How to Measure the ROI of Identity Verification Software

In financial terms, ROI is an approximate measure of an investment’s profitability. Simply put, it represents the percentage ratio between the cost of identity verification software and the benefits gained from its implementation in monetary terms. 

There are several ways to calculate ROI. A simplified formula is:

ROI = Net value from IDV / Total cost of IDV x 100

To determine Net value, you need to subtract all expenses from the total return. This leads to a more detailed formula:

ROI = Return (value) from IDV - Total cost of IDV / Total cost of IDV x 100

For example, if a company spends $10,000 on an IDV solution, and, after a year, gains $25,000 in return, the ROI would be:

25,000 - 10,000 / 10,000 x 100 = 150%

This means the company achieved a 150% ROI—namely, each $1 of cost generated $1.50 in profit. 

The ROI formula seems straightforward. In practice, some companies—including Regula customers—find it difficult to calculate ROI due to the lack of financial analytics that convert all profits and costs into the same unit of measure. For instance, it’s hard to express indicators like onboarding speed or customer loyalty in monetary terms. Still, the core idea is simple: if your costs are lower than your gains, the IDV solution is doing its job.

So, what exactly counts as an expense and benefit when implementing IDV? Let’s break it down. 

It’s a mistake to think of an IDV solution as a product with a fixed price since many factors influence the final cost of ID verification.  

At a minimum, three key cost factors should be considered:

Direct costs include expenses related to the implementation and maintenance of the system, which largely depend on the type of IDV solution—on-premises or SaaS. Beyond the software price itself, this category may also cover system setup and customization by in-house or third-party specialists, infrastructure provisioning (e.g., additional hardware or cloud storage upgrades), and ongoing system maintenance.

Hidden costs, as the term suggests, aren’t always obvious. Moreover, these expenses can vary significantly depending on how the IDV software is integrated—for example, whether it’s limited to a company’s mobile app, or also added to the website and self-service kiosks—and which stages of the customer journey it covers. This affects the volume of data that needs to be processed, stored, or deleted. Additionally, employee training may be required, for instance, to handle false positives or negatives during manual IDV checks or to fine-tune the system during use. Regulatory compliance is another cost factor, as the legal requirements for using AI-driven IDV solutions may require additional preparations.   

Finally, there are ongoing costs associated with the daily operation of the IDV system. These typically include licensing or transactional fees, as well as employee salaries for personnel involved in the IDV process. For instance, if your company relies on human agents for live interviews to verify the identities of high-risk clients as part of a customer due diligence program, their salaries should be factored into this category.

The benefits businesses gain from implementing an IDV solution may seem vague or intangible. However, the ROI of IDV can not only be clearly defined, but also measured using quantitative metrics.  

Importantly, ROI always depends on the company’s industry—how many transactions it processes per day, how many clients it attracts, what products or services it offers, etc. From this perspective, a bank and a gambling platform have vastly different operating conditions from the start, meaning their ROIs—both in terms of the metrics used and the overall calculation—will vary significantly.

Let’s look at the potential benefits to consider.

This refers to the financial benefits a company gains by using IDV software to reduce fraudulent activities. Typically, organizations track the fraud rate—the ratio of legitimate to fraudulent transactions—which can be converted into monetary value using the revenue per transaction.

For instance, if a business earns $50 per conversion, this amount can be considered either a profit or a loss, depending on whether the transaction is legitimate or fraudulent. To ensure accuracy, fraud types such as identity document fraud and presentation attacks (including those powered by deepfake technology) can be tracked separately.

Example from a Regula customer:How IDV helps Zamna prevent identity fraud →

IDV software also helps businesses meet Know Your Customer (KYC) and/or Anti-Money Laundering (AML) requirements. To calculate the financial benefits of using these solutions, companies can compare potential fines and reputational damage that could result from non-compliance.

Example from a Regula customer:How IDV helps Checkport prevent 100% of fines imposed for INAD violations → 

Faster verification often leads to higher conversion rates, which should be compared before and after IDV implementation. If an IDV solution automates manual processes, like video interviews or/and manual data checks, the hourly wage of human agents previously handling verifications should also be factored in, as automation can significantly cut labor costs. Additionally, the costs for customer onboarding can be reduced through data entry automation, which speeds up the process for both employees and clients. 

Example from a Regula customer:How IDV helps Skylegs improve data entry speed and accuracy →

Many businesses invest in IDV solutions to create a frictionless user experience (UX). Tracking key metrics such as new registrations/subscriptions and retention rate helps assess improvements post-implementation. Additionally, marketing metrics like customer satisfaction scores, brand mentions, and online sentiment can provide insights into how IDV impacts brand reputation.

Example from a Regula customer:How IDV helps Grand Casino Luzern accelerate new customer onboarding →

When making calculations, every case is unique. Need help? Request assistance or a personal consultation with a Regula representative for deeper insights.

Feel free to contact us with any questions!