In the digital economy, identity verification is everywhere, but standardization is rare.
Bank customers face different hoops when opening an account. Shoppers log in with passwords, Face ID or third-party apps, depending on the platform.
“It’s bewildering,” Trulioo Chief Technology Officer Hal Lonas said, adding that the “array of steps you’re put through to identify yourself or your business is all over the place.”
Lonas told PYMNTS CEO Karen Webster as part of a What’s Next in Payments conversation that the hodgepodge reflects how fragmented identity remains, despite its central role in the connected economy. Every business needs it, yet no two experiences are the same. The result is frustration for users and missed opportunities for firms that treat digital identity as a regulatory checkbox rather than a chance to differentiate.
A Piecemeal Approach That No Longer Works
The patchwork approach to digital identity has struggled to keep pace with fast-changing customer expectations. Companies often implement point solutions that don’t scale or interoperate.
Advertisement: Scroll to Continue
“The bar for table stakes keeps going up,” Lonas said. “And unfortunately for everybody, it requires engineering and product investment just to keep up.”
What worked a few years ago may now feel outdated, as users expect seamless verification across devices and geographies. A “good enough” mindset risks leaving firms behind, he said.
“Customer expectations are only getting higher for what their experience is when they show up to do business,” Lonas said.
Beyond ‘Good Enough’
Organizations can be lulled into a false sense of accomplishment when they meet the bare minimum for know your customer (KYC) or know your business (KYB) requirements, a mindset that is often in evidence when Trulioo first engages with its corporate clients, Lonas said.
“We absolutely understand the compliance aspect,” he said. “But don’t leave it at that. Make it a competitive advantage.”
At Trulioo, Lonas said he and his team work closely with customers to reframe how they think about identity. Too often, conversations stay confined to compliance departments.
“We spend a lot of time broadening the conversation beyond compliance people, to product leaders and executives,” he said. “We want companies to see identity as a competitive advantage, not just a cost.”
That requires technology that is not only sophisticated but simple to implement.
“The last thing companies want to hear is that they have to dedicate scarce engineering resources to this,” Lonas said. “One thing we can do as an industry is make it easier. So instead of six weeks to implement, it takes two weeks.”
Trulioo’s tools, from APIs to merchant control panel (MCP) servers to example agents, are designed with that goal in mind.
“We think about how we’re going to make it just easy, easy, easy to implement and use,” Lonas said. “As we get more learning, we’ll make the process even more efficient and simple for our customers.”
Against that backdrop, Lonas said identity systems can deliver more than compliance. Done right, they keep fraud in check, create trust from the first interaction, and provide insights that strengthen relationships with good customers and partners.
“Identity and knowing your customer are absolutely a competitive advantage,” Lonas said. “Fraud intelligence, onboarding, staying in touch with good customers; those are not just regulatory exercises.”
Friction as a Tool, Not a Burden
One reason identity can be a differentiator is the ability to tailor friction to context.
“There’s [the process of] using the tech to make it as frictionless as possible,” Lonas said. “And sometimes that’s what you want. Other times, companies want to insert friction into the process.”
The best practice is to apply friction selectively. Onboarding should be smooth, and then, additional verification can be added when transactions become more sophisticated or higher value.
“Being smart about how you do it is key,” Lonas said. “You might have a very frictionless process when you’re just getting to know someone. But when they start doing higher value transactions, now’s the time you need more surety.”
AI, Bots and the Next Wave of Challenges
The rise of artificial intelligence-driven agentic commerce adds urgency. Customers are headed into a daily life where they rely on digital agents to book travel, buy groceries or manage payments. That raises new identity questions. Who built the agent? Who operates it? Has its code been altered?
“We consider this a very revolutionary development in AI and commerce,” Lonas said. “But merchants ask us: ‘How do I tell an agent from a bot?’ They’ve been defending against bots for years, and now they wonder how they’ll support agents without getting their catalogs scraped or accepting bad transactions.”
Digital identity verification will need to evolve to address these concerns, with standards and safeguards to distinguish trusted agents from malicious automation.
“It is going to be messy for a while,” Lonas said. “So, it’s up to us to provide good standards and help businesses get through that initial friction.”
While today’s identity environment feels fragmented, Lonas said he sees progress toward more consistency. He pointed to the development of agent templates that could come preloaded with identity verification components, creating a baseline of trust across implementations.
“If that template included the identity portions to make sure we know what we get and we can trust it, that goes a long way toward uniformity,” he said. “Instead of the hodgepodge universe we live in now, we could have a more regulated, more trusted experience for everybody.”
Portable, tokenized identities, similar to programs like CLEAR, which Webster said has been a boon in streamlining travel, offer a glimpse of what a consistent standard could look like.
“It’s a big opportunity we have in front of us to make it more uniform and know what we’re going to get,” Lonas said.
Ultimately, the future of identity in the connected economy will hinge on moving beyond compliance. Businesses that treat it as table stakes will struggle to keep pace. Those that embrace it as a source of trust, efficiency and differentiation will gain an edge.
“Don’t leave it at compliance,” Lonas said. “Make it a competitive advantage. Help users have a good experience and feel that sense of trust the first time they interact with you. There’s so much opportunity there to do a good job.”
