Identity Verification for Online Marketplaces: Preventing Fraud For Sellers and Buyers

Marketplace fraud is often seen as a user problem, as it’s buyers and sellers who are losing money. However, platforms themselves also suffer long-term: online identity fraud pushes good users away, increases disputes and support costs, weakens seller quality, and puts more pressure on compliance teams.

In this article, we will explain where identity verification belongs in marketplace fraud prevention, and the ID verification methods that provide usable proof without making the product experience worse.

The marketplace may not lose money directly at first, but a lot of issues may come up later. Let’s break them down.

When scam warnings keep mentioning a specific marketplace, users start to get the idea that buying there is unsafe.

Secondhand marketplaces show the problem clearly because buyers often deal with private sellers, limited guarantees, and goods that may be hard to inspect before payment. In a Which? survey reported by The Guardian, 32% of buyers said they had been scammed on secondhand marketplaces over a two-year period. Some commonly cited issues included incorrect items, empty packages, and counterfeits. For specific marketplaces, that number can even be as high as 50%, making buyers think twice before purchasing there.

It must be said that seller verification will not prove that every product is genuine. A verified seller can still upload a misleading listing or misrepresent an item, so marketplaces still need listing review, brand reporting, and product checks.

What identity verification does provide is a stronger evidence base: the platform will be able to see who exactly received payouts, or whether the same seller is trying to return under new account details.

Counterfeit or misrepresented goods can make honest sellers compete with suspiciously cheap listings and create complaints from brands and rights holders. Moreover, they make buyers more cautious in categories where authenticity is part of the value: fashion, jewelry, cosmetics, electronics, collectibles, and branded accessories.

Fraud is not always seller-led. Buyers can also abuse a marketplace by claiming that an item never arrived, returning a different product, filing false “not as described” complaints, or using chargebacks after receiving the goods. Even when the platform eventually sides with the seller, the process can cost time, freeze funds, delay payouts, and make every new order feel like a risk.

Again, identity verification will not prove whether a package arrived or whether a return claim is honest. Delivery data and seller evidence review still do most of that work. But identity verification becomes useful when the same buyer behavior repeats across accounts, devices, cards, or addresses.

It would be easy to assume that seller verification is essentially a typical Know Your Business (KYB) procedure. It would mean checking that a company exists, that its registration and tax details are valid, and that the person opening or managing the seller account is authorized to act for that business.

Marketplaces, however, rarely deal only with registered companies. Sellers can also be sole proprietors, creators, small resellers, micro-merchants, or private individuals. 

That is why many platforms need a tiered KYB/KYC model: business checks for companies, personal identity checks for individual sellers, and stronger verification when the seller asks for more trust, money, or access.

The point is not to collect every possible data field from every seller. A better rule is to connect verification to what the seller can do on the platform.

For example:

• A new individual seller may start with basic account data and low listing limits.

• Before the first payout, the platform may ask for ID document verification and a payout account check.

• Before access to branded electronics, cosmetics, jewelry, or luxury goods, the platform may require stronger seller proof and category approval.

• Before selling controlled or age-restricted products, the seller may need business verification, licensing data, and stricter category rules.

• After a sudden sales spike, payout change, or rise in disputes, the platform may ask for re-verification before releasing funds or raising limits.

Many major marketplaces have already incorporated merchant identity verification into their onboarding processes for sellers. Amazon, for instance, requires sellers to provide identity documents and banking details before gaining access to its platform.

Seller verification can create some level of friction, so it needs to be rewarded. Honest sellers need a reason to complete the process, especially if they are asked to provide business details, an ID document, or payout information before they have made their first sale.

One such reason could be earning a verified seller badge that can help improve confidence in higher-value purchases, cross-border orders, new sellers with little history, and categories where counterfeits or delivery disputes are common.

Verification can also be tied to practical seller benefits, such as:

• higher listing or transaction limits;

• access to restricted or higher-risk categories;

• faster payout eligibility;

• fewer holds on funds after a clean sales history;

• stronger buyer confidence for new or cross-border sellers;

• clearer recovery paths if the account is attacked or impersonated.

Buyer verification is a more sensitive topic than seller verification. In most marketplaces, buyers are not regulated counterparties by default, and asking for an ID at checkout can hurt conversion.

Unless the buyer is purchasing controlled or age-restricted goods, the platform usually has to be more careful: start with payment, device, account, delivery, and behavior signals, then ask for ID only when there is a clear reason:

• Every extra step at checkout can cost sales. If someone is buying a low-cost item or making a routine purchase, asking for an ID scan may feel excessive and push them to abandon the order.

• The request has to feel reasonable. Most users understand extra checks when money, access, or restricted goods are at stake. They are less likely to accept the same check when they are simply buying an ordinary item.

• Suspicious buyers often leave other traces first. A marketplace may spot risk through the card used, device history, delivery address, account age, refund behavior, or links to other accounts before it needs to ask for an ID.

At the same time, there are, indeed, cases where buyer verification is a must.

When alcohol, tobacco and nicotine products, adult content, gambling services, or other age-restricted goods are sold online, a buyer’s account history or payment method does not prove age. 

And there is no single age verification process for online sales either, as requirements vary by country, product type, and delivery model. In practice, marketplaces often employ one of the two methods:

• Self-declaration, such as a checkbox, birthdate field, or “I am over 18” button.

• An ID check at delivery, where the courier asks the recipient to show a document.

While these may work in some cases, often they do not prove much either: a minor can complete them as easily as an adult. Self-declaration requires no effort to bypass, while delivery checks may fail when a package is left at the door or handed to someone else.

That’s why solutions like Regula IDV Platform can add more proof to the process, asking the buyer to scan an ID document on purchase, and, when needed, complete a selfie and liveness check. The system can then check the date of birth, document validity, and whether the person presenting the document matches the portrait on it.

Naturally, online verification cannot control who opens the door, so it should not always replace any check required at handoff. But this can help a marketplace block an underage purchase earlier, reduce orders that later fail an age check, and keep a record of how the buyer’s age was verified.

Buyer verification is also useful when the platform needs to return access to an account or approve sensitive account changes. Account takeover is especially difficult because the person using the account may have the right password, access to email, or control of a phone number, but still not be the rightful owner.

Extra checks may be reasonable when a buyer tries to:

• reset a password after suspicious login activity;

• change the email address or phone number;

• add a new payment method;

• change the delivery address after placing an order;

• request a refund shortly after account recovery;

• access stored payment, order, or personal data.

Document and selfie verification is best used for marketplace KYC: it provides solid proof that a seller or buyer is tied to a real person, not only to an email address, phone number, payment card, or device.

A typical document + selfie check has five steps.

In a marketplace, the strongest triggers are usually:

• seller onboarding before full selling access;

• first payout or payout account change;

• access to high-risk categories, such as electronics, luxury goods, alcohol, tobacco, or adult content;

• high-value purchases from new or unusual buyer accounts;

• account recovery after suspicious login activity;

• age proof before the order moves to fulfillment.

This keeps the check tied to the action that creates risk. A casual buyer can keep moving through checkout, while a seller requesting funds or a buyer trying to purchase restricted goods can be asked for stronger proof.

The user takes a photo of a passport, driver’s license, national ID card, residence permit, or another supported document. The system checks whether the image is good enough to process: readable text, full document edges, no strong glare, no heavy blur, and no signs that the document is being shown from another screen.

This is important because many failed checks are not fraud. A legitimate seller may have a worn ID, poor lighting, a camera issue, or a document type that is less common in the platform’s main market. Good capture guidance and a retry path reduce false rejects before the case reaches support.

Once the image is captured, the system reads and checks the ID. 

Depending on the document type, this may include:

• extracting name, date of birth, document number, expiration date, and issuing country;

• checking whether the document is expired;

• comparing data from the visual zone, MRZ, barcode, or RFID chip when available;

• checking layout, fonts, security elements, and data consistency;

• flagging signs of tampering, replacement, or digital editing.

The user then takes a selfie. Face matching compares that selfie with the portrait on the ID document. This helps prevent a fraudster from using someone else’s document, even if the document image itself is genuine.

For seller verification, this can connect the person opening the account to the document used for onboarding or payout access. For buyer verification, it can support age-restricted purchases, account recovery, or high-value orders where the platform needs stronger proof before moving forward.

Liveness detection checks whether the person taking the selfie is physically present. This is needed because fraudsters may try to pass face matching with a printed photo, a video replay, a phone screen, a mask, or a deepfake.

Liveness is especially relevant for remote marketplaces because the platform cannot rely on an employee, courier, or branch agent to inspect the person in front of them. The check has to happen inside the digital session.

Marketplaces are a two-way street when it comes to trust: sellers need verification before reputation and payout access, buyers need step-up checks when behavior or product type raises exposure. That balance reduces fraud while keeping normal purchases, listings, and reviews from turning into paperwork.

Regula IDV Platform can support this model when a marketplace needs document- and face-based onboarding, user lifecycle management, risk-based authorization, and compliance checks in one configurable system. More specifically, the solution offers:

• Seller onboarding: Verify passports, ID cards, driver’s licenses, residence permits, and other documents using 16,000+ templates from 254 countries and territories, with support for 138+ languages and scripts.

• Buyer-side biometric matching: Authenticate users via live selfie that's compared against the photo on their submitted ID document, adding a layer of confidence beyond just document checks.

• Step-up verification: Trigger stronger checks after access to a higher-risk category, or unusual buyer activity, while letting routine buyers and sellers avoid the heaviest checks.

• Payout access and payout changes: Ask the seller to pass a document or biometric re-check before the first payout, after payout details change, or when account activity raises concern.

• Account recovery: Request a fresh selfie, liveness check, or ID re-check before restoring an account after suspicious login or recovery activity. Verification results, review notes, and decision history can be kept with the user profile.

• Age verification: Start with selfie-based age estimation when a lighter check is sufficient, request an identity document when proof of date of birth is required, and add face matching and liveness when the risk is higher.

• Pre-configured workflows: Roll out a KYC scenario in about 20 minutes, with no installation headaches, using ready-to-run white-label components. Deployment can be on-premises or cloud-hosted for quick setup and full control.

Want to know more about how Regula can support your marketplace? We're just a message away.