Legal marijuana sales in the United States topped a new record in 2020, with a total of $20 billion.

Cannabis businesses are having no problem finding a solid customer base across legalized states. However, that doesn’t mean the industry is without its challenges.

Dispensaries must deal with lingering social stigmas and keep up with changing laws. They also have limited banking options due to federal laws. Additionally, online verification of customers presents unique challenges.

The COVID-19 pandemic caused consumer demand for delivery to skyrocket. Many people have grown accustomed to delivered meals, groceries, and other household products.

So, it’s no wonder that dispensary customers want their products delivered right to their doorsteps as well.

Marijuana businesses must figure out the logistics. This starts with online id verification and ends with the process of delivering products.

Here are the ways that businesses are dealing with online identification along with the different options.

Why Accurate Online Verification Is Critical

Businesses like banks, bars, and tobacco stores have been verifying identification in person for years. Whether it’s to prevent fraud or comply with laws, these businesses have the process down.

After all, poor verification methods can result in an array of negative effects. These include fraudulent transactions, losing business licenses, or even criminal charges.

Fake IDs are easy to obtain online, but traditional businesses have always been able to review the identification in person. Employees could use tried and true techniques to differentiate authentic from fake IDs in person.

As cannabis dispensaries have been opening across the country, they have used similar methods to verify IDs. Most businesses scan a government-issued identification card using a digital device.  The ID can then be verified against official records.

Employees are responsible for matching a customer’s face to the ID. The system also stores ID images. Once an employee has verified ID, the customer is free to continue with a purchase.

Virtual ID verification does not come quite as easily, however. With the demand for delivery increasing, cannabis businesses must learn the best way to verify customer IDs from a distance.

If verification processes fail, the business may face cataclysmic consequences. For a cannabis business, inaccurate verification can result in criminal charges, loss of the business, or both.

A New Way

Online purchases are beginning to make some in-person ID checking obsolete. But they’ve also helped expose some of the downfalls of in-person transactions. Human error in ID verification has always been an issue, particularly for bars.

Employees that verify IDs throughout the day become fatigued and accuracy may go down with fatigue. People also come to the job with internal biases that they are often unaware of. This can also result in faulty verification.

Business owners can never be 100% certain that an employee is checking all ID cards thoroughly. A business may suffer simply because one or two employees have done a poor job of ID verification.

When you consider the cons of verifying IDs in person and the drastic increase in online purchases, it’s clear that new methods are needed.

Businesses must investigate the different types of online identity verification. Research is crucial to ensuring the right solution is implemented.

The Basics

Some businesses verify a customer’s identity online using basic information about the person.

This often includes a person’s name, date of birth, address, social security card number, or driver’s license number. Customers enter this information themselves into a site or application.

This information is verified against a government database to confirm that the data is accurate. This method is quick and painless for both the customer and the business.

However, it is the least secure method of online interactions. Data breaches are increasingly common across the world. It is impossible for online stores that use this method to know that the customer is who they say they are.

While it is important to offer verification methods that are easy to use for everyday customers, this method is far from secure.

Combating Sybil Attacks

What is a Sybil attack? A Sybil attack occurs when one person or group creates a massive number of online accounts. The name comes from a book called Sybil, which is about a woman with a dissociative identity disorder.

In a Sybil attack, one person acts as many. A prime example is when one individual creates many accounts on an online retailer site. This many fake accounts creating reviews of a product could undermine the authority of the site.

This type of attack on a verification system could wreak havoc on its level of authority. When a Sybil attack creates a majority of fake users on a site, the controller of these accounts has a greater ability to make illegal transactions.

To a cannabis business, this type of attack would look like many new, valid customer accounts. The person that is controlling the accounts could carry out various levels of fraudulent activity. This could devastate a business.

Basic online ID verification can be vulnerable to Sybil attacks. Luckily other options provide a stronger defense.

Know Your Customer (KYC)

Know Your Customer (KYC) is a method that has become more popular. Financial institutions and cryptocurrency exchanges use KYC to verify a user’s identification. Sybil attacks are more difficult given the level of documentation required.

This is because KYC requires customers to provide ample documentation that can be verified. A new user typically needs a photo ID, a verified document like a utility bill, photos or video, and biometric data.

Instead of typing in this data, copies of the documents are submitted to the site. The system then matches the data against a government or other institutional databases.

KYC generally requires either a photo or a video of the customer in addition to a copy of a photo ID. Computer algorithms are far superior to human verification in this area.

Algorithms can closely verify each of the person’s facial features to ensure the face matches the ID. This is where a human’s skills are nowhere near as accurate as a computer.

This method is far more secure than simply verifying customer-entered data fields also. However, it does have its downfalls. KYC requires more on the part of the customer and additional software for the business.

It also places a lot of personal data in the hands of one organization, creating security concerns for customers. On the other side, businesses must purchase additional storage to keep the data safe.

Biometrics on the Blockchain

The terms cryptocurrency and blockchain seem to always go hand-in-hand. But there is a whole lot more to the blockchain than just sending money back and forth.

The blockchain provides the ability to store data on a decentralized system. No single database is responsible for securing all of the data, making it a more secure storage choice.

For organizations that are responsible for keeping personal data secure, the blockchain is a great option. This technology is advancing at a rapid rate and becoming more secure in the process.

For instance, Finnovant and Governor DAO recently partnered for this type of solution. Their products combine facial and voice biometrics with blockchain governance.

This partnership provides a user-friendly experience for both customers and businesses. While this solution is more costly than basic ID verification techniques, it is more accurate and more secure.

The Balancing Act

Organizations charged with verifying identification virtually are faced with a tough balancing act. Which is more important? Ease of use for customers, security levels, or the cost of systems?

A business must find a product that balances these needs. If a customer feels burdened with security requirements, they may opt to shop elsewhere.

However, customers who have a better understanding of security needs may feel the opposite way. They may actually decide to support a business that focuses on security precautions.

Cannabis businesses that offer online sales should educate customers on their security practices. This will help customers feel safe. They’ll also better understand why they need to submit additional documentation.

Dispensaries must also take the cost of systems into account. A basic verification system may be tempting, but the lower level of security may end up more expensive in the long run if there is a failure in the system.

Get Down to Business

Online verification is one of the pieces of the puzzle for cannabis businesses. It’s a crucial piece to the success of online sales, however. Faulty verification can cause a business to fail, but offering online sales is critical to success.

Online sales aren’t the only way to success. Looking for other resources and ideas to grow your business? Check out our other articles for the latest news!

June Potter wrote this article on behalf of FreeUp. FreeUp is the fastest-growing freelance marketplace in the US. FreeUp only accepts the top 1% of freelance applicants. Click here to get access to the top freelancers in the world.   

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