The pandemic’s catalysation of the digital world has led more people to need to prove their identities online. However, with many criminals aiming to imitate innocent users and access their data, ensuring a secure digital ID should be at the top of every company’s priority list.
Sebastián Stranieri, Founder and CEO VU, a cybersecurity company specialising in fraud prevention and identity protection. He spoke to The Fintech Times to explain how fintechs have managed to drive ahead of the competition; banks and other financial organisations must now collaborate with fintechs to protect their customers:
Digital identity was one of main talking points at last year’s Singapore Fintech Festival, with fintechs driving not only the conversation, but the action too. Whether launching their own tech or being the innovation backbone for government plans, fintechs are repeatedly making personal authentication more secure and streamlined in digital spaces.
For example, Mastercard recently announced its plan to supply the infrastructure for cross-border digital ID between Australia and Singapore. The Vice President of the financial services company specified that these kinds of fintech-driven “public foundation digital infrastructures will be critical for inclusive economic and social development.”
With more people having to prove their identity online on a daily basis (to pay bills and work remotely), private fintech companies best facilitate that step because they can implement solutions faster and on a bigger scale. Considering one billion people are unable to prove their identity online, fintech’s speed and agility gives more people access to digital IDs and thus basic necessities.
Here’s how fintech is leading the digital ID charge, and why it’s set to stay ahead in the race:
Building a more inclusive banking sphere
Digital IDs are standard practice in fintech. Biometrics like fingerprint scanning and facial recognition have long been used to authorise entry to digital wallets and fintech services like microloans, insurance providers, trading, and cryptocurrencies. There is also the more recent introduction of decentralised digital identities where documents like a driving license or password are stored on third-party blockchain platforms and used for validation with the user’s approval.
Currently, over 1.7 billion people worldwide (nearly a fourth of the population) don’t have a formal bank account, and yet 64 per cent of global consumers have used one or more fintech platforms. Part of the reason is people can more easily set up a digital ID online than go to an in-person bank appointment. Likewise, for people who live in rural areas or who don’t speak the local language, a digital ID is more attainable. Plus, digital IDs accommodate people who have limited mobility or cognitive disorders and can’t travel or remember their account details.
Protecting people’s data and path to wealth-building
People are increasingly placing their trust in technology over traditional banking – which is one of the most targeted groups for cyber attacks. And while attacks cost this industry billions per year, it’s everyday bank account holders who are at risk of losing their savings and personal information.
While fintech equally faces rising threats of cybercrime, digital IDs are effective at closing the entry points that criminals use for foul play. Digital IDs that pair with smart contracts, multiparty computing and lightning network infrastructure are especially robust.
Reassured with these secure IDs, more people can seize fintech services that provide alternative routes to wealth building. For example, fintech platforms that consolidate multiple bank accounts in one place give users a better overview of their finances. Some platforms also enable users to browse and switch to cheaper utility providers, saving account holders time and money. Even better, this improved financial management only requires one, singular digital ID.
In emerging economies – which are more frequently catching malicious players’ attention because of their tech growth but less developed cybersecurity – fintech digital IDs can be implemented from day one. That means that these markets can put one of the strongest cybersecurity shields at people’s fingertips earlier and at a greater scale.
Bringing new solutions to stagnant institutions
Fintech isn’t just championing digital IDs in its own silo, companies have been sharing the advantages of the tech with traditional banks. Take multinational Dutch bank ING, which paired with fintech Minna Technologies to allow customers to manage and swap subscription services directly in the banking app. Elsewhere, UK bank TSB teamed up with fintech ApTap to provide customers with a dashboard to oversee their bills across providers.
The innovation taking place in fintech companies is already why 81 per cent of banks believe fintech collaboration is key to their digital transformation. Fintechs have been able to build impressive digital identity systems that are interoperable between different entities (including banks), meaning people can have a seamless authentication experience whether they prefer traditional banking practices or fintech ones. Rather than compete with banks, digital IDs allow fintechs to integrate with them, and serve (and shield) a broader scope of people.
With fintech continuing to bring banking up to speed in the digital realm, there’s significant potential for it to do the same in government. For instance, in Argentina, where the population still faces challenges in financial literacy, the public and private sector has launched MODO, a digital wallet that consolidates people’s bank ID into a single app. Here, users can manage accounts, make QR payments, and transfer funds through WhatsApp.
Following in the footsteps of countries with digital identity schemes such as Argentina, Uruguay, Ecuador, and the Dominican Republic, nations now need to take advantage of new technologies like Web 3.0 to better test and evolve citizens’ financial experiences.
Fintech’s familiarity with digital IDs doesn’t just empower the people who have already adopted fintech services, but the people who have previously been excluded by traditional banks too. Considering that the UN and World Bank have stressed the importance of citizens being able to prove their existence, these digital IDs ensure more people have a higher quality of life for good.