Identity, AI, and API-First Architectures
This is post three of our five-part series on the future of Unemployment Insurance (UI) adjudication and modernization.
In Parts 1 and 2 of this series, we examined the scale of the crisis facing unemployment insurance (UI) adjudication and explored Integrated Fact-Finding (IFF) as a pathway to more efficient and equitable casework. But no matter how strong the workflow design is, modernization fails without the right technical foundation. In Part 3, we take a closer look at the technology stack essentials: robust digital identity verification, AI-driven fraud detection and adjudication, and API-first architectures that replace rigid, monolithic systems.
These are not optional extras. They are the backbone of a modernized UI benefits administration system and a core requirement for states investing in an end-to-end unemployment insurance solution for states that is both resilient and future focused. Without them, even the most ambitious reforms collapse back into bottlenecks and inequities. With them, states can build a future-ready unemployment benefits tool with advanced AI that is secure, transparent, and adaptable.
Digital Identity: Building Trust at the Gate
The pandemic proved how fragile identity defenses were in most states’ unemployment benefits processing systems. Fraudsters exploited stolen data to file millions of claims. Some states saw more than half of their payouts siphoned off by identity thieves.
A next-generation identity verification system for UI claims changes that calculus. These systems combine multifactor authentication, document validation, biometric checks, and integration with government data sources to confirm identities in real time. Importantly, they don’t just keep criminals out. They also restore confidence for legitimate claimants navigating a state unemployment insurance platform designed with security and accessibility in mind.
Identity tools must also be accessible. Many workers rely on mobile devices as their primary internet connection. A scalable cloud-native UI platform built for federal standards ensures verification steps work seamlessly across devices, languages, and bandwidth environments. Paired with unemployment insurance software with IVR and chatbot support, claimants who lack digital literacy or English proficiency can still navigate the process.
Identity verification is not just fraud prevention. It’s a trust-building exercise. If claimants cannot confidently pass the first hurdle, they disengage or fall through the cracks.
AI for Fraud Detection and Fair Adjudication
Traditional rules-based fraud detection is no match for today’s adaptive fraud rings. That’s why states are increasingly deploying AI-powered unemployment claims adjudication software that learns from patterns across vast datasets and supports real-time eligibility determination for UI benefits.
For example, AI can detect suspicious activity such as:
- Dozens of claims filed from the same IP address
- Wage records that don’t align with employer filings
- Claimant identities linked to multiple bank accounts
When deployed within an AI-enabled UI claims system aligned with federal procurement, these models operate continuously, flagging anomalies before payments are made and strengthening the broader ecosystem of fraud prevention tools for unemployment insurance.
But with AI comes responsibility. Bias in algorithms can disproportionately harm vulnerable populations. The answer is to build on an AI-neutral unemployment claims processing software framework. That means using unbiased AI tools for UI benefits and embedding transparency at every step. A transparent and explainable UI decisioning system shows why a claim was flagged, while a federally compliant AI UI solution with audit logs ensures that every decision is reviewable.
For states focused on risk mitigation, an AI governance-ready unemployment insurance platform gives regulators and policymakers confidence that adjudication practices align with modern standards and ethical expectations.
AI should not replace human adjudicators. It should amplify them. Caseworkers remain the final decision-makers, but with automated fact-finding and supporting evidence organized through an automated fact-finding and document upload portal for UI, they work faster and fairer.
API-First vs. Monolithic Systems
Perhaps the most underappreciated element of modernization is system design. For decades, states have been shackled to monolithic unemployment insurance platforms. These systems were built as single, massive codebases where every change ripples unpredictably. Updating one function often breaks another. Scaling up requires huge new infrastructure investments.
An API-first architecture flips that model. Instead of one massive block, the system is composed of modules that communicate through standard APIs. This enables states to integrate best-in-class components without being locked into a single vendor or a rigid unemployment insurance software for government.
For example:
- Unemployment appeals and hearings management software can be plugged in when disputes need to be tracked more efficiently
- UI overpayment and recovery tracking software can be layered in to manage recoupment and repayment plans
- A federal UI reporting and compliance solution can be attached to streamline mandated reporting
The result is a modular unemployment insurance technology platform that adapts as needs evolve. States can add, upgrade, or replace modules without ripping out the entire system. That flexibility is critical in a policy environment where federal guidance, funding streams, and claimant needs shift frequently.
This approach creates a pathway toward a truly modern UI claims management software ecosystem that aligns with procurement requirements and long-term state needs.
Financing Innovation Without Federal Grants
With ARPA grants rescinded, states face the question: how do we pay for modernization?
Several creative models are emerging:
- Subscription-based vendor financing: Instead of a huge upfront cost, states pay a recurring fee for access to a cloud-native unemployment benefits processing system that scales with demand
- Multi-state cost-sharing: Neighboring states pool resources to build a shared state unemployment insurance platform, reducing per-state costs while increasing standardization
- Public-private partnerships: Vendors front implementation costs for innovative UI software built on a secure government AI stack, recouping expenses over time through long-term contracts
These approaches may require more negotiation than a one-time grant, but they offer sustainability and predictability, qualities too often missing in government IT funding cycles.
Equity in the Tech Stack
Technology is not neutral unless designed to be. Each piece of the stack must advance, not hinder, equity. That means:
- Identity systems accessible in multiple languages and formats
- AI models trained on diverse data and monitored for disparate impacts
- API-first systems flexible enough to integrate accessibility enhancements like text-to-speech or screen-reader compatibility
When modernization embeds equity by design, it creates not just efficiency but legitimacy. Claimants are more likely to trust and comply with determinations when systems are transparent, fair, and accessible.
Looking Ahead
The right tech stack is the difference between modernization success and failure. Strong digital identity proofing keeps fraudsters out while supporting claimants. AI delivers fraud detection at scale while preserving fairness through transparent, unbiased tools. And API-first, modular architectures free states from the constraints of monolithic systems.
Together, these components lay the groundwork for the future-ready unemployment benefits tool with advanced AI that states need. They also align with federal priorities for transparency, auditability, and equity, even as direct grant funding becomes uncertain.
Conclusion
States cannot modernize UI systems on policy willpower alone. Without the right technology stack, even the best ideas for Integrated Fact-Finding or equity-focused reforms will collapse under the weight of outdated infrastructure.
The path forward is clear: invest in a modernized UI benefits administration system built on a modular unemployment insurance technology platform, powered by AI-neutral adjudication tools, and delivered through a scalable cloud-native UI platform built for federal standards.
These investments pay off in fewer fraudulent claims, faster determinations, reduced appeals, and stronger claimant trust. More importantly, they deliver dignity to workers who depend on unemployment benefits to weather economic disruption.
In Part 4 of this series, we’ll explore the policy side of modernization: lessons from Tiger Team reviews, the funding vacuum left by ARPA, and new opportunities like consortia that can help states finance these critical investments.
Catalis equips states with an API-first, modular platform that integrates advanced identity proofing, AI fraud detection, and compliance reporting. Built on a secure government AI stack, our solution is future-ready, scalable, and equity-centered, delivering a complete end-to-end unemployment insurance solution for states.
Explore how Catalis can help your agency implement secure digital identity, AI-driven fraud detection, and API-first modernization. Schedule a demo today and see how we can future-proof your unemployment insurance platform.