Identity verification is the process of making sure that someone is really who they claim to be. This step is crucial when signing contracts, which are fundamental to numerous deals, agreements, and partnerships.
As businesses and individuals increasingly operate online, the importance of identity verification in contract signing has grown significantly. It’s no longer just about verifying identities; it’s also about protecting transactions, preventing fraud, and building trust.Â
Identity verification uses a multi-layered approach, such as checking government-issued IDs, verifying personal details only the individual would know, and using two-factor authentication for extra protection.
In this blog, we’ll explore how digital identity verification works. We’ll look at the different methods used, their benefits, and how they can give you the peace of mind you deserve when signing that next big contract.
Why is identity verification important (benefits)? Identity verification makes sure that the person signing a contract is really who they say they are. It is important because it helps prevent problems that could happen if the wrong person signs a contract.
Imagine signing a contract with someone, but it goes into someone else’s hands. This could lead to several big problems. For instance, you might end up losing money. If the contract was about paying for a service or product, you could pay someone who doesn’t actually deliver what they promised.Â
Another problem could be legal disputes. If a contract is signed by someone who shouldn’t have signed it, it might not be legally valid. This could lead to a lot of time spent in court trying to sort out the mess.
Preventing these issues is why identity verification is so crucial. It helps stop impersonation and fraud.Â
Another important benefit of identity verification is that it increases trust and confidence in agreements. When everyone knows that the identities of the people involved have been checked, they feel more secure. This makes people more likely to enter into agreements.Â
Identity verification also makes the entire process smoother because there’s less worry about potential fraud or disputes over who signed the contract.
What is the difference between ID verification, authentication, and authorization? These three critical concepts in information security are often confused but serve distinct purposes within the framework of accessing systems and data. Understanding the differences between them is key to implementing effective security protocols.
1. ID verification Identity verification during contract signing involves confirming the identity of each party involved in the agreement. This step ensures that the persons signing the contract are who they claim to be, which is crucial in binding agreements legally.Â
ID verification could be achieved by checking government-issued IDs, performing biometric checks, or using other personal identification methods to establish the signatories’ true identities before they engage in the contract.
2. Authentication Once ID verification is complete, authentication is required every time a party wants to access and sign the contract. This step verifies the identity of the signatories at each log in session to prevent unauthorized access.Â
Authentication methods commonly used include passwords, digital tokens, biometric data (like fingerprints or facial recognition), or multi-factor authentication processes that provide an additional layer of security.
See More: Director of Cybersecurity at EY, Soumya Tripathi explains the rising demand for password-less authentication.
3. Authorization Authorization in the context of contract signing determines what actions each authenticated user can perform within a document management or contract signing platform.Â
After parties are authenticated, authorization controls, such as SSO , allow them to read, modify, sign, or approve contracts based on their roles and privileges. For instance, a manager might have authorization to approve a contract, whereas an entry-level team member might only view it.
How does identity verification work? Imagine showing your ID at the airport. Identity verification while signing eContracts uses similar methods to ensure that the person is really who they claim to be. Here are some common ways it works:
1. Knowledge-based Authentication (KBA) This involves asking the person to answer personal questions to which only they would know the answers. The answers are then checked against reliable databases to see if they match up. This helps confirm that the person is genuine.
2. Government ID verification Here, the person must upload a photo of an official ID, like a driver’s license or passport. The system then checks the photo and the details on the ID to make sure they are real and match the person who is using them. This method is quite effective because it uses official documents that are hard to fake.
3. Multi-factor Authentication (MFA) This method requires the person to provide two or more proofs of their identity. For example, they might need to enter a password and then provide a fingerprint or a code sent to their phone. This combination of different checks makes it difficult for someone else to pretend to be them.
These methods work together to ensure that when someone signs a contract online, they are who they say they are. This is important because it helps prevent fraud and ensures that agreements are valid and trustworthy.Â
What is the identity verification process? Digital identity verification involves a multi-step process to confirm individuals’ identities before granting them access to specific contracts, services, data, or systems. It ensures secure and reliable transactions, which are essential when signing contracts, opening bank accounts, or accessing sensitive information online.
A segmented approach such as below ensures that identity verification is thorough and effective, providing security and trust throughout the lifecycle of the contract signing process.
Here’s how these stages typically work:
Pre-Signing
Collection of Information
Collect personal info like name and birthdate through secure forms.
Document Verification
Verify digital copies of government IDs for authenticity.
During Signing
Knowledge-Based Authentication (KBA)
Verify identity with personal history questions checked against databases.
Biometric Verification
Use biometrics (e.g., fingerprints, facial recognition) to confirm identity before signing.
Multi-Factor Authentication (MFA)
Additional identity confirmation through secondary devices or methods.
Post-Signing
Audit Trail
Log all verification steps, operators, and times for accountability.
Trust Seal
Embed digital certificate and timestamp in PDF for security and longevity.
Final Analysis
Comprehensive review of all data and steps to ensure process integrity.
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1. Pre-signing a. Collection of information: Personal information is collected before any contract or transaction. This could include details such as name, address, and date of birth, typically entered through secure online forms.
b. Document verification: Individuals must often provide digital copies of valid, government-issued ID documents such as passports or driver’s licenses. These documents are scanned and verified for authenticity, checking for any signs of alteration or forgery.
2. During the signing a. Knowledge-based authentication (KBA): Knowledge-based questions may be asked to verify the signer’s identity during the signing process. These questions could relate to personal or financial history and are checked against secure databases for accuracy.
b. Biometric verification: If applicable, biometric data such as fingerprints, facial recognition, or voice verification are used at this stage to confirm the signer’s identity directly before the contract is executed. This ensures that the person signing the agreement is the same person who was verified initially.
c. Multi-factor authentication (MFA): For additional verification, the signer must confirm their identity through a secondary device or method, which helps prevent unauthorized access to the document.
3. Post-signing a. Audit trail: This comprehensive log records every step taken during the verification process, who conducted them, and when. It serves as an essential tool for backtracking and verifying the authenticity of each action in case of disputes or audits.
b. Trust Seal: This PKI-based security enhances a document’s identity and security. Trust Seal embeds a digital certificate of the document’s fingerprint and a timestamp certificate from the Trust Service Provider into the signed PDF. It also includes metadata necessary to validate these certificates, ensuring the document’s credibility and long-term validity for decades.
c. Final analysis: The collected data and steps undertaken are analyzed comprehensively to ensure thorough verification. This post-signing analysis is crucial to certify that the entire process was executed securely and appropriately.
What are the challenges associated with verification of identity? Verifying someone’s identity can be tricky and comes with several challenges:
1. Accuracy of data: Sometimes, people’s information might not be up-to-date or correct, making it hard to verify their identity accurately. For example, if someone has recently moved and hasn’t updated their address, it might not match the one in official records.
2. Privacy concerns: People often worry about their personal information being stolen or misused. When organizations collect sensitive data for identity verification, they must ensure it’s kept safe and private, which can be difficult.
3. Technological limitations: Not all systems used for verifying identities are perfect. They might have flaws that allow errors or fraud, like fake IDs passing as real ones. Also, some people might not have access to the technology needed for certain types of verification, like smartphones for receiving verification codes.
4. Cost: Setting up and maintaining a good system for identity verification can be expensive. This includes the cost of advanced technology and training staff to use it properly.
5. User experience: Easy verification methods let in sneaky impersonators. But overly complex verification process makes it too complicated and can frustrate users. If it takes too long or requires too much information, people might give up on signing up or completing a transaction.
Where is ID verification important? Application and use cases Identity (ID) verification is important in many areas where confirming someone’s identity is crucial for safety, security, and legality. Here are some key applications and use cases:
1. Banking and financial services Banks and financial institutions use ID verification to prevent fraud, ensure only the rightful owner accesses financial services, and comply with legal requirements (like anti-money laundering laws). For example, when opening a new bank account or applying for a loan, customers must provide proof of identity to proceed.
2. Healthcare Contracts in healthcare , including patient consent forms, service agreements with providers, and contracts for medical services, require identity verification. This ensures that authorized individuals only access and administer medical information and treatment plans, protecting patient privacy and ensuring accurate healthcare delivery.
3. Employment HR departments verify the identities of potential employees to ensure they are hiring the right person, especially for positions requiring high security or trust. It helps confirm the credentials and backgrounds listed by applicants are true.
4. Government Services Accessing government services often requires ID verification to ensure that benefits or services go to the right person. Contracts related to government services, such as welfare benefits, service agreements, tax filings, and public sector employment contracts, involve identity verification to ensure that services and benefits are rendered to the correct individuals, maintaining integrity and fairness.
5. Travel and immigration Airlines and immigration services use ID verification to ensure travelers are who they say they are, enhancing security by preventing unauthorized travel and enhancing border control measures.
6. Real Estate In real estate transactions, identity verification is crucial to prevent fraud, such as false property claims or mortgage fraud. It ensures that buyers and sellers are legitimate and that all agreements are legally binding.
7. Telecommunications Contracts such as service agreements, SIM card registrations, and equipment sales agreements require identity verification. This helps prevent fraud related to the issuance of SIM cards and ensures compliance with regulatory requirements, safeguarding the interests of both the service provider and the customer.
What are the industry standards and regulations for identity verification? Identity verification is not just a practice for security and trust but is also deeply tied to compliance with various legal and regulatory standards across different industries. Here are some key regulations and how they impact identity verification:
1. Personally identifiable information (PII):Â Laws concerning PII, such as the General Data Protection Regulation (GDPR) in Europe or the California Consumer Privacy Act (CCPA) in the U.S., require businesses to protect the privacy and security of personal data. This includes verifying identities to ensure that access to sensitive information is granted only to authorized individuals and that data handling complies with privacy standards.
2. Health Insurance Portability and Accountability Act (HIPAA) In the healthcare sector, HIPAA requires strict management of personal health information. Healthcare providers must use identity verification processes to ensure they are sharing patient information only with authorized parties, thus safeguarding patient privacy and securing medical data.
3. Anti-Money Laundering (AML) and Know Your Customer (KYC) In the banking and financial sectors, AML and KYC regulations mandate that institutions verify the identity of their clients to prevent fraud, money laundering, and terrorism financing. This includes checking the client’s background, monitoring their transactions, and understanding the nature of their activities.
4. ESIGN Act The U.S. ESIGN Act establishes the legality of electronic signatures in digital transactions, provided that the signatory’s identity can be clearly verified. This makes identity verification crucial in digital contract management and electronic document signing.
5. Federal Information Security Management Act (FISMA) This act requires federal agencies to develop, document, and implement an information security and protection program. Part of FISMA’s mandate includes controls on access to sensitive information, necessitating strong identity verification procedures to comply with federal standards.
What are the levels of signature security and the role of identity verification? Different types of signatures, ranging from traditional handwritten (wet) signatures to digital ones, offer varying levels of security.Â
The level of security provided by the signature type is directly linked to the rigor of the identity verification process used. As the verification process becomes more thorough, the security level of the signature increases, significantly reducing the risk of fraud and unauthorized access.
1. Handwritten (wet) signatures Traditionally, handwritten (wet) signatures have been used to authenticate documents. While they provide a personal touch, their security relies heavily on visual verification, which can be subject to forgery.Â
Identity verification in this context might involve checking a person’s ID in person to confirm their identity before they sign.
2. Electronic signatures (eSignatures) They are digital marks or symbols applied to documents electronically, signifying a person’s approval or acceptance of the document’s contents. eSignatures are more secure than handwritten ones because they are accompanied by timestamps and IP address recording.Â
Identity verification for eSignatures often includes email verification, security questions, or SMS codes that confirm the signer’s identity at the time of signing.
3. Digital signatures Offering the highest level of security, digital signatures are a type of eSignature that includes encryption and decryption technology. They are generated using a Public Key Infrastructure (PKI) and include a certificate-based digital ID issued by a trusted Certificate Authority (CA).Â
Identity verification for digital signatures is rigorous, involving multiple checks against identity documents and often biometric data to generate a unique certificate that is very difficult to forge.
4. Advanced electronic signatures (AES) These are specially designed to be uniquely linked to the signer and capable of identifying the signer. AES requires strict identity verification processes, including live video interaction, biometric verification (like fingerprints or facial recognition), and checks against government databases.
5. Qualified electronic signatures (QES) As the most secure type, QES is recognized as equivalent to handwritten signatures within the EU. They require the signer to appear in person before a registration authority to verify their identity or use a secure signature creation device, ensuring the highest compliance with identity verification standards.Â
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