When you are figuring out what the future of KYC looks like, you first have to understand its current scope and what it looks like today.
The financial services industry is a highly regulated business which is obligated by law to run KYC processes frequently for already verified customers. This is tremendously expensive, with large firms spending $150 million in 2017, up from $142 million in 2016, and expecting their CDD and KYC outlays to rise a further 13 percent over the next 12 months.
How do you Prove Your Identity Online?
On an everyday basis, we are expected to provide personal data in order to identify ourselves. Different situations and verifiers require various types of data, but we tend to provide it without putting any extra effort into it. The GDPR, the most strict regulation to protect personal data in the world yet, has made this issue a hot topic and many times raised more questions than answers.
Image: Kyle Glenn
There is currently no universal silver bullet to solve the issue of proving one's digital identity online, so different governments in different countries are using different solutions. They have tried to solve the issue with several variations of strong(er) digital identification: government-issued smart ID's or Digital Identity wallets, bank verified identification, ID and passport scans, ID document automated OCR solutions and private certificates.
However, these solutions still have some barriers. These include:
a) a lack of standardisation and compatibility across regions and banks
b) the ease of use is only adequate
c) adoption rates have been limited
The first steps towards the standardisation have finally been taken by a few relevant initiatives. They include W3C's (World Wide Web Consortium) and Verifiable Claims Working Group which is tasked with the standardization of a data model and syntax for the expression of verifiable claims.
The Right to an Identity
This strong statement is enshrined in Article 16 of the International Covenant on Civil and Political Rights and represents one of the basic human rights. But it is a staggering fact that over a billion people in the world don’t have the means to prove their identity and thus are being deprived of this basic right, to protection and to different services.
In the age of the internet, globalisation and mobile first, the availability of information has never been so abundant. One could be forgiven for thinking the processes of proving one's identity online have been standardised and internationally recognised by now.
Proving identity for most of us is as simple as opening your wallet and presenting a document issued by a trusted authority (the issuer) to another person or company that is requesting the proof of identification (the verifier). We need to do it when applying for a bank account when requesting government services, when buying an aeroplane ticket or when collecting a postal package. It is such a simple procedure, so incorporated in our everyday lives, that we take it for granted.
Image: Johann Walter Bantz
All of the above would make you think that such practices would be even easier on the internet, but proving identity in a digital world is actually extremely difficult. There is no equivalent of a personal identification document in a digital world. As a matter of fact, we all have dozens of "identities” – one for each website we ever registered with.
Yes, there have been some fairly successful initiatives to "unify" online identities by linking accounts to one of the popular identity provider services, like Google’s or Facebook’s single sign-on. These methods are sufficient to prove identity to make comments on a blog or to ensure that you are a real person for your Tinder profile. However, these methods are not as successful if the service requires verified and sensitive personal information.
Addressing Identification Issues with Smarter Solutions
When it comes to applying for services that fall under KYC and AML regulations, more robust and trustworthy solutions are required. During the years, more than a few different solutions have been introduced that offer such authentication, and Instantor is one of them.
After decades of struggle, it is not a coincidence that the time to start addressing identification issues using digital means, is here. The birth of promising technology in the last few years has now made it possible to solve the biggest challenge related to this issue: trust. Proving your digital identity online should be as simple and secure as presenting a piece of identification coming from your wallet.
Image: Bernard Hermant
Will Blockchain offer that trust? Will we finally have the standardised, globally adopted, smooth and trustworthy solution Digital Identity solution for all needs? Probably not in the near future, but it sure looks bright.