Why Age Verification is Trending: The New Legal Trends Threatening Your KYC Process

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Online age verification is once again trending.

Gone are the days when a simple ‘are you over 18?’ tickbox disclaimer absolved age-sensitive services from the responsibility of protecting and vetting underage users from emotional, psychological and financial risk.

This is especially troubling given that:

60% of parents admit they don’t monitor what their kids do online.

That’s according to this Entrepreneur Article citing a 26,000-participant study conducted by global C2C marketplace OLX. Conscious of the unrealistic nature of reliance on parental oversight over children’s internet use, many countries have stepped up efforts to apply new legal pressures on providers of online services and products such as cannabis, alcohol, e-cigarettes, gaming and dating.

In fact, one survey (Society for Prevention Research, 2018) found that 75% of legal online marijuana dispensaries in the USA don’t include any kind of age verification at all. Researchers found that even when sellers do include verification, it usually consists of a simple tick box.

In this article, we’ll explore some of the brewing trends in the legal KYC landscape and what age-restricted services can do to safely navigate it.

Verifying the KYC-Process Challenges

In a joint study cited by Forbes in 2021, Johns Hopkins and Boston Universities “found that underage drinkers accounted for $17.5 billion or 8.6% of the alcoholic drinks sold in the U.S. during 2016.” Fast-forward to the present day and you can wager that number is significantly higher. In the post-pandemic era, you can also count on online sales of alcohol accounting for a significant proportion of illegitimate underage sales.

Now, new hardline legal trends and KYC regulations are closing in to hold online vendors accountable where parental stewardship has failed.

And It’s Not Just Age-restricted Substances Being Placed Under Stricter Legal Lock-and-key

According to a recent NY Times article, people in Japan are required to provide a document proving their age in order to use the dating app Tinder. In Germany and France, new laws require pornography websites to check visitors’ age.

For age-restricted products and services, the penalties and consequences of failing to plug the emerging KYC gaps can be mission-ending.

The data clearly shows that businesses are responding to regulations. An Oxford Internet Institute report by Nash and colleagues shows in the case of social gaming, “the lack of age verification procedures is undoubtedly a reflection of the absence of regulatory requirements in this area.” By contrast, where rules exist, and enforcement is effective, age verification adoption is high. By contrast, where rules exist, and enforcement is effective, age verification adoption is high. That is unsurprising when we consider the costs both in terms of potential fines and other penalties, but also the high risk of reputational damage for businesses that do not meet best practice requirements.

Let’s examine some of the shifting legal trends that are putting KYC process under tighter pressure and scrutiny.

The Age Verification Policy Landscape

When you think of age verification, you typically think of adult-only products and services. That narrow definition is expanding – and for a good reason. In the past, underage consumers would have to be physically at a business’s location in order to attempt to gain access. Today, everything can be ordered online and therefore the “gate” that protects underage consumers needs to be placed at the digital entry point.

Should a child be able to open an account at a marketplace or financial service? What about ride-sharing? Social media is filled with adult content. What’s the point of limiting minor’s access to one piece of content when they can access it via content amplification elsewhere?

Will legislators take this to the point of requiring every instance of shared content to verify age? Every country needs to decide where to draw the line and how to implement and regulate underage access to content, products and services.

The trend is clear - the need for standalone age verificationis expanding.

New Laws Protecting Underage Consumers Around the World

US federal law sets the legal age to purchase alcohol and tobacco at 21.

In the European Union, a new law requires video and audio services to protect underage consumers and checking users’ age is becoming commonplace. YouTube currently performs age verification to users within the EU by asking for identification or credit card details.

A law recently passed in the UK, called the Children’s Code, is influencing how other nations deal with protecting minors online. An interesting guideline in the Children’s Code requires websites and apps to apply the highest possible privacy setting by default for underage persons. In addition, digital services can only collect “as little information as possible.”

Some of the wording in the UK legislation is intentionally vague and only time will tell how the law is actually implemented.

The fact that age verification is becoming an accepted practice in order to access content, products and services should come as no surprise. Particularly given that underage consumers are themselves proliferating online content promoting workarounds and backdoor access techniques for accessing age-restricted products and services.

To get an idea of the potential scale of that problem, you need look no further than this ‘How to’ YouTube video—with close to 100,000 views at time of writing—teaching underage users how to buy bitcoin illegitimately.

What Businesses Should Look for in Age Verification

From the perspective of the online business (regardless of sector) that is adding age verification to their existing KYC (Know Your Customer) processes, every new step means potentially lower conversions. Age verification must be super-fast, easy to use and scalable on a minute’s notice to handle any spike in traffic.

An adult watching a YouTube video that requires age verification won’t wait for a long time or suffer through many steps. How many steps would you put up with in order to watch a video? Consumers seeking any product or service online are just a tab away from competitors’ websites. Speed and ease of use are of the essence.

As every DevOps engineer knows, every deployed web application must be instantly scalable. This rule of thumb applies to age verification as well. No one should be expected to wait for human intervention while verifying their age online. The age verification user experience must be like everything else online – automatic from end to end. What’s automatic is instantly scalable.

Age verification is emerging as a major milestone in identity. Be on the lookout for your competitors starting to deploy age verification on their websites. Are you verifying your users’ ages? If your website caters to the EU, UK, or Japan, now is the time to begin assessing a new approach to verifying the ages of your users.

What’s Next? Putting KYC on Autopilot

It’s clear from the misalignment in KYC process and emerging legislature responding to underage consumers’ purchasing patterns that online vendors must set a firmer anchor or risk staying adrift in a landscape that could spell deep financial and legal trouble.

Part of the answer is socio-ethical—education and social values must play a preventative role; but that’s for the long-term. In the ‘here and now’, a straighter-line answer is rooted in finding more innovative ways of automating alignment between customer-facing KYC workflows and the legal literature they’re accountable to. 

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