Digital Identity — why it will never be truly global
By: Qayyum Rajan
Tags: Identity, Blockchain, Technology, Digital Identity, Government

Estonia, with a population of approximately 1.3M, has an e-identity system that is currently one of the most advanced in the world. Easier to implement within a smaller population, but the principles are essentially the same. Specific government services, over high level ideas such as portable self sovereign ID:

legal travel ID for Estonian citizens travelling within the EU

national health insurance card

proof of identification when logging into bank accounts

for digital signatures

for i-Voting

to check medical records, submit tax claims, etc.

to use e-Prescriptions

This goes back to the concepts of trying to integrate a one-size-fits-all solution across jurisdictions. Similar to a multinational company looking to expand globally, there are many variables to consider including local culture and standards, along with local regulatory bodies, systems and infrastructure. The world is not harmonized, much to the dismay of most.

Switzerland & FINMA

It is interesting to see how different governments and regulatory organizations approach forms to online identity. While you might see a lot of hype around self-sovereign ID’s and the internet, what people don’t see is that the scope of typical financial transactions is often different between regulators. Those digital KYC mechanisms are thrown out of the window, and you cannot participate in the financial system.

The Swiss financial regulator, FINMA, has a newly proposed method of online identity verification. This shows positive steps to improve the onboarding procedure for individuals.

One of the elements that was changed from the previous method of digital onboarding was the requirement of a money transfer from a bank in Switzerland. This requirement was restrictive for global business. They also removed the requirement for the use of using a one time password during a video identification procedure, another hurdle that was sometimes counterintuitive.

Among these additions to the new approval process is the requirement to use liveness detection during digital onboarding; a trend that is taking place around the world , which requires checks during the onboarding process to confirm that it is actually a real person who is registering using a system that goes further than a selfie but actually requires the individual to “look up, look left, look down” and a random screen is taken from that process.

There are many more countries that belong on this list, including some with e-identity services as well as those developing these services. The cross between all of these mini worlds on a global scale will be an interesting one.

Digital Identity and Customer Onboarding

Now, this is all great; different ID’s, different systems, different government benefits… we all see the use case. But what about products and services? We have all done some kind of identity verification and business transaction online, so, what happens there?

There is a difference between identity as it is needed from a regulatory perspective, and KYC which is centred around two fundamental questions:

Are you the person that you say you are? Are you a malicious actor?

Financial transactions fall under different regulatory bodies regionally and globally. A fundamental reason these are monitored under stringent guidelines is a result of Anti-Money Laundering (AML), and Anti-Terrorist Financing which lead to different requirements as shown in the FINMA example above.

Securities and KYC

This brings me to my last topic : Raising capital. When buying shares of a company, one would want to know the details of their cap table and this means following regulation specifications. In some cases, it is counterintuitive to what is best practice in the identity space — but sometimes the world is far from perfect.

This is where we can differentiate between multiple elements such as document authentication, liveness checking, barcode checking and matching against global sanctions and watchlist databases. An example of this is FINTRAC in Canada, the financial standard that organizations have to adhere to. According to FINTRAC, it is not sufficient to use a passport, and liveness and checks to onboard your investor. Counterintuitive, like I said. To meet the requirements you must do a credit bureau and SIN check OR document authentication and get proof of residence. The former can be automated, the latter often cannot which puts certain firms in an advantageous position to offer these services: yet ultimately there is still friction for the end user.In closing

This article is by no means all-encompasing, but it is meant to show the different e-identity programs and digital onboarding regimes available in the world, and highlight that there can be massive jurisdictional differences depending on what kind of transactions you are performing. For this reason, while I am optimistic on novel ways to protect privacy and create digital identities — ultimately citizens of countries need access to government services and the ability to participate in financial markets, and I just dont see a short term — or even medium term where some of the new services are used for more than just onboarding for the next consumer web-app.

In closing

This article is by no means all-encompassing. It is meant to show the different e-identity programs and digital onboarding regimes available in the world, and to highlight that there can be massive jurisdictional differences depending on what kind of transactions are being performed. For this reason, while I am optimistic on novel ways to protect privacy and create digital identities, citizens need access to government services and the ability to participate in financial markets. I don’t see a short term or even medium term solution where some of these services are used for more than just onboarding for the next consumer web-app.

The world is kind of weird.