Today, 1.5 billion people worldwide are estimated to lack an official form of identity; most of them living in the most impoverished regions of the planet.
Governments, international institutions, and public and private organisations are turning to technology in their quest to solve this problem. The first step is to move from traditional, cumbersome systems requiring in-person authentication to a digital identification process, using, for example, identity document authentication and biometric recognition solutions that can identify a person uniquely.
The nation of Nigeria led the charge with a digitised identity verification system based on biometric technology. Back to 2003, when Ngozi Okonjo-Iweala assumed the position of Prime Minister of Finance, she faced the problem of ‘phantom pensioners’, false identities created by criminal organizations to claim payments and other benefits. To combat such a rising risk of fraud, they launched a digital identity verification program in 2015. This initiative has made it possible to identify more than 65,000 phantom workers to date, as well as to provide thousands of Nigerians with an identity, making them “visible”.
Meanwhile, government-backed electronic identities initiatives are flourishing across the Western world. Adopted by the EU in 2014, eIDAS created a new legal structure for digital identity and signatures across the EU; a digital identity that works across borders. In 2016, these rules replaced in-country laws across Europe. National eID schemes can be added to the eIDAS network through a notification process that makes sure that the eID scheme in question meets the security and quality requirements. Once connected, these eIDs can be used across Europe. The European Commission has stated that this is the long-term plan: “rolling out eIDAS means higher security and more convenience for any online activity such as submitting tax declarations, enrolling in a foreign university, remotely opening a bank account, setting up a business in another Member State, authenticating for internet payments etc.”
Furthermore, the Sustainable Development Goal 16 project, promoted by the United Nations, is seeking to ensure that everyone has a legal form of identification by 2030. With such a rapidly approaching deadline, digital identities are seen as many as the most sustainable, cost-efficient and secure means of personal identification.
Digital Transformation is Forcing Business to a Tipping Point
But legitimate consumers and organisations are not the only ones eyeing the many benefits of digitised identities: more than half of the world’s population’s personal information is available on the dark web due to massive data breaches, helping fraudsters thrive. Criminals are using forged identity documents in complex fraud schemes and anti-social behavior, making traditional identity verification methods obsolete and turning the establishment of trust in the digital channel into a business and government imperative.
As a result, the private sector is also determined to find a solution for the current lack of commonly accepted means of digital customer identification. Market experts point to three major market drivers for this urge to achieve digital transformation:
- Rapid transformation of consumers’ expectations and competitive landscape, speeded up by the merge of online and offline worlds. Telecoms services providers, financial institutions, and other organisations operating within regulated sectors need to find cost-effective ways to bring their online and offline offerings together. This need is especially critical for those companies offering enrollment both in stores and online; they need to deliver a consistent and delightful experience to the end user, to prevent them from going to the competition. Market experts note how semi-physical models start to go mainstream, allowing users to start their application at home but still requesting them to go to the branch and present themselves for identity verification purposes. In the financial industry, challenger banks forced the system to a tipping point, and a somewhat similar trend can be now traced in the telecommunications industry. In the telecoms space, meanwhile, businesses are concerned with ensuring an easy-to-use and engaging experience to their pre-paid users, who would otherwise move to the more straightforward post-paid model.
- Regulatory compliance. Digitalising services enables organisations to reach out to a global audience, but also implies a larger compliance burden, as they need to satisfy different regulations and legal requirements across multiple markets. Registering foreign nationals, expats, and new-to-country customers also presents its challenges, requesting a system that can process and leverage international identity documents for customer authentication. On a related note, organisations face hefty fines and penalties for non-compliance with privacy laws and anti-money regulations such as GDPR or AMLD4, AMLD5, and PSD2.
- Mitigating the increasing risk of fraud. Fraudsters are benefiting as much as legitimate users from the increased convenience and ease of use of new digital services, what has taken the level of fraud to an all-time high. Regulated entities not only risk losing money to fraudsters that pose as legitimate users, but also have to deal with the hurdles of not being able to correctly identify customers for debt collection purposes, enhancing their potential monetary loss. A further challenge shared by financial institutions and telecoms is the need is to simplify the authentication process while reducing the fraud to minimum, or, in other words, to hit the right balance of security, UX, and usability.
Aimed at solving the global digital identity crisis, identity and digital transformation experts will participate in the Power Hour Session hosted by Mitek at Mobile World Congress in Barcelona.
Renowned experts from Telefónica, Accenture, 4Finance, Artilium, Biocryptology, and Consult Hyperion will discuss how they leverage identity verification to transform their digital experiences, achieve compliance, and mitigate the risk of fraud while delivering a great user experience in a panel hosted by Mitek.