Best practices for customer verification

The internet is a great tool for business, transforming how companies interact with their customers and providing new channels to sell products, provide services, and make money. Unfortunately, the internet is also great for criminals looking to exploit businesses for their own gain.

 

Global estimates for online payment fraud in 2022 reached $41 billion (USD), more than double the figure from the previous year. With that in mind, if you’re running an online business, you need to consider implementing customer verification best practices.

What is customer verification?

Customer verification is the process of checking that the information provided by consumers online is correct. Essentially, verifying the customer is who they claim they are. So that when you receive payments online, you know exactly where the funds came from.

Customer verification, in some form or another, is generally a requirement for operating a business online. Companies must comply with the customer verification processes laid out by the relevant regulatory agencies and governments where they operate. This protects both the customer and the business, reducing the likelihood of fraudulent transactions or identity theft.

With customer verification, you can also reduce expenses related to incorrect information, and guarantee products are delivered to the right address and services are provided to the correct individual. Additionally, it’s critical for businesses selling age-restricted products.

Different types of customer verification

There are several best practices used to implement customer verification. The most popular types include:

1. Multi-factor authentication: Commonly used by banks and other financial institutions, with two or more pieces of evidence from the customer. The evidence could be something intrinsic to the individual, specific knowledge about them, or something they own.
2. Age verification: Used for age-restricted products or services, this form of customer verification asks the customer to provide their date of birth.
3. One-time password (OTP) verification: Typically, an email or SMS is sent to the customer’s account containing a unique, time-sensitive (i.e., expires after a fixed period) code or password.
4. Knowledge-based verification: Asking customers to re-enter personal information about themselves, such as their full name, address, phone number, or email address.
5. Photo or video verification: A more modern method requiring customers to submit photographic or video proof of themselves.

When it comes to customer verification, it’s highly recommended that businesses take the time to learn best practices and find ways to improve the process for both parties.

Customer verification steps

Most shoppers today are in a hurry, and it can be frustrating to have to jump through additional hoops when purchasing online. As a business, it’s your role to show your customers that you value their online security. This can easily be done by explaining the reasoning behind your customer verification processes.

Whether your business is simply complying with regulations or going above and beyond to increase protection, better-informed customers have a better shopping experience.

Streamline the process by implementing Single Sign-On (SSO)

Speeding up the process without sacrificing security always goes a long way. One of the best customer verification methods currently available is SSO. This lets customers confirm who they are by logging into their account from other popular services, such as Facebook or Google.

By piggybacking your online store onto other trusted services, you can quickly verify identities while simplifying the process for customers. They no longer have to go through the process of creating an account, providing information about themselves, and generating another username and password combination to remember.

SSO can also help your business prevent fraudsters or bots looking to create accounts on your website or app.

Collect the correct payment information

As mentioned above, many different customer verification types are available for your business. When it comes to online payments, you need to do your due diligence and gather all the necessary information. This differs depending on your business model and if you sell to consumers or other businesses.

Important customer information you should record when dealing with individuals:

• Name
• Date of birth.
• Physical address.
• Email address.
• Identification or social security number

When dealing with businesses, you should also gather additional information, such as:

• Business name.
• Business EIN.
• Business address.
• Information for the authorized representative (e.g., name, email address, date of birth, identification, or social security number).

Using software to automate customer verification steps

Manually verifying each customer can quickly become a problem. What happens if you get a rapid increase in customers and your staff can’t keep up? Relying on manual procedures create bottlenecks that slow business growth, and are tedious, lengthy processes for customers.

A much better solution is to incorporate identity verification software capable of automating the process. With technology on your side, you can verify customers in real-time while also reducing the risk of fraud and identity theft and complying with the necessary regulations.

There are many identity verification solutions to choose from, and it is worth doing your homework to find the one that best suits your business needs. You want to be able to quickly verify customers wherever they are in the world and ideally offer customized services based on their location. It’s also critical to ensure any identity verification software you purchase is safe and secure, meeting global and local regulations.

Protecting all parties with customer verification

Customer verification is a fundamental part of running an online business. When it comes to designing verification processes for your business, the goal should always be to maximize protection, for both you and the customer, without ruining the shopping experience.

You need to accurately identify everyone you’re selling to, comply with any legal obligations, and create a smooth and straightforward process for customers visiting your online store. With the growing threat of online fraud, now is the ideal time to upgrade your customer verification procedure to include the best practices available.