Voice of the Industry

2021 is the year for execs to get strategic about identity

Friday 11 June 2021 09:06 CET | Editor: Claudia Pincovski | Voice of the industry

Cameron D’Ambrosi, Managing Director at One World Identity, explains what the rules are when it comes to choosing the right digital identity design for an organisation

Last year enterprises across every sector of the economy witnessed a mass adoption of identity tools, like biometrics or user behaviour analytics, to ensure security at various levels of the organisation. The incorporation of digital identity verification grew by 72% through three quarters of 2020, directly due to COVID-19, according to Trulioo. Financial institutions’ rate of adoption increased by 52%.

While companies had to incorporate these technologies to adapt to the online surge, most failed to develop a strategy to accompany the inclusion of this digital identity. Instead, in most cases, they added a digital identity capability for a specific purpose, like authenticating, mining for insight, or reducing risk. This implies that company leaders still view digital identity as an add-on to their strategies, similar to a Chrome extension. What they fail to realise is that digital identity, when properly utilised, can become a core enabler of how the business functions and create new layers for service.

The failure to properly recognise the potential in a robust digital identity design leaves organisations unable to truly escape friction when interacting with customers across the company’s segments.

The silo design holds organisations back

Many organisations still operate within silos across internal business units, especially when it comes to capturing and storing data. Viewing digital identity as a basic tool creates a scenario where much of the identity work takes place within these company silos. What does the customer experience in such a design? Each area of the business must ask a user for more personal information and cull potentially repetitive data. What makes matters worse, the new data pulled by the various sections of the organisation is then stored within the respective silo – leading to internally misaligned data. Not only does the customer face more friction via requests for information, but the organisation fails to capture a full picture of the customer across the company.

By taking this route with the digital identity efforts, a business only increases the friction that a customer will feel. It also increases the compliance complexity, since there’s weaker insight across the company into when the organisation collected and received consent for the data. Take a riskier action a customer may make at a bank, such as taking out a large loan. The more assurance the institution needs to process the loan, the more documents and forms the customer will need to fill out. This inherently adds significant friction to the process, even for customers that have more than enough capacity to cover the loan. On top of that, processing the loan requires the sharing of significant personal data. Without insight into whether the individual provided the consent, compliance can’t approve the loan, resulting in more friction since it will require returning to the person for consent again. This only becomes more complicated, as data privacy restrictions and consent regulations tighten.

But payment providers and financial institutions aren’t alone in this thinking. Users, for instance, still expect to use a password at login, even though 77% of bank customers say they feel most secure with biometrics. In truth, almost all services could be password-less and still providing multi factor authentication. Brands have not communicated this fact to consumers, so customers still expect the password. Having this conversation will free businesses from the use of the password. And to effectively achieve the password-less design, organisations must also free digital identity from siloed thinking.

A better way for payments

This limiting of digital identity as an ‘add-on’ to various segments of the business means the company can’t take advantage of the most powerful aspects of the tools. Think about the very nature of payments. Typically, one thinks of the payment model where identity provides confirmation to allow for a transaction to process. This takes the limited view of what strong identity design can offer. In reality, the opposite design can – and should – occur, with a strong identity layer. Payments become a function that identities can perform. Identifying customers comes first. Then actions that the institution must process are achieved by the identity design.

Instead of a payment flow, which requires identity to process the final payment, you have the option to build in services based on the identity first. With the identity secure, certain payments can become automated or even dynamic. You see this design in a company like Klarna, which uses digital identity to determine if someone that wants to make a purchase has the credentials to pay. If they do, passing the identity layer, the company allows the payment on the merchant site, without any cash or credit card information exchanging hands. Klarna supports the payment and will collect in the weeks or month that follows. This calculus happens in mere moments, right at check-out. But it allows customers in a digital space, for example, to try on clothes without money exchanging hands.

It’s just one example of this type of digital identity leading the payment process, but plenty of other possibilities exist. A digital identity-first design also reformats the way a company spreads and shares data. By sharing such a strategy, data, and infrastructure across all areas of your organisation you can create an infrastructure layer internally that also shares onboarding, risk, payment, and account management signals, so business silos don’t have to continually re-transact or re-identify the customer. Instead, it becomes continuous and seamless.

Some companies have already moved aggressively in this direction, but they’re the early adopters. Many more will move this way in the next year or two. Why? Because in a time when companies spend billions on removing friction from the digital experience, the number one area of friction that needs to be removed comes from the fractured design internally within the organisation.

Digital identity solves that concern, and leveraging it is the strategic move to make for 2021.

This editorial was first published in our Financial Crime and Fraud Report 2021 - How to Fight Fraud and Master KYC, Onboarding & Digital ID, which provides a comprehensive overview of the major trends driving growth in fraud prevention, identity management, digital onboarding and KYC, transaction monitoring, financial crime compliance, regtech, and more.

About Cameron D’Ambrosi

Cameron D’Ambrosi is a Managing Director at One World Identity, and host of the State of Identity podcast. In his role, Cameron is responsible for supporting OWI’s advisory services platform by offering clients key insights into the companies and technologies shaping digital identity today.



About OWI

OWI is the world’s leading research and advisory firm focused on identity, trust, and the data economy. Through proprietary research, data and analytics, bespoke consulting, working groups, and events, our team helps businesses build sustainable, forward-looking products and growth strategies.

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Keywords: biometrics, digital identity, COVID-19, financial institutions, data, banks, Klarna, identity verification, digital onboarding
Categories: Securing Transactions | Digital Identity, Security & Online Fraud
Countries: World
This article is part of category

Securing Transactions