In today’s world, digital identity and verifiable credentials are becoming increasingly important in the delivery of products and services. Liminal believes that digital identity is not a standalone product but a vital enabler of consumer objectives and business offerings. These capabilities are increasing in value to organisations and will enable a smooth transition from the current Web2 model to a decentralised Web3.
Digital identity refers to the digital representation of an individual or organisation, and verifiable credentials provide evidence of identity attributes, such as licences, memberships, or employment history. In the current digital identity model, individuals must create and maintain multiple accounts, passwords, and personal information across various websites and services. This leads to a fragmented and cumbersome experience that can lead to data breaches and security risks. Unfortunately, the model creates a poor customer experience because of the need to enrol and re-provide identity information for every new website or service.
Our recent research found that security is the greatest priority when onboarding and 42% of consumers have abandoned an account application due to friction. One particularly acute area where friction is problematic is in digital onboarding, especially for financial services accounts with Know Your Customer (KYC) and anti-money laundering (AML) requirements for ensuring that a customer is adequately verified. Consumers have become accustomed to onboarding flows in consumer-facing applications that have not had the rigorous requirements for KYC and AML checks, and therefore are affronted by requests for proof of identity for financial services applications that they don’t experience in other forms of account opening.
There are exciting efforts underway to build a drastically different future, with emerging models such as Personal Identity Ecosystems (PIEs), Identity as a Service (IDaaS), eIDs and identity wallets, and self-sovereign identities (SSIs). These models aim to move digital identity from siloed, privately-held databases to open networks where individuals and businesses can maintain their identity and credentials in one place and then reuse them wherever they go.
Adopting reusable digital identity and verifiable credentials is poised to bring significant advantages to both individuals and organisations by eliminating the need for constant re-enrollment and re-verification, resulting in substantial time and cost savings. This enables users to share their verified identity attributes across various services and applications, creating a seamless and secure experience that enhances customer satisfaction. Given the growing consumer demand for streamlined, personalised, and privacy-protecting interactions, organisations recognise the need to embrace these innovative technologies to remain competitive in the market.
A major obstacle to the widespread adoption of digital identity and verifiable credentials is the need for interoperability and adherence to common standards and frameworks across different systems. This requires businesses to have a comprehensive understanding of the technical, legal, and regulatory aspects and ensure adequate privacy and security measures. To achieve this, organisations must collaborate with stakeholders to establish a shared language of compatible standards and protocols to ensure universal adoption and interoperability.
Furthermore, shifting from a traditional siloed identity model to a more open and interoperable network has significant implications for businesses. With the adoption of reusable digital identity and verifiable credentials, organisations will be able to provide a seamless and personalised customer experience that is more secure and efficient. However, this transition requires significant changes to existing back-end operations and underlying technologies, including authentication protocols, identity providers, and authorisation frameworks.
This change poses new security concerns as sensitive identity information will be shared across multiple services and applications. Organisations must ensure the privacy and security of personal data by implementing robust security measures, such as data encryption, secure data storage, and access management. Adopting industry best practices, guidelines, and standards, such as ISO/IEC 27001 or NIST Cybersecurity Framework, can help businesses establish a secure and resilient digital identity and verifiable credentials ecosystem.
Reusable digital identity and verifiable credentials are key to building a secure and trustworthy Web3, where users can seamlessly interact across decentralised applications without compromising their privacy or security. As the market for these solutions grows, organisations must adapt to meet customers’ evolving demands. However, this shift from a siloed identity model to a more open and interoperable network requires significant changes to existing back-end operations, underlying technology, and security practices, which poses challenges for businesses. Nonetheless, with careful planning and stakeholder collaboration, businesses can overcome these challenges and reap the benefits of a more streamlined, secure, and efficient digital identity ecosystem. At Liminal, we are committed to staying at the forefront of emerging market trends and helping organisations navigate the complex landscape of digital identity and verifiable credentials.
Figure: 2023 Liminal Digital Identity Landscape
The Digital Identity Landscape tracks emerging trends and technologies, providing enterprises with valuable insight into the direction of the industry and helping to shape next-generation strategies. Identifying and tracking more than 120 product features mapped to 32 solutions segments across more than 2,000 key players in the market makes it the most comprehensive digital identity market intelligence tool available globally. This allows senior executives representing small and large businesses to identify opportunities for growth and expansion, as well as potential areas of risk.
This editorial was initially published in the Financial Crime and Fraud Report 2023 which dives into the captivating world of fraud management, digital onboarding, and financial crime in the financial services industry. You can download your free copy here.
Travis Jarae, founder and CEO at Liminal, is a digital identity and technology thought leader. He’s passionate about building a community dedicated to solving the challenges of digital transformation. With leadership roles at Google, Deloitte, and Citi, Travis has a keen eye for helping organisations navigate growth market opportunities and strategically allocate resources.
Liminal is a strategy advisory firm serving digital identity, cybersecurity, and fintech firms, as well as private equity and venture capital investors, helping leaders make decisions at all stages. Our clients include business leaders, investors, and government officials seeking to invest in the next-gen of digital identity platforms. We offer solutions for evolving market dynamics, growth strategies, M&A opportunities, and deal flow optimisation. We guide clients in navigating complex digital transformation challenges by showing them how to reach their destination.
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