Identity Management in Retail: Its Time Has Come

Identity management is set to explode as archaic state laws governing age-restricted sales of alcohol and other products play catch-up as a growing number of shoppers—and the merchants serving them—move online.

The proliferation of grocery retailers and convenience stores online has given shoppers the headache of yet more usernames and passwords to manage across sites and apps. But traditional online identity management does not provide for age verification in a meaningful way, thus presenting a high hurdle for the sale of alcoholic beverages and other age-restricted products.

In those few locations where online ordering of alcohol is permitted, the order fulfillment efficiency retailers are seeking is disrupted because workers have to validate age when delivering online orders to the home or pick up in the parking lot. And these identity-management challenges are just those in the online world.

We can’t forget about every retailer’s nightmare: having some inexperienced cashier hurriedly checking shoppers’ driver's licenses at checkout to verify age and failing to prevent an underage sale. The issue of verifying a government-provided document such as a driver’s license is made only more challenging by the ease of forgery using today’s available technologies.  And, lest we forget, the issue of stolen identities and payments continues to grow for retailers.

In business, and especially in retail, existing identity management continues to be reliant on paper-based forms issued by the government—things such as driver's licenses and passports. But these analog instruments are almost antiquated in today’s digital world. Technology can provide far better alternatives, far better suited for an omni-transactional world.

Biometrics is part of the answer. Smartphones are now offering either finger scanning or facial recognition to validate the user. Companies such as Apple and Samsung are tying that biometric validation to payment, reducing fraud and speeding checkout. It was recently reported that Amazon is testing a palm scanner for access to the company’s automated Amazon Go stores and tying it to payment. But while improving payment security, these solutions do not address age verification.

Clear is a biometric-based identity service used at more than 65 airports, stadiums and venues across the U.S. that speeds a user through security. Once Clear validates a user’s license or passport and other identification, the company ties that identity to either a retina scan or fingerprint scan. As a Clear customer arriving at the airport, all I have to do is scan my fingers or eye to prove I am whom I'm claiming to be, and I am whisked to the front of the security line. The Clear service is expanding: Hertz has a partnership enabling customers to use Clear for validation and then just drive away.

While Clear is expanding its footprint, its dependency on dedicated hardware makes the solution’s extension into retail problematic. And while Apple, Samsung and other tech companies may someday get into the identity-management space, an interesting young company out of the U.K. is already making retail inroads.

In what the company believes to be a precursor to expansion into the U.S. market, Yoti has been approved as a digital ID for age-restricted purchases such as energy drinks, lottery tickets and tobacco products by the U.K.’s Association of Convenience Stores (ACS). Yoti uses the biometric facial scanning capability in smartphones and access to government services to authenticate driver’s license and passport identification documents. In the store, Yoti uses location technology along with the user’s smartphone facial scanning to authenticate the shopper and pass a validated age verification back to the POS terminal.

Along with passing back to the POS a validation of age, Yoti’s digital wallet can hold and send across to the transaction loyalty and payment details. And Yoti doesn’t stop there; think about all the interactions a consumer has during a typical day in which they have to “prove” identity. Workplace access, school access and travel are just some of the things that come to mind. And let’s not forget about healthcare. Along with verifying identity to receive service or prescriptions, Yoti’s digital wallet can pass across health insurance details.

Companies such as Clear and Yoti are providing identity-management solutions for omnichannel retailing, but state governments must now catch up. Some states are moving in the right direction and are in discussions with solution providers like these. Other states though continue to operate in the world of yesterday, leaving in place hurdles retailers and shoppers must overcome.

Gary Hawkins is the founder and CEO of the Center for Advancing Retail & Technology. He can be reached at [email protected].