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The universal digital identity – how to get it right?

Aadhar, AML, Bitcoin, Digital Currencies, Digital Identity, Distributed Ledger Technology, India, KYC, PayNow, Proof of Identity, Risk Management, Singapore, Standard Chartered Bank, Universal ID

October 30, 2017

  • Aadhar
  • AML
  • Bitcoin

Everyone has a digital identity that represents you as a unique individual. But, says Dr Michael Gorriz, group chief information officer at Standard Chartered Bank, that which distinguishes you in the physical world is generally irrelevant to how you are identified in the digital one

The challenge for banks, technology firms and governments is how to make it easier and safer for people to identify themselves online while allowing them control over and giving consent for use of their digital identity (DI). These days, you are asked to create a new login when you apply for each new service, so you potentially have to log in your details a few times a day and remember multiple passwords. A universal DI for everything would make life much more convenient.

Passports, driving licences, birth certificates – documents that identify us in the physical world will no longer be necessary. A business trip or vacation would be a seamless experience, where passport control may no longer be required, and banking services will be a breeze because of robust and trustworthy KYC (know your customer) processes.

Some governments have taken the lead as part of their development of digital economies. With Singapore’s MyInfo one-stop database of personal data, citizens can apply for government services or open a bank account without filling in multiple forms or providing supporting documents. India’s Aadhaar project provides a unique ID to each citizen so they have access to healthcare services, education and government subsidies. It is a key driver of socio-economic development and ensures benefits directly reach unbanked pockets of the population.

The role of financial institutions

Banks need to give their customers a seamless and convenient experience. That is why Standard Chartered has participated in pioneering DI initiatives such as PayNow in Singapore which makes peer-to-peer payment easy as it only requires your national ID or mobile number. The development of a universal identity system needs robust processes to recognise and authenticate a person’s data. The system also has to work for myriad institutions with complex, interconnected operations across different geographies.

Financial institutions including banks have traditionally performed the role of custodians of data and have established cross-border operations, so are well-positioned to support the creation of DI systems. Banks are also incentivised to collect accurate data because the viability of their business depends on it.

New anti-money laundering directives and KYC rules mean regulators expect financial institutions to maintain high standards for identity verification of new and existing customers. To that end, Standard Chartered has started a proof of concept with fintech firm, KYC Chain, to improve our client onboarding process. The project, which uses blockchain technology, can recognise and verify identities of clients in a reliable way. Blockchain allows entities independent of one another to rely on the same shared, secure, auditable source of information.

Who owns the data?

Any universal identity system should allow the ownership of personal data to lie with the individual, who chooses what information to share to gain access to services. Bblockchain, the distributed-ledger technology behind the digital currency Bitcoin, has been seen as providing a potential technology solution.

With about half of the world connected to the internet, having a DI is in some quarters regarded as a fundamental human right, because proof of identity is required to gain access to a range of services. Achieving a universal DI would have many advantages but making it work would require cooperation among financial institutions, governments, technology companies and more. The benefits in terms of cost, time and user satisfaction are so great that we are optimistic a comprehensive and holistic solution may not be too far in the future.

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