Digital Identity and its role in Financial Services is top of the agenda for Rainmaking Colab

Identification and verification have always been crucial elements for financial services' participants. We are more and more reliant on our digital identities to open up access and participate in the modern economy, meaning that we are increasingly vulnerable to sophisticated data theft and impersonation. If you think central government or the police are the biggest buyers of identity management technology, you would be mistaken. Banks alone are now spending over $1billion a year on identity management solutions.

Financial institutions are seeking new business opportunities by exploring KYC, AML, biometrics, anti-fraud and identity theft technologies as well as advanced authentication solutions to increase customer insights and service relevance, while reducing fraud and market abuse.

Rainmaking Colab recently kicked off its first program cycle themed around Digital Identity in London and hosted its first Panel Discussion and FinTech Social on ‘The Role of Digital Identity in Financial Services’, moderated by Joy Macknight deputy editor at The Banker. Joy was joined on the panel by: Collin Wallis from Kantara Initiative Inc, Ewan Willars from Upstream Insight (previously from UK Finance), Jennifer Bers from Onfido, and Simon Wilkinson from Tradle.

Joy Macknight opened the session by discussing how critical digital identity is for the economy in terms of economic growth, productivity, competitiveness and financial inclusion. She believes that we are not taking enough advantage of what digital has to offer, which is improvements in efficiency, and that we are still stuck somewhere between the analogue and digital worlds. A sizeable section of the global population is lacking the basic digital credentials to fully participate in the digital economy.

She described how digital identity can provide increased privacy and reduce friction in the customer experience. She then moved on to discuss the role of banks in digital identity and questioned whether there is a need for a consortium approach to digital identity, with government led schemes. Finally, she mentioned the blockchain and how Distributed Ledger Technology (DLT) could provide a self-sovereign identity function, raising questions about the new business models being built on monetizing data.

The first question put to the panel was on the biggest challenges faced by banks on their transformative business approach to digital identity, driven by shifting customer expectations. Ewan Willars highlighted that we as a society are undergoing a revolution in the way that we bank, from offline to online apps due to modern day time constraints. It's a tricky task trying to balance innovation in a heavily regulated industry where the need to control money laundering and terrorist financing are dominant. Regulation is often seen as a barrier to innovation and is now becoming an impetus for banks trying to manage consumer demands with high security standards. Digital identity might just be the answer to help solve this.

Biometrics was another theme of the discussion. Jennifer Bers reminded the audience that there is no central biometrics database and that results can be easily falsified. To counter falsification, Onfido – a company that builds trust in an online world by helping businesses digitally verify people’s identities - asks each user to perform random actions, for example random numbers so it cannot be faked, bringing in voice and using machine learning such as matching your face to a legal document.

When asked about how Tradle – a blockchain based KYC-platform – is using DLT for Anti-Money Laundering (AML) and Know-Your-Customer (KYC) checks, Simon Wilkinson clarified that they do not use the blockchain to store data, but to move trust around the planet. To identify the person, they use biometrics and identity services such as Onfido. Once the bank or insurer has carried out the verification they put verification on the blockchain so they can be shared among the parties. This enables the user ownership of your KYC. On top of this, it reduces hacking points to virtually zero versus centralized data. Simon reminded us that up until now we were only talking about the identity of people, but we also have identity of devices, for example, which is data that still relates to us as individuals.

The panel moved on to debate whether financial institutions can rely on government schemes such as Verify in the UK or should they be more of a driving factor. Returning to Joy Macknight’s question at the beginning: would consortiums work?

Ewan Willars noted that he works closely with Verify and that banks turn to this to check some robust standards around identity. Verify provides four attributes on data points about a consumer, towards KYC and that more information is needed to confirm digital identity. There was the opinion that Verify does not yet match up to what banks need.

Are consortiums the new trend? Countries such as Canada, Austria, and Spain have put consortiums in place. Ewan Willars emphasized that key to success is the involvement of banks from a very early stage for a cross sector public and private consortium. Colin Wallis reminded us that we forget the real goal is digital economy. Digital identity is a means to an end to develop an ecosystem where a number of different communities can correlate and collaborate.

Digital identity should really be owned by the individual. How does that work and are we there yet? Jennifer Bers said that we are still trying to work out how individuals can be in control of their own digital identity.  Ewan Willars added that there are still competing ideas about what identity actually is. Until this can really be defined, answers to the rest of the questions that the panel considered will be hard to find.

The panel was pulled together with a question for the audience to think about, asking how we think digital identity is going to change in terms of IoT, smart contracts and artificial intelligence, creating an interconnected world where machines are becoming economic entities in their own right.

Similar panel discussion took place last week also in New York with Ghela Boskovich from Rainmaking Colab and FemTech Global, Gene Vayngrib from Tradle, Salvatore D’Agostino from Kantara Initiative, Brett Smiley from ComplyAdvantage and Makarand Shivadevuni from Wells Fargo.

To continue the digital identity conversation and to find out more about Rainmaking Colab, please get in touch with us. If you want to hear about our next panel discussions make sure to keep an eye out on our events section or get the invitations directly to your inbox. Make sure to follow us on Twitter!

By Triin Linamagi

Head of Ecosystem

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