Why trusted digital identity is the new gold standard for financial services
Posted on: June 11, 2018 by Olaf Badstuebner
In our clamor to embrace a fully digital economy some things have been left to take a backseat. For all the headlines about new apps and digital services, what about the processes that underpin them?
Take ID and identity validation, for example.
To conduct any kind of commercial interaction always requires the transfer of money. And this means accessing your bank account, shopping carts or even your new blockchain contracts. To do this we currently use passwords.
Yet passwords are often highly personal and hardly un-breakable. In our digital age, we need more convenient ways to demonstrate who we are (ID) and then link that to some kind of central point of reference (validation).
Cryptographic keys are more robust than simple passwords. Yet they are still passwords – just ones that are harder to remember and slightly harder to crack.
The financial services imperative
ID and validation should be a major cause of concern for banks and insurers undergoing huge digital transformation projects. In particular, how can you adequately protect your customers while giving them a better digital experience?
From an ID perspective, only biometrics can fulfill both criteria. Facial recognition via a camera phone or fingerprint access on a smartphone is highly secure because it is unique. Add to this behavioral recognition that is hard to simulate, such as how you sweep your fingers across your phone’s screen and the ID side of the equation is getting more intuitive and more secure. But what about validation?
The recent Atos whitepaper, the Digital Business Continuum, highlights how continual transformation will become the new normal for large banks and insurers. But with rapidly released products available from multiple providers, customers should be able to easily take advantage. Instead, they are often left waiting by ageing and distinctly un-digital validation practices.
A working example
A customer must come into a branch with their papers to validate their identity. These papers are then stored as a reference for future requirements. But they are stored individually by each business the customer interacts with. What happens when there is an attractive savings deal advertised on TV late one Sunday night? People don’t expect to wait days and miss out on the deal because they can’t get to the branch with their paperwork.
We need a more convenient way to sign up and prove who we are. Inspired by what FinTechs are already exploring, here is my vision for how to do just that.
A single source of truth
Why not create a central repository for a ‘single source of truth’ that financial services providers (and any other enterprise for that matter) can link into?
Such an identity hub could work across borders. Individuals would only have to provide their evidence once. It could then be relied upon again and again – for validating anything from opening bank accounts in multiple countries to verifying smart contracts.
Imagine the benefits
The Digital Business Continuum suggests banks and insurers will be constantly innovating new products. A single source of truth means customers can take advantage of these products and banks or insurers can instantly onboard them to grow market share.
However, if clusters of providers attempt to do this individually there will be the obvious problems of interoperability. A single source of truth must be precisely that: single. A trusted organization would be needed to aggregate the information from sources such as government-issued ID, mobile behavior and biometric recognition. There would also need to be some form of global consensus or ‘gold standard’.
But before you start thinking this is pie-in-the-sky, let me remind you that it has been done before. How do you think the telecommunications networks allow people to call between countries? They have agreements and standards in place.
Put simply, if we are moving to a digital world in which continual transformation, innovation and convenience rule, then we cannot constrain ourselves with slow, in-person and paper-based processes.
To give people the digital convenience they crave, we must come up with an entirely new way to set them free from the shackles of old-school validation.