By FINTECH Books Contributor, Pascal Bouvier
We are faced with three unavoidable truths and one inevitable conclusion. First, regulatory pressure will remain strong across the globe, which means AML/KYC issues will remain front of mind for the financial services industry. Second, we are living in a digital age where individuals and entities transact and exchange in ever increasing degrees online. Third, our existing identity schemes were built and optimized to represent our real-life interactions.
The inevitable conclusion is that identity schemes as they stand are woefully inadequate for the digital world and in need of a reboot. Given the ubiquity and plasticity of identities, the multifaceted data sets that comprise a holistic identity, and the interaction, or lack thereof, between physical and digital lives, we are facing a widening gap where it is difficult to identify someone or something with a high level of trust.
Without trust, transactions incur a high cost of execution, as well as losses due to bad actors or the inability to vet would be good users. The financial services industry is faced with a set of intractable issues when it comes to managing identities and discharging their AML/KYC duties.
This is why building digital identity schemes for the 21st century is such a vital endeavor, and a central piece for the financial services industry in general, and RegTech in particular.
To be clear, several stakeholders have taken the matter in their own hands. Governments, from the Nordics to India have mandated or facilitated national digital identity schemes. The private sector, notably GAFA, is flirting with various identity solutions, most if not all with low level of assurances. Banks have been noticeably timid to date.
We contend that the financial services industry can and should be a central actor in building digital identity schemes, bridging the gap between problems ranging from regulatory to privacy to legal, while delivering a much needed retail and wholesale utility that will facilitate tomorrow’s commerce.