Digital identity must adapt to new financial ecosystems

With digitization leading to exclusion from the financial system in some cases, digital identity and biometric technologies need to be addressed in new regulatory frameworks, suggests a US state government official.

Podcast Financial inclusion and beyond asked Matt Homer, executive deputy commissioner of the New York State Department of Financial Services Research and Innovation Division about the importance of adapting digital identity and financial solutions to new industry challenges.

The podcast focused on the technological advantages of digital and biometric financial technologies; Digitization has in some cases resulted in exclusion, says Homer, who calls for new regulatory frameworks to reverse the trend.

Homer points out that for many, wages are not digitized, making it difficult to convert cash into digital value that can be kept in an e-wallet. Even though people have cell phones to connect to a bank account or digital wallet, often in rural areas coverage and quality of service can be limited, which means people still fall through the cracks of the internet. net. Therefore, having multiple means of self-identification and other means of accessing digital finance is essential for different types of communities.

When people use agents to deposit money for conversion into a digital wallet, it can be difficult to regulate or oversee, and this could be one of the areas where trusted executives come into play.

Homer describes other approaches that regulators are looking at to mitigate these types of issues: “Something called multi-level KYC, which has become… kind of a standard that even the FATF has endorsed and that many countries are following. So these are the requirements that regulators place on customers to identify themselves. And the idea with multi-layered KYC is that the greater the risk you pose to the system, the more arduous the identity verification procedures you have to follow. “

The cost of KYC compliance for banks has increased to 50 million euros ($ 55.2 million) per year, along with the increase in fines.

Having a digital identity also makes other aspects of life accessible; have access to government benefits, enroll a child in school, be able to travel. From a consumer’s perspective, it’s not necessarily the digital ID that people are looking for, says Homer, the engine here is economic opportunity.

Therefore, is a well-constructed digital identity too idealistic? According to Homer, we must navigate balancing the rights of the individual with the rights of society. “To me, whether it’s a government program or a self-sovereign program… it really comes down to the governance of the program that matters so much. And frankly, it depends on the kind of people who control it, whether you trust them and whether they are subject to democratic and citizen-sensitive standards.

Deposit insurance is one way to build trust around people’s monetary assets, but there is not yet a trust framework for financial data. Powerful solutions should address giving people power over data and the ability to exercise that agency.

While Homer highlights the development of new frameworks and multiple biometric collection methods as the key to holistic financial inclusion, others believe that a self-sovereign identity for all is the way forward.

The Latin American appeal seeks to further develop the self-sovereign identity project

A new regional call for proposals was announced this week by Argentina Didi project and the Civil association DECODES based on the self-sovereign digital identity model developed by Didi. The projects will focus on civic and economic inclusion in the countries of Latin America and the Caribbean, thus strengthening the model already in place in innovative ways.

The Didi Project is the first Self-Sovereign Identity (SSI) project in Argentina, creating solutions to reduce information asymmetry and generate financial inclusion. The project developed a self-sovereign identity application, AIDI, which acts as a digital document support for a multitude of services.

Last year, iRespond, a humanitarian digital identity solutions company, conducted a pilot study in Southeast Asia around a self-sovereign identity to provide ‘birth certificate’ credentials to newborn families.

The call for proposals aims to strengthen public administrations for the identification of people according to new international standards, such as digital wallets, blockchain networks or verifiable credentials. Also aims for organizations to integrate the mobile application into the work process for free and open source license use.

“Autonomous digital identity models on the blockchain, like ours, mean empowering people to manage and use their personal data, privacy and security, which means something very innovative and transformative about to traditional identity models, where users’ information is centralized by companies and institutions that can use it for other purposes and for other purposes, ”explains the DIDI project.

The call is supported by LACChain, the Global Alliance for the Development of the Blockchain Ecosystem in Latin America and the Caribbean, and ends on June 15. Winning projects will receive between $ 10,000 and $ 50,000.

Subjects of the article

biometrics | credentials | digital identity | financial services | government services | identity management | identity verification | KYC | regulation | self-sovereign identity

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