As Citi Innovation Lab tells us, there is nothing more important for digital identity than authentication and trust. The question is if that applies to corporate identity too
Like personal identity, corporate digital identity captures and stores the unique attributes of an entity (or person) so that they can be transmitted electronically to establish they are who they claim. For corporates, a digital identity gives them the potential to access services, without having to resort to human intervention or the use of physical documentation.
There may be fewer corporate identifiers than personal ones, but company registration numbers, bank accounts or sector/industry memberships can serve a similar purpose. Just as for individuals, the bedrock of corporate digital identity is authentication and trust.
The goal for companies is to find a straightforward way to prove identity and make that verification clear to others and will only be successful if it makes life easier and safer.
Is corporate digital identity a reality?
Countries around the world have widely differing levels of maturity when it comes to corporate digital identity. The leading countries, such as Singapore, UAE, New Zealand, and Estonia, started by developing a digital identity framework for individuals before adding corporations. It is notable that countries at the forefront of such developments are smaller and often unencumbered by legacy systems of larger countries.
Estonia has perhaps the world’s most advanced country digital corporate identity; its scheme allows companies to establish residency without a physical presence. It can also be used to make automated tax payments, enable insurance claims to be paid out rapidly, and provide authorisations for banking services.
Critical to these examples is the establishment of trust and confidence in the network. Government involvement is important in this respect: most people are comfortable with the idea of governments creating and safeguarding our ‘foundational’ personal identity as part of a national identity scheme.
Typically, this foundational identity is built on to create a ‘functional’ or ‘industry-based’ identity. For example, medical practitioners have a registration number that identifies them as a consultant with a particular speciality. The third type of identity is known as ‘transactional’ and can be used to facilitate financial or other transactions. One example in the banking world is an international bank account number.
The private sector also has a role to play in ensuring standards and interoperability. The Global Legal Entity Identifier Foundation provides trusted services and open, reliable data for unique legal entity identification worldwide: its 20-character alpha-numeric code Legal Entity Identifier (based on an ISO standard) ensures a counterparty is always identified on financial transactions in the same way.
Assessing value
Corporate digital identity offers a range of potential benefits. In Estonia, these range from gaining significant tax revenues from company registration without a physical presence, to ease of paying taxes, and the digital provision of services during the COVID-19 pandemic ensured 99% of government services remained available.
For businesses, corporate digital identity offers a way to tackle longstanding challenges. Global trade is complex with multiple players, including exporters, importers, banks acting on behalf of each party, customs, freight forwarders, shippers, and insurers. Establishing identities across this chain is critical both to ensure the security of trade and to facilitate efficient access to finance through the issuance of letters of credit or other instruments.
In a 24/7 world, many leading Fortune 500 multinational companies plan to leverage technological advances to operate an asset-light model with a limited/ non-existent physical presence. However, to transact cross-border they need to establish their identity.
At the heart of this challenge is increasingly onerous know-your-customer regulations (KYC), which are costly for banks and create potential delays for corporates. Corporate digital identity is widely seen as key to improving how KYC works by avoiding false-positives and distinguishing between similarly named group companies or entities.
Overcoming challenges
The most pressing challenge is to create a digital ecosystem robust enough to withstand the proliferation of cyber threats as well as international standards on data protection. Moreover, while technological change is accelerating, there is often limited regulatory infrastructure to support the deployment of technologies such as blockchain or the Internet of Things.
Given the geopolitical backdrop, building a consensus on such issues has been challenging. However, as GDPR in Europe shows, it is possible to design-in protections that meet regional regulatory requirements and still allow for global operations.
For an interoperable corporate digital identification scheme to be successful, companies need to reassess strategy, how data is stored and exchanged, and to integrate new technologies such as artificial intelligence to process and interpret it. Central to this is understanding the impact on entitlements to information, to ensure that only the right people are authorised and can access information.
Incremental change
Corporate digital identification is at a nascent stage and has so far focused on research rather than implementation. The success of closed networks, such as in Estonia, is likely to spur other countries to embark on similarly ambitious projects. Scalable global networks — in which banks are likely to play a pivotal role — are expected to take many years to emerge.
This is a long-term plan and rather than a big bang approach, there are likely to be a series of incremental gains that will offer opportunities for greater efficiency, enhanced resilience, and improved flexibility to meet the needs of companies in an increasingly connected, always-on, and instantaneous world.
About Citi Innovation Lab
With expertise ranging from data science, design thinking, and distributed ledger technologies, Citi’s Innovation Labs listen to today’s challenges, explore future opportunities, experiment with new technologies and partner for new business models.
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