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Age verification software provides a way for institutions and businesses to check the age of their customers. This is often part of an onboarding or KYC (Know Your Customer) process.
Age verification software comes in various forms. It can be a component of a full identity verification tools, with APIs that allow integration with other corporate systems. It can be a dedicated tool that does only this and stacks with other software. Alternatively, there are digital products dedicated to age verification and specific solutions for offline field usage, such as mobile apps to verify IDs on entry to casinos and music festivals.
Just as the applications for age verification can vary, so can the methods of providing it. Some systems focus on verifying documents and checking databases such as those from governments and credit reference agencies. Others incorporate video calls and interactions with live agents.
What Companies Use Age Verification Software?
The necessity to regulate access to age-restricted products, services, and websites compels many types of companies to employ age verification software. This not only ensures the safety of underage users but also helps maintain their licenses.
These companies include:
- Banks
- Loan companies
- Money transfer services
- Fintech firms
- Online casinos and betting sites
- Sellers of age-restricted products (such as weapons, alcohol, and tobacco)
- Dating services
Age verification is increasingly becoming a priority for social media platforms as well. This is partly to prevent underage users from accessing these platforms.
Moreover, following Instagram’s implementation of new age verification measures in June 2022, there is also a legal obligation to comply with federal laws. These laws prohibit the collection of data on users under the age of 13 without parental consent.
Given the widespread demand for age verification data, the identity verification industry (which includes age verification) is expected to double in size from 2021 to 2026, reaching an estimated value of $17.6 billion by 2026.
How Does Age Verification Software Work?
Age verification software utilizes various methods to authenticate an individual’s age. Similar to many KYC (Know Your Customer) checks, age verification typically revolves around verifying official documents such as passports, driving licenses, and other forms of government-issued ID.
Customers typically submit these documents along with their date of birth. Scanned copies and photographs are commonly accepted, often requiring users to upload a selfie photo or video alongside their document(s).
The verification process itself is frequently automated, cross-referencing information with government databases or credit files. In some instances, these systems route some or all verifications for manual review by human operators.
AI-based systems that employ facial analysis to estimate a user’s age are also gaining popularity. While not solely sufficient for KYC compliance, these technologies are sometimes deployed in environments like nightclubs or self-service checkouts to automate requests for further verification or ID checks.
What Are the Challenges of Deploying Age Verification Software?
The primary challenge in implementing age verification is cost. Each KYC check can range from $13 to over $130, resulting in financial institutions facing annual bills amounting to tens of millions of dollars.
Another significant concern is user friction. Similar to all KYC processes, anything that slows down customers in achieving their objectives risks causing frustration or inconvenience.
Consequently, this can lead to abandoned applications and transactions. Research indicates that 62% of consumers in Europe have abandoned financial product application processes.
In many cases, these checks are not optional but a legal requirement for organizations. Therefore, the focus is on finding efficient and compliant methods of age verification that minimize user friction.
The Importance of KYC and Age Verification
KYC verification, including age verification, plays a crucial role in the daily operations of numerous companies. For entities such as financial institutions, gambling firms, and fintech companies, it’s not only a legal requirement but also essential for preventing fraud.
Age verification is equally important for businesses selling age-restricted products and services, ensuring compliance with regulations and safeguarding minors. This requirement extends to online sales, including delivery or Buy Online, Pick Up In Store (BOPIS) options, which are pivotal channels for many retailers.
How to Deploy Better Age Verification Software
Two primary objectives for enhancing age verification software deployment are cost reduction and minimizing inconvenience for legitimate customers.
One effective approach to achieve these goals is through pre-KYC checks, which filter out individuals who may not require a full verification process due to obvious fraudulent indicators or other unsuitabilities.
Techniques like data enrichment, velocity checks, and device fingerprinting provide businesses with valuable insights. These methods can flag potential risks early, allowing some customers to be flagged for rejection without requiring further extensive checks.
For instance:
- Data enrichment and device fingerprinting solutions may detect enough suspicious activity to warrant rejection without additional scrutiny.
- A KYC system that maintains comprehensive records from previous checks may streamline the verification process for returning customers based on existing data and documents.
- Larger institutions benefit from integrated systems across departments, enhancing efficiency and reducing costs by ensuring seamless communication.
Based on the outcomes of pre-KYC checks, businesses can then determine whether to apply light KYC (Know Your Customer) or more rigorous CDD (Customer Due Diligence) or EDD (Enhanced Due Diligence) measures, including age verification.
The key focus should be on optimizing the customer journey, minimizing unnecessary hurdles while ensuring full compliance with regulatory requirements. This approach not only enhances age verification compliance but also strengthens fraud prevention efforts, safeguarding both business interests and customer trust.
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