Know Your Contractor: How IDV Builds Trust in Freelance Marketplaces

The gig economy is booming. More companies worldwide are turning to independent workers for short-term projects, while professionals seek side jobs or temporary roles to generate income.

Several factors push this shift: rising resignation rates in large companies, ongoing economic turbulence, the post-pandemic work-from-home culture, the digital nomad trend, and the rise of algorithmic management for task coordination. In fact, by 2027, freelancers are expected to make up over 50% of the workforce in the USA—one of the world’s largest work markets. 

In this new economy, freelance platforms become trust hubs where businesses and contractors meet, collaborate, and make payments. But creating this trust demands stronger security measures to prevent fraud and impersonation while protecting all parties involved.

In this blog post, we’ll explore how identity verification (IDV) can help protect freelancers, clients, and platform reputations.

Work marketplaces have a lot in common with social media platforms. Today, there are many major players competing fiercely for users' attention. Additionally, they must comply with varying legal requirements depending on the region. Finally, they must tackle fraud attempts from both unfair contractors and employers posing as scammers. 

Work marketplaces earn revenue in different ways, from commission fees to staffing services. Some, like Dribble or Codeable, attract niche professionals such as designers or WordPress developers. Others, like Upwork and Fiverr, cater to specialists from different domains.

However, regardless of the model, the number of customers—both businesses and freelancers—is the foundation for most platforms’ success and the main point for competition.

A quick Google search for “best work marketplace” or “top freelance marketplace” pulls up hundreds of rankings and reviews. Forums like Reddit and review websites are packed with multi-comment discussions, showing how competitive this niche is. With so many choices, potential users become very demanding—and their experiences can either lift or ruin a platform’s reputation. These two contrasting Trustpilot reviews prove this point.

To sum up, freelance marketplaces must deliver a seamless experience if they want to attract and retain users. Otherwise, they risk public backlash that can quickly damage their sign-up conversions.c

Freelance platforms handle large volumes of sensitive information, including personal details, payment data, addresses, and phone numbers. This makes compliance with data protection laws—which vary by country—a must for them. 

Also, there are specific obligations related to taxes and payments in the gig economy. For example, in the EU, gig workers must submit a DAC7 form summarizing their quarterly earnings, fees, taxes, and transactions. In the US, freelancers must report using Form 1099-K. It’s typically the platform’s job to send users the appropriate tax forms. 

Additionally, platforms often need to implement Know Your Customer and Anti-Money Laundering practices, especially during onboarding and payment processing. For example, the EU’s 5th Anti-Money Laundering Directive sets a limit of €50 for anonymous prepaid card transactions—a rule freelance platforms must respect to stay compliant.

Work marketplaces face a wide range of fraud attempts. Common scams include:

• Account takeovers and impersonation

• Use of stolen or synthetic identities to exploit job offers

• Fraudulent businesses asking freelancers to pay for software, application fees, or training

• Requests for unpaid "sample work” that is never followed by a real job

• Cashier's check scams and upfront payment schemes

These issues are well known among freelancers and are widely discussed online. Importantly, fraud is one of the top concerns, and sometimes discourages independent workers from even joining freelance platforms.

The main purpose of any work marketplace is to create a trusted environment where businesses and contractors can interact safely and conveniently. While convenience comes from features like payment support, trust needs proof—and IDV is key to delivering it. 

Let’s take a closer look at how standard IDV processes work.

First, users scan their government-issued photo ID using their mobile phone. IDV software then runs a series of authenticity checks, including document type detection and reading data from the Visual Inspection Zone and machine-readable elements like MRZ codes and barcodes. If the document is electronic and has an embedded RFID chip, NFC verification can be used—it’s the smartest and most reliable way to check IDs remotely.  

Next, users take a selfie, which is compared to the portrait in their ID (and on the chip if available). This step proves that the person presenting the document is its rightful holder.

Finally, the system performs a liveness check, which is critical for strong remote IDV. It determines if a real person is present, not a photo, video, or synthetic image, all of which are often used in presentation attacks. Users are also asked to smile, nod, or move slightly to verify their presence. The software checks for irregularities such as unnatural skin tones or strange movements. 

A document liveness check works similarly—it confirms the user is showing a real, physical document rather than an on-screen or printed copy. Dynamic security features like holograms, Optically Variable Ink (OVI) elements, Multi Laser Images (MLIs), and Dynaprint images are monitored, as they shift when the document is tilted. For example, an MLI may display the holder’s portrait or birth year depending on the viewing angle.

Now let’s see what IDV approaches freelance platforms use.

Not all work marketplaces require users to verify their identity upon registration. Instead, IDV may occur later—when the user becomes active, completes transactions, or reaches certain milestones. Upwork, for example, uses this approach.

On Upwork, users are notified via email or during login when it's time to verify or reverify their identity. Once completed, users receive a verification badge. Social media platforms like Instagram or LinkedIn also use badges for verified accounts. 

Platforms often use a custom freelancer identity verification process based on user groups or risk levels. For instance, enhanced due diligence might be applied to high-risk users, a common practice in the KYC framework.

Some platforms also use lighter verification methods like email verification, SMS codes, or phone calls, especially for lower-risk users.

Example, here are Upwork’s IDV options:

• Government ID

• Location verification (for US-only jobs)

• Government ID + location verification

• Visual verification (selfie or video identification with a human agent)

• Phone number verification 

Fiverr, another big player in the market, mainly relies on government-issued ID authentication and selfie verification. Phone verification is an alternative in some cases. IDV becomes mandatory when legally required, or when users apply for premium programs or act suspiciously under their accounts.

Some work marketplaces offer benefits to encourage users to verify their identity—an approach often seen on payment services or crypto platforms. By the way, it may be payment gateway providers—not the marketplaces themselves—who require these identity checks.

On Freelancer, users can verify their identity by submitting a photo of themselves holding a unique platform-provided code alongside their government-issued ID. Additionally, users must provide utility bills or bank statements as proof of residence. 

Verified users on Freelancer enjoy faster payment processing, quicker dispute resolution, and exclusive access to better-paying projects.

Freelancer ID verification always costs platforms money and time; interestingly, some of them share these costs with users. For instance, PeoplePerHour offers two IDV tracks for their users:

• The free, basic verification flow takes up to seven working days.

• Faster, paid verification (about $13 in equivalent) takes just one day.

IDV is mandatory for all users registered on the platform. Regardless of the path they choose, they must submit their ID document, proof of address, and card details. These can be photos, scans, or screenshots.  

This model mirrors IDV practices on social media, where verification is sometimes a part of paid subscription packages.

By analyzing real-world examples, two key insights can be drawn:

• Most gig work platforms see IDV as essential for creating a safer, more authentic environment for both freelancers and companies seeking part-time or project hires.

• There is no single, standardized approach similar to the KYC framework widely adopted by financial institutions.

The second insight highlights a major takeaway: gaps in the IDV process can leave blind spots that fraudsters may exploit. These inconsistencies can also lead to poor user experience, with manual steps and long waiting times causing frustration. 

Here are the main pitfalls freelance marketplaces should keep in mind when building their IDV process:

Passports, driver’s licenses, and national identity cards are accepted forms of proof on most platforms. But since work marketplaces often attract users globally, they must handle a wide variety of document types and formats. 

ID diversity is a major challenge. Many countries have multiple versions of IDs in circulation. For example, in the US, there are at least 50 different types of driver’s licenses, as each state issues its own. 

To be effective, a freelancer ID verification solution must rely on a large database of document templates. It must be able to recognize identity data from various languages, layouts, and security features to successfully verify a broad range of IDs.

With the rise of generative AI, it has become easier for fraudsters to create synthetic identities or impersonate legitimate users to hijack accounts.

This makes liveness detection and presentation attack detection critical parts of modern Know Your Contractor flows. Unfortunately, many freelance platforms still do not integrate these checks into their processes. Without them, marketplaces remain vulnerable to increasingly sophisticated fraud attempts.

Multi-step verification can enhance platform security. However, unless done right, it risks frustrating users and increasing churn. 

IDV processes often involve filling out long forms, submitting multiple document scans and photos, and then waiting for results for days—sometimes only to be asked to repeat the entire process if something goes wrong. 

Manual procedures hurt user satisfaction and loyalty. In contrast, smart technologies such as automated data entry and document and biometric verification can make the process faster and more user-friendly without sacrificing security. 

As reusable identities move closer to reality, platforms relying on paperwork and manual reviews risk falling behind.

Freelancer identity verification isn’t just about compliance—it’s about building a community based on trust. Freelance platforms that treat IDV as a core part of their user experience and fraud prevention strategy will lead the market.

Regula, an IDV vendor with decades of expertise in document authentication, offers advanced cross-platform solutions to help you create an effective Know Your Contractor flow:

• Regula Document Reader SDK: Verifies any ID document in seconds with minimal manual input. While the user scans their ID, the software runs a series of authenticity checks, including document liveness detection, to confirm the document is genuine. With more than 15,000 document templates from 251 countries and territories, the solution is a strong fit for global businesses.

• Regula Face SDK: Confirms whether the user is a real, live person, preventing sophisticated presentation attacks thanks to smart tech such as active liveness detection.

Ready to learn more? Feel free to book a call with one of our representatives to explore how Regula’s solutions can support your platform’s growth.