It wasn’t too long ago when we were NOT simultaneously sitting in a restaurant and paying for our meal on a tablet while buying tickets to the show down the street after ordering an Uber to take us there. What seems commonplace now is revolutionary from where we used to be just 15 short years ago.
However, with greater technological capabilities and conveniences come greater needs to keep our identities and personal information safe. Growing consumer expectations, increasing transaction volumes, rising transaction complexity, more stringent regulatory requirements, and risks to our credit union’s reputation – all these factors demonstrate the need to improve the ways we currently verify a user’s identity.
Before we dive in too deep with details about the benefits of digital identify verification systems, let’s briefly review the definition of digital identity and why it is important.
Digital identity means each person has their private information stored within a secure platform, and each person then authorizes businesses (i.e., Amazon, Walmart, Apple) access to that information with the individual’s permission. Having a “digital identity” is different from the way our private information is used/accessed today. Consider how we currently use our personal information in the online retail and banking arenas: Whether buying something from a retailer or logging in to a mobile-banking platform, we create and use a separate identity (user name/password) for each digital transaction/interaction.
And then, sometimes that private information moves in ways you have no control over; companies are bought or merged, and your data goes to a new place where it might be sold. The information we think of as “private” isn’t really all that private, since we’ve given it to so many businesses.
Instead of the current method of creating a new identity every time we make an online transaction and offering our private information repeatedly, it would be more efficient and secure to own our personal identity as digital data. Then, those businesses we interact with digitally get access to that private information from us when and how we want them to. For example, Amazon only needs our credit card information and only when we are making a purchase. The shipping company delivering our purchase only needs our address. Both places could get that information from our “digital identity,” which is stored in a secure platform.
Now that we’ve defined digital identity, let’s look at four specific benefits of these verification systems.
Beyond offering new functionality, effective and efficient digital identity verification systems have significant functional benefits over physical-based identity systems in four specific areas:
1. Security
Currently, physical identity documents can easily be lost, stolen, or replicated by illicit actors, as well as read by entities with no legitimate reason to have the user’s information. Digital identity information could be stored, transferred, and exposed using cutting‐edge digital security protocols that would prevent data breach, modification, loss, and theft.
New digital identity mechanisms make it much, much harder for hackers to break in and steal your personal information and reduce the opportunities for those hackers to get multiple pieces of information at once.
2. Privacy and control
Physical identification documents, such as drivers’ licenses and passports, reveal all of a user’s personal information all at once instead of just showing the one or two pieces of information needed for a particular transaction or situation. Physical documents can’t be tailored and do not allow the release of information to be tailored to the identity transaction; identity documents display a fixed set of information that can be read by almost any entity.
On the other hand, new digital identity processes allow individuals to control the sharing of their information, to expose the minimum amount of information required for a given transaction, and to shield their information from illicit access. As individual users, we are in control of supplying the amount of personal information that is required for a transaction. With user-owned digital identities, we have much more control over private information that needs to be distributed only to certain entities for certain kinds of transactions.
3. User experience
Physical identity documents require users to manually show or enter information during transactions, resulting in a cumbersome user experience and creating potential for human error. For example, many of us have had the experience of securing a loan, which required producing lots of paper copies of paychecks, bills, and other documents to verify that we met all the requirements.
Digital identity transfer would streamline the transaction process for users and providers across all channels, increasing the ease of transacting for both parties and removing much of the potential for human error. There’s a lot of verification organizations can conduct in the background without the individual user having to provide/release personal information. Combined with an ability to permission access to our own user data, the experience can be simplified while still being secure.
4. Flexibility
Physical identity documents only offer a fixed view of identity that cannot be expanded to cover additional user attributes. For example, your drivers’ license only has particular pieces of information. But if you’re taking out a loan, you’re going to be required to bring more information about yourself than is contained on that license.
Digital identity would provide a flexible and scalable system that could incorporate a greater richness of identity information than is currently possible. A much broader and richer view of an individual would streamline the identity verification process in certain scenarios.
So, what are a few ways efficient and effective digital identity verification systems would specifically benefit credit unions? Below are three advantages to keep in mind:
1. Information accuracy. We want the best info we can get so we can remain compliant. The more accurate the information your credit union can get, the more you will Know Your Customer (KYC), which strives to reduce fraud and money laundering.
2. Decreased risk. The many kinds of fraud, checks, and ways to move transactions through the system is increasing the need for identities to have complex attributes to conduct/validate the transaction. We need to stop letting hackers break into our systems and stealing enormous amounts of data and private information, which ultimately damages the reputation of our financial institution.
3. Member experience/preferences. A great user experience strives to reduce barriers to commerce and simplifies processes. “Frictionless” is the word that comes to mind. With an effective digital identity system, we can ensure we’re not asking the member for too much information, and we can obtain information about them in other kinds of places that allow us to be as frictionless and easy to use as possible.
As these industry advantages to digital identity verification become more well-known, credit unions will undoubtedly have more opportunities to strengthen and protect their members’ identities as well as their institutions with innovative identity verification solutions. If your credit union is looking to strengthen its identity verification solution, check out ID-Pal, which enables credit unions to verify the identity of members simply, securely and conveniently.