Decentralized ID in U.S. forces creative authentication workarounds
Many countries, including Sweden and Estonia, have adopted the use of centralized electronic ID schemes that allow users to securely identify themselves online using a smartcard, mobile or single login without having to jump through the usual, cumbersome hoops. Unfortunately, identity within the U.S. market is far more fragmented, relying on various states and agencies to attest to identity.
As a result, U.S. firms have been reliant on data aggregators like credit bureaus and other data companies to provide identity verification services.
As digital onboarding takes hold, these services haven’t always kept pace due to various factors including the amount of personal data requested and the challenge of reconciling disparate datasets. Fraudsters have taken advantage of these vulnerabilities by using stolen data from data breaches to commit identity fraud or even create synthetic identities (fictional identities) to steal from financial institutions.
While a centralized electronic ID scheme is unlikely to materialize in the U.S. any time soon, some states and agencies are rolling out new digital services to significantly smooth out the digital account opening process as far as identity proofing is concerned. A recent memo from the U.S. Office of Management and Budget directs agencies like the Social Security Administration to create identity proofing APIs against their authoritative data sources.
While an electronic ID scheme would take a substantial amount of time to implement and roll out, new players have come to market with simple, fast and effective solutions to solve the “identity crisis."
Some companies use machine learning and facial biometric solutions to proof an identity using a mobile device and a government-issued ID. Other companies are building consumer-centric verification platforms that eliminate exposure to personal data.
These service providers can help not only financial services, but government, health care providers, and online retailers to streamline their processes when trying to determine whether a new customer is a) a real person and b) who they say they are.
Account opening is still the most critical process to perfect. New accounts and customers are, after all, a primary means of growth. But the trend is undeniable. Consumers expect more, and firms need to do better if they want to stay relevant in a world gone digital.