Skip to content
Log InGet Started
KYC Best Practices02 May 2023

What is Digital Identity: Benefits and verification procedures

Rachael Wambua

Content Marketing Manager

In the digital space, our unique personal information and data comprise what is known as our "Digital Identity." The information provided includes important details such as the individual's name, address, date of birth, ID number, email address, and other unique identifiers. The data is often used in order to verify our identity when accessing online services, making purchases, or performing other digital transactions.

Digital Identity can be created and managed by individuals or by third-party entities such as social media platforms, financial institutions, or government agencies. With our growing dependence on digital services, protecting digital identities is taking precedence in order to safeguard against risks such as identity theft and data misuse.

Whenever we engage with digital and online businesses, we use their digital identity or create one. For example, using login details to access your workstation and email at work, while outside of work, logging into social media, shopping online, or even watching your favourite TV show on an entertainment platform.

All of these activities contribute to our digital persona, which helps us perform daily tasks more efficiently and receive better recommendations. When it comes to sensitive industries, e.g., online banking, digital identity is even more robust, with more checks and balances to ensure people are who they say they are. For instance, we may receive an OTP on our phone when making a transaction or be required to verify our identity through biometrics like face recognition or fingerprint scanning.

In the past couple of years, there has been a significant shift from physical identification and verification of identities to remote methods. To identify a person, businesses look at three important elements.

  1. Something a person knows, e.g. email address, password
  2. Something a person has, e.g. ID card for KYC
  3. Who a person is, e.g. biometrics (fingerprints or facial recognition).

Most businesses put more importance on the first two, which are more susceptible to compromise through social engineering, stolen IDs, and phishing, just to name a few. Who a person is, is more difficult to duplicate, making it a great addition to existing verification methods.

How are digital identities verified?

Governments issued ID Verification - Government-issued documents are among the most forged documents, as they are widely used for user verification. A quick verification of the validity and authenticity of a document can allow businesses to only accept genuine documents. This could be coupled with biometric authentication to ensure the photo on the document matches the user submitting it to your platform for a more secure option.

Biometric verification  - This is one of the more secure options for identity verification as it uses unique features of the person, e.g., facial biometrics or fingerprints. Through spoofing, fraudsters can trick algorithms into giving them access. To solve this, we have liveness detection. This is where a user will be told to perform a certain action, e.g., smile or move their head from side to side. This is to ensure that a living person is submitting a photo and that it is not a photo of a photo or any of the other spoofing methods fraudsters would use.

Two-factor authentication (2FA) - This is a widely used method where a code (OTP) or a link is sent to a user after they perform a certain action, e.g., logging into an account, changing account settings, or checking out.

Knowledge-based authentication (KBA) - This is based on 'what a customer knows’. They are sometimes called security questions. e.g., what is your mother's maiden name? It is susceptible to social engineering, as most people knowingly or unknowingly share this information with others or on online platforms with little to no knowledge of its consequences.

What are the benefits of digital identity verification?

Digital identity plays a big role in ensuring efficiency and security as we digitally engage with people and businesses. Verifying digital identities ensures that your users are who they say they are. Some of the benefits are:

Improved trust

Businesses and their customers are always looking to have a trusting relationship with each other. Customers are more likely to deal with businesses that are secure and protect their data from unwanted and malicious use. For businesses, on the other hand, verifying digital identities ensures that they only let trusted users onto their platforms. In this digital age, trusted users are proving more valuable than amassing a large customer base of unknown users.


The regulatory and compliance landscape is always changing. One key thing remains constant: verifying the identities of people or businesses they interact with. KYC/AML regulations require businesses to identify, verify and manage the risk of their current and future customers. Adopting robust digital identity systems ensures that businesses can easily run Customer Due Diligence (CDD) and Enhanced Due Diligence EDD) programs. As users continue to share their data with businesses, more stringent measures as pertains to data protection policies continue to crop up. This ensures that businesses do not misuse the data they collect from their users.

Fraud prevention

With information readily available online, fraudsters have many ways to get access to sensitive information and use it to access products and services online. Customers trust businesses that take user verification seriously. With the holistic view provided by well-managed digital identity systems, businesses will not only be able to stop fraudsters but also accurately monitor ongoing activity to gain insights into changing behaviours that might pose a risk to their business.

How different industries use digital identities
Financial Services:

Digital identity is crucial to financial services, especially regarding Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations. In the past, financial institutions had to rely on in-person verification processes to confirm a customer's identity. However, with digital identity verification, customers can now easily and quickly verify their identity online, greatly reducing the time and cost of manual verification processes. Digital identity also helps prevent fraud by identifying fraudulent activity more quickly and accurately. For example, if a user's transaction patterns change suddenly, it could be an indicator of fraudulent activity, and digital identity verification can help catch such activity early.

Government Services:

In government services, digital identity is used to verify citizens' identities and improve the delivery of public services to citizens. Digital identities can be used to verify citizens' identities when accessing government services online, such as renewing passports, applying for social welfare benefits, or registering to vote.


Digital identity is also used in the remittance industry, where it helps to improve the efficiency and security of cross-border money transfers. By verifying the identities of senders and recipients, digital identity systems can reduce the risk of money laundering, terrorist financing, and other fraudulent activities.


In the banking industry, digital identity is used to verify customers' identities and ensure compliance with regulatory requirements. It can also help banks to improve the speed and efficiency of their customer onboarding processes, which can be a key competitive advantage in today's fast-paced business environment. In digital banking, customers can use their digital identity to securely access their account information, make transactions, and apply for financial products.

Online sports and betting:

They have a legal responsibility to ensure that their users are of an appropriate age to use their services. To achieve this, they may use age verification methods that incorporate facial biometrics and age lookups from legal identification documents. These measures help ensure that the businesses operate within the legal requirements and do not harm minors.

What to Look for in a digital identity verification service
Choosing a digital identity verification provider is a process that should be given keen consideration to ensure that you have the right partner by your side. Some things to consider are:

Compliance: The service should comply with all relevant regulations and guidelines, such as KYC/AML and data protection policies. Compliance ensures that businesses operate within the legal framework and mitigate the risk of regulatory penalties and reputational damage.

User experience: The verification process should be user-friendly and efficient, with minimal friction for the user. A complex or time-consuming verification process could frustrate customers and lead to lost business.

Accuracy: The accuracy of a digital identity verification service is crucial as it determines the success of the verification process. Look for a provider that has a high accuracy rate and can accurately verify the identities of individuals

Security: The digital identity verification service should use state-of-the-art security measures to protect against data breaches and unauthorised access. Additionally, they should have measures in place to prevent identity theft and other forms of fraud, such as screening against watchlists and sanctions lists.

At Smile Identity, we are powering the digital economy by obsessing over our partners’ success. We have built state-of-the-art technology that will allow you to verify your users' identities across Africa while you stay compliant. We have on-ground teams that keep tabs on the ever-changing regulatory landscape to ensure that we have the best outlook on the changes and can advise our clients. Talk to us to learn more about how we can help your business verify digital identities at scale.

Ready to get started?

We are equipped to help you level up your KYC/AML compliance stack. Our team is ready to understand your needs, answer questions, and set up your account.