Who are you? Beyond the existential nature of this question, proving your identity is difficult to do in a digital world. While new technologies, such as biometrics, are making digital authentication possible, the regulatory environments in many countries have not yet caught up. But as soon as an individual has to reach for their passport or driver’s licence, the automation enabled by a fully digital process is interrupted, adding a time lag and friction to the customer experience.
To all intents and purposes, the digital validation process is broken. Without fully digital identities, it is not possible to take advantage of everything a digital economy can offer, including greater privacy. Yet developments such as the Internet of Things, artificial intelligence and smart contracts are pushing the world towards greater straight-through processing, where no human intervention, username or password is required.
Banks have a unique role in acting as a trust anchor for digital identity solutions, due to know your customer processes and regulatory standards. But even within entities, let alone between them, the siloed approach to identity has led to a fragmented view of customers. Today, many initiatives are taking a consortium approach, building an ecosystem of important identity providers, including banks, telcos, utilities and government.
This is where blockchain, or distributed ledger technology (DLT), is making a big impact. Many consortia are building platforms based on DLT because it is decentralised and, therefore, more secure, as there is not a single point of attack as there is with central repositories. DLT also provides greater levels of privacy and control for the individual. With the advent of blockchain, a truly independent, self-sovereign digital identity system becomes possible.
