchpoints and devices seeking access. This amplifies the complexity of identity authentication.

To address these challenges, businesses need robust identity authentication solutions that are user-friendly and offer seamless identity authentication experience.

Steps to Follow for Identity Authentication

The identity authentication process generally involves identification, verification, authentication, and authorization.

Whenever a user tries to sign-up or log in, the identity authentication process gets triggered. It is only after the user inputs the correct authentication factor that the access is granted. Often two factor authentication (2FA) and multi factor authentication (MFA) are deployed for enhanced security. While 2FA requires an additional authentication factor, such as an OTP or code sent to the user’s mobile through SMS, MFA requires using more than one form of authentication. This includes a password and biometric data such as fingerprint, iris scan, or facial recognition. Many businesses are now offering “passwordless” authentication, where a digital identity is verified on the basis of digital intelligence such as user’s location, network, online activity, and key strokes, among others.

Implementing a robust identity authentication system involves a combination of steps that may vary depending on the specific method or system in use. Some of the key steps in identity authentication are:

  • Registration: User creates an account by providing necessary information, such as personal details, email address, or mobile phone number.
  • Credentials Creation: User sets up authentication credentials, such as username and password.
  • Authentication Request: The system initiates an authentication request when the user attempts to access a system or service.
  • Authentication Factors: User provides one or more authentication factors.
  • Verification: The system verifies the provided credentials against the stored information.
  • Access: The system grants access if the provided credentials match the stored information, else authentication fails and access is denied. Additional security measures, such as account lockout or notification alerts, may be triggered.
  • Session Management: The system monitors the authenticated user session for any suspicious activity.
  • Reauthentication: For ongoing security, the system may require users to reauthenticate periodically.
  • Account Recovery and Reset: In case the credentials are compromised or the user forgets the credentials, the system allows users to recover accounts with a secure process to reset password.
  • Logging and Monitoring: The system logs all authentication attempts and monitors for any unusual patterns or anomalies.
  • Continuous Evaluation and Improvement: The organization reviews and updates the authentication methods regularly to address the emerging threats.

Identity Authentication in Action

Identity authentication plays a crucial role in protecting sensitive information, preventing unauthorized access, and ensuring the integrity of digital interactions across different sectors.

Here’s a look at some of the use cases of identity authentication:

  • Consumers: To access their digital accounts, such as email, social media, banking, and e-commerce platforms.
  • Financial Institutions: To secure digital transactions, protect against unauthorized access to accounts, and prevent fraudulent financial activities.
  • eCommerce: To secure online transactions, prevent unauthorized access to payment information, and ensure that only the rightful owner can make sales/purchases.
  • Travel and Immigration: To ensure the legitimacy of travelers and protect national security, especially in border control and immigration processes.
  • Healthcare: To protect patient records, maintain patient privacy, and comply with health regulations by ensuring only authorized healthcare professionals have access to sensitive medical information.
  • Government Services: To protect sensitive citizen information such as tax records, social security information, and other government services, by granting access only to authorized users.
  • Corporate Network Access: To protect intellectual property, client data, and internal communications on corporate and business networks.
  • Physical Access Control: To prevent entry of unauthorized persons into buildings, data centers, and other secure facilities.
  • Remote Workforce: To ensure secure access to corporate systems and data from remote workforce spread across various geographical locations.
  • Mobile Device Security: To secure access to personal data, applications, and mobile payment systems.

How Good Identity Authentication Drives Revenue

Identity authentication not only protects businesses and customers from unauthorized access and ensuing criminal activities, but also creates opportunities to increase revenue, sustained growth and profitability. By reducing fraud attempts and enhancing customer trust through secure and seamless transactions, effective identity authentication can contribute to revenue generation in several ways. Some of these ways are as described below:

Seamless Transactions:

Streamlined, user-friendly, and frictionless identity authentication contributes to a positive customer experience and can encourage more transactions, especially in e-commerce, where conversion rates are directly linked to ease of use.

Reduced Fraud and Chargebacks:

By preventing fraud attempts, unauthorized transactions, and account takeovers, identity authentication helps businesses minimize financial losses, chargeback and other associated fees that ultimately help preserve revenue.

Reduced Operational Costs:

Mitigate the impact of security breaches and fraud, reducing the need for costly investigations, customer support for fraud-related issues, and other operational expenses associated with security incidents.

Enhanced Customer Trust:

Build consumer trust that their personal information and financial details are secure, encouraging greater engagement in the form of transactions, account creation, and use of online services.

Increased Customer Retention:

Reduce the probability of security breaches, identity theft, and other cyber threats, fostering customer loyalty and retention.

Personalized Marketing:

Gather and use reliable customer data to create personalized marketing strategies, targeted promotions, discounts, and recommendations, thereby driving sales.

Cross-selling and Upselling:

Create a secure and trusted environment to effectively cross-sell or upsell additional products and services to existing customers.

Regulatory Compliance:

Enable compliance with regulatory requirements regarding customer identity verification to avoid fines and legal consequences, thereby preserving revenue and reputation.

Brand Value:

Enhance reputation for safeguarding customer information, improving likelihood of greater customer acquisition, increased market share, and revenue.

Future of Identity Authentication

Driven by innovations in technology, the future of identity authentication is poised for greater evolution. As the digital ecosystem expands, the future of identity authentication will involve a holistic approach that balances security, privacy, and user experience to meet the ever-evolving challenges of an interconnected world.

The growing need for secure and seamless digital interactions will drive businesses to adopt user-friendly identity authentication that leverage biometrics such as facial recognition, fingerprint scans, and behavioral biometrics.

By allowing continuous assessment of risk factors and adjusting the security measures to adapt to evolving fraud tactics, artificial intelligence and machine learning will play a greater role in adaptive authentication. Password-less authentication, using device trust and multi-factor authentication, will offer more resilient defenses against cyber threats.

With ongoing innovation, the future where individuals have greater control over their digital identities is not too far away. Decentralized identity solutions, utilizing blockchain and distributed ledger technologies, may empower individuals to control and share their identity information securely.

Collaboration between technology developers, businesses, and policymakers will be essential to create a future where identity authentication not only safeguards against threats but also enhances the overall digital experience.


Identity authentication is pivotal to ensuring the security and integrity of digital transactions as well as sensitive, personal and business information. In view of continually evolving threats and fraud techniques, it is essential that businesses adopt innovative identity authentication that leverage biometrics, AI-driven adaptive measures, and decentralized solutions.

With effective implementation of identity authentication, organizations can balance robust security with superior user experience. Businesses can use identity authentication to deliver a more secure, user-centric, and interconnected digital environment that strengthens trust and encourages greater consumer engagement.

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"A Deep Dive into Identity Authentication"