Digital Identity - Chapter 4 (FinTech) PDF

Digital Identity By Dr. Muath Asmar Digital Identity Digital identity refers to a collection of information about any individual, company or organization that exists in any network. It refers to an electronically captured and gathered set of data points and characteristics tha...

Digital Identity By Dr. Muath Asmar Digital Identity Digital identity refers to a collection of information about any individual, company or organization that exists in any network. It refers to an electronically captured and gathered set of data points and characteristics that can identify an individual. A digital identity is created when individuals access the internet, make online purchases, buy travel tickets, make hotel reservations or through any other action for which they provide information about themselves to the network. Through these actions, individuals create virtual presences of themselves that mirror their actions, beliefs and thoughts. Often, individuals create their digital identities by providing to the network their personal information, and virtual profiles are created by the network based on the users’ actions on the network. Digital identities are often seen as contextual as they are created based on selective data provided by the individuals to the network. Why We Need Digital Identities According to the World Bank in October 2017,4 “More than 1.1 billion people in the world are unable to prove their identity and therefore lack access to vital services including healthcare, social protection, education and finance.” With many institutions and services adapting their products and services for online access, bringing these 1.1 billion people onto a digital identity platform will provide an immense benefit. The World Bank also highlights the benefits that digital identity has provided to such individuals in developing economies. If done right, digital identity can Create unique identities Be made retrievable without a person providing personal documents or being physically present Be used across organizations to access various services Provide privacy and security Components of Digital Identity There are different layers of digital identity management, and each layer plays an important role in ensuring that the whole process is managed in a structured manner. Application owners and service providers need to ensure that their users are rightfully granted access to applications by ensuring that there is a streamlined identity authentication process while also ensuring strict adherence to internal data security and privacy protocols Identity Access Management Considering the importance of identity access management in protecting data and financial and business assets, the following five steps are considered important components of the IAM (identity access management) process: Authentication: The process by which users who want to access their accounts or perform transactions prove to the network of the service provider (such as a bank or other financial services platform) that they are who they claim to be. Identity management: The process of identifying users of a network or application and defining and controlling the amount of access to information or various resources that are present within these systems or applications. Digital rights management: An important component in ensuring copyright protection to software and applications. Privileged account management: The task of authorizing and monitoring privileged users of any systems. It allows one to flag suspicious account activities and monitor various accounts, rightly grant access to the correct users, provide timely access, revoke the same if required and create a history of account actions undertaken by the user. Password vaults and session managers are classic examples Compliance: The implementation of sufficient systems and control mechanisms to provide data security and data privacy. Problems Solved by Digital Identity Digital identity helps to solve two important problems: Greater efficiency and security from the move from physical to digital authentication and Enabling the complete digitalization needed to optimize its effectiveness. Enhanced Efficiency and Reduced Risk The current system of identity is predominantly based on the possession of physical documents, which is cumbersome to say the least. Possession of physical documents by an individual may not be able to establish a relationship between the user and the physical documents (may not be successful in authenticating the user). Also, physical documents can be forged, stolen or falsified. The possession of false documents by users creates issues in transaction security and authentication. Currently, it takes a couple of weeks for a bank to sanction a loan to a client because it needs to create a risk profile of the client and consider other financial parameters by collecting physical financial documents of the client. Credit processing efficiency can be improved if technologies such as OCR (optical character readers) and cloud computing are employed to assist clients in upload the necessary loan documents. Banks could employ data-driven workflow systems in order to aggregate customer financial data and quicken the credit decisioning process. Some fintech companies have also able to design products that are able to predict risk profiles of clients based on their social media profiles or actions on the network. Such innovations will go a long way in ensuring ease in processing and disbursement of loans to customers. Power Complete Digitization Digital identity needs to be ubiquitous to be effective. It also has to be usable across different platforms and service providers, so a single identity must be created to operate across different services/platforms. Possessing a single digital identity that is interoperable across different services will lead to complete digitization of various process flows and will reduce time and enhance ease of service delivery. The Impact of Digital Identity on Business Models How do financial institutions and other businesses change their business models to adapt to digital identity? Financial services: Digital identity has led banks and financial institutions to focus on complete digitization of their platforms and services. Digital identities can be used to ensure process automation and better service delivery for a variety of functions, including opening new accounts, making mobile payments, providing investment solutions and approving loans. Healthcare: Healthcare companies have created online portals that facilitate digital onboarding and online communication with their doctors and nurses. Clients can also gain insights into their health data and execute a wide range of requests. Retailers: Many retailers are now replacing their expansion plans for physical stores with e-commerce portals. These e-commerce portals allow users to provide initial information to set up accounts for online transactions. Companies use big data analytics to track the transaction patterns of their customers. Based on that data, they are able to predict purchase patterns and products that may be of more interest to a customer and provide relevant offers and discounts. Issues Concerning Digital Identity Management As the amount of personal data that is collected to create and manage digital identities increases, questions on data security and data privacy tend to rise, too. Individuals today are concerned with identity theft and data leakages as they no longer control the data. It is necessary for global digital identity programs to garner the trust of those enrolled by ensuring sufficient protection from data theft and data leakages: Standards need to be set to ensure that there is a clear consensus of the nature of data that is collected in order to prove a person’s identity. Organizations must ensure that that data lifecycles are tracked. They must be able to control access and user privileges if the user leaves the organization or deletes his account. Companies must ensure better customer experience with the digital identity initiative. A Digital Identity Application Use Case: Aadhaar The Aadhaar, which in Hindi means foundation, is a 12-digit unique identification number that is provided to all enrolled citizens of India. Various details about the individual such as demographic and biometric data are collected as part of this initiative. Aadhaar is the world’s largest biometric digital identity creation initiative. This initiative is currently being carried out by UIDAI (Unique Identification Authority of India). In India, there is at present a large portion of the population that lacks formal identification and may possess only identification documents that are not nationally accepted. Considering the problem of common names and a lack of methods to authenticate and verify identification documents, government distribution agencies often provided government social security benefits to individuals who may not have qualified for the benefits.