It is no secret that the coronavirus crisis has resulted in a widespread increase in fraudulent activity online, along with identity theft. The
Opportunistic criminals are taking advantage of an environment where our need to live more of our lives online has outpaced our ability to do so securely. Taking all necessary precautions to protect sensitive information and IDs should be at the forefront of the discussion.
As far back as 2011, the concept of a universal digital identity was gaining traction. The idea was fundamentally sound. In the U.S., President Obama proposed a unique internet ID for every citizen. This Internet Driver’s License aimed to simplify interactions with financial institutions and government bodies while minimizing the threat of identity theft and fraud. Initial thoughts on how to execute the idea, however, met considerable headwinds. The idea of governments issuing these digital identities faced resistance, while an attempt by Facebook to suggest they could issue such licenses was met with derision amid the social network's ongoing privacy-breach investigations.
When customers place blind trust in an organization that requires their documentation for the purpose of onboarding, the customer's personal data may be at risk, and could be monetized without the knowledge of the owner. This paired with the dangers of identity theft and heightened demand for identity reselling services presents the industry with an opportunity to rethink digital identity from a Know Your Customer (“KYC”) perspective. There is a need to increase transparency on all sides in order to eliminate fraudulent activity, identity theft and the monetization of personal information.
Today, a new approach is gaining momentum that combines the principles of personal privacy, data protection, and enhanced online security; a digital identity, owned and controlled by the customer (both individual or corporate customers), that can be used to access myriad products and services.
A transparent and secure digital identity vault ecosystem underpinned on the blockchain offers the ideal platform to create and share key sensitive information while leaving the power and control in the hands of the data subject or customer. The customer retains ownership of their identity and simply provides access to necessary data and documentation as required. Customers also retain control to revoke access to their digital identity vault when desired (albeit understanding and considering the legal term of need required by the organization they have engaged with). This digital identity can include contact details, identity documentation (e.g. passport / driving license), proof of address, Social Security and credit card details, for example, but access to each piece of information is explicitly granted to onboarding businesses only for specific products and services and for a limited time period, in compliance with AML regulations.
A digital identity vault provides a secure solution that empowers customers to maintain and share their identities as needed. As well as providing significantly enhanced security, it offers a transformational onboarding user experience which is significantly faster and more convenient than the incumbent onboarding processes customers are all too familiar with today. Importantly, digital identity vault connections can easily be revoked by customers with businesses where access is no longer required.
Leveraging the immutable audit trail capabilities of blockchain combined with a privacy by design architecture ensures there is a complete, undisputed record of transactions, giving users assurance that their data is not being tampered with or accessed in an unauthorized fashion. It provides an audit trail required by regulated businesses to prove their compliance in carrying out customer due diligence responsibilities. By utilizing blockchain technology, a level of transparency and fairness is achieved that ensures the safety and equity for all parties involved.
In addition to the benefits for customers, there are significant advantages for onboarding businesses, in particular for financial institutions operating in the asset management and banking sectors. It allows for greater transparency, and dramatically cuts the time and costs involved in onboarding new individual and corporate customers. It’s a game-changing move in confronting financial crime - facilitating the streamlining of digital onboarding and reducing identity fraud theft by leveraging biometric identity verification checks, while making document forensic checks standard for all customers. Providing regulated financial institutions access to their customers’ data in a secure vault also eliminates the need to manage this data internally, thus reducing companies' data-privacy management burdens.
Digital identity is a hot topic in the fintech space at the moment and there is broad consensus that its rise is inevitable. Digital identities represent something of a holy grail to businesses, with no provider currently offering the perfect solution. The concept of a universal digital identity has enormous potential; an immutable, certified digital version of data which can be truly owned by individual or corporate customers, with the relevant documentation shared only as long as it's needed. A digital identity solution can cut onboarding times as well as ongoing customer due diligence costs for both customers and financial institutions, while offering a more secure, convenient and compliant approach. This represents a significant step forward in online privacy and data protection serving all stakeholders in the fight against financial crime.
