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,” said Hal Lonas, Chief Technology Officer at Trulioo, 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 this 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. This often results in frustration for users and missed opportunities for firms that treat digital identity merely 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 do not scale or interoperate effectively.
“The bar for table stakes keeps going up,” Lonas noted, highlighting that “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 What worked a few years ago may now feel outdated, as users increasingly expect seamless verification across various devices and geographies. A “good enough” mindset risks leaving firms significantly behind in the competitive landscape.
“Customer expectations are only getting higher for what their experience is when they show up to do business,” Lonas emphasized.
Beyond ‘Good Enough’
Organizations can easily be lulled into a false sense of accomplishment when they meet only the bare minimum for Know Your Customer (KYC) or Know Your Business (KYB) requirements. This mindset, Lonas said, is often evident when Trulioo first engages with its corporate clients.
“We absolutely understand the compliance aspect,” he stated. “But don’t leave it at that. Make it a competitive advantage.” At Trulioo, Lonas and his team work closely with customers to reframe how they perceive and think about identity. Too often, discussions are confined solely to compliance departments.
“We spend a lot of time broadening the conversation beyond compliance people, to product leaders and executives,” he explained. “We want companies to see identity as a competitive advantage, not just a cost.” Achieving this requires technology that is not only sophisticated but also simple to implement.
“The last thing companies want to hear is that they have to dedicate scarce engineering resources to this,” Lonas continued. “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, including APIs, merchant control panel (MCP) servers, and example agents, are all designed with this specific goal in mind.
“We think about how we’re going to make it just easy, easy, easy to implement and use,” Lonas reiterated. “As we get more learning, we’ll make the process even more efficient and simple for our customers.” Against this backdrop, Lonas highlighted that identity systems can deliver much more than just compliance. When implemented correctly, they help keep fraud in check, build trust from the very first interaction, and provide valuable insights that strengthen relationships with good customers and partners.
“Identity and knowing your customer are absolutely a competitive advantage,” Lonas affirmed. “Fraud intelligence, seamless onboarding, and effectively staying in touch with good customers; these are not just regulatory exercises.”
Friction as a Tool, Not a Burden
One significant reason identity can serve as a powerful differentiator is the ability to strategically tailor friction to specific contexts.
“There’s the process of using the tech to make it as frictionless as possible,” Lonas clarified, adding, “And sometimes that’s what you want. Other times, companies want to insert friction into the process.” The best practice involves applying friction selectively. Onboarding should ideally be smooth, but additional verification can be judiciously added when transactions become more sophisticated or involve higher values.
“Being smart about how you do it is key,” Lonas advised. “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 rapid rise of artificial intelligence-driven agentic commerce adds a new layer of urgency to digital identity. Customers are increasingly moving towards a daily life where they rely on digital agents to book travel, buy groceries, or manage payments. This development raises entirely new identity questions: Who built the agent? Who operates it? Has its underlying code been altered?
“We consider this a very revolutionary development in AI and commerce,” Lonas explained. “But merchants frequently ask us: ‘How do I tell an agent from a bot?’ They’ve been defending against malicious bots for years, and now they wonder how they’ll support legitimate agents without getting their catalogs scraped or accepting fraudulent transactions.”
Digital identity verification will undoubtedly need to evolve significantly to address these emerging concerns, requiring new standards and safeguards to effectively distinguish trusted agents from malicious automation.
“It is going to be messy for a while,” Lonas predicted. “So, it’s up to us to provide good standards and help businesses navigate through that initial friction.” While today’s identity environment certainly feels fragmented, Lonas expressed optimism about progress toward greater consistency. He pointed to the development of agent templates that could come preloaded with essential identity verification components, thereby establishing a baseline of trust across various 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 stated. “Instead of the hodgepodge universe we live in now, we could have a more regulated, more trusted experience for everybody.” Portable, tokenized identities, akin to successful programs like CLEAR, which Webster noted has been a boon in streamlining travel, offer a compelling glimpse of what a consistent and standardized approach 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 concluded.
Ultimately, the future of identity in the connected economy will critically hinge on moving beyond mere compliance. Businesses that treat it as just table stakes will undoubtedly struggle to keep pace. Conversely, those that embrace it as a fundamental source of trust, operational efficiency, and competitive differentiation will gain a significant edge.
“Don’t leave it at compliance,” Lonas urged. “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.”
