In theory, we have been able to design Digital Identity solutions for a while now. However, the costs were prohibitive and interoperability issues needed to be solved.
Today, we can implement technology (hardware) that is cheap and this allows us to experiment and target opportunities that couldn’t be exploited before.
It is cloud computing, cryptography, public key encryption and peer-to-peer networking protocols that are the critical “cooking ingredients” for recipes that can solve costly and basic problems in Capital markets, like provenance, authentication and reconciliation.
In this post, we zoom into the Digital identity issue (whether for an end-user or a corporate entity) in Capital Markets. In traditional financial lingo, this is coined as KYC and it shifted on the very top of the stack of issues that keep up managers at night, mainly after Sep 11.
Currently in Capital Markets we are looking for the following qualities in a Killer Digital Identity solution:
- Ability to be accurately updated
- Accessible and Granular = Interoperability and Granularity
The last two qualities are critical and encapsulate the practical difficulties of such a service. A Killer Digital Identity solution should offer both individuals and organizations the ability to authorize actions on their behalf. This can range from settling a trade, to registering for a financial product or service like an investment product or a loan.
At the same time, it has to be granular so that only the pertinent bits of the Digital Identity are used.
This is what Pascal Bouvier has been pointed out for a while. It is critical because it enables individuals and corporates to choose how to interact with a merchant or a supplier or a client. Being able to have a secure way to divulge only the granular bits of information is the key. It is also the enabler to be used in different contexts without having to go through the whole process again.
Imagine a world that any individual can open a bank account for their consumer banking needs, a telco account, an investment account, a brokerage account …. with different institutions securely, with all updated info, without having to repeat the whole process (e.g. they all need a copy of passport or a digital picture but the telco account needs much less information than a brokerage account that allows me to trade options and futures and buy stocks on margin). In addition, in order to register a corporate entity for a business, imagine a world where one can avoid repeating the process that overlaps with all the above, the registry is able to obtain accurate Social KYC information around the shareholders and directors of the company (updated real time), and have access to any particular cross-border information necessary.
There is one Fintech based on the Isle of Man that has been focused on developing such apps using blockchain technology. Credits, has been working with the government on the Isle of Man to develop “The Federated Know your Customer” app that was demoed at the recent Misys World Trade Symposium. This sits on the cloud and has the four elements mentioned above. Credits is also in conversations with the UK government for use cases in regulatory reporting and healthcare. Credits has not been at all focused on creating some cryptocurrency or some decentralized app. They have been thinking differently, in that they are focused on solving specific problems in the infrastructure of capital markets. Digital ID has been their first use case.
We are in the very early stages leading towards an invisible ID for individuals and corporates for the variety of functions in Capital Markets.
Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech & operates the Fintech Genome P2P Knowledge Network. Efi Pylarinou is a Digital Wealth Management thought leader.