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Digital identities are increasingly becoming important today. Aspects like customer trust, security, real-time, etc., are now included in the concept of a great customer experience. Traditional methods of identity verification, such as passwords, pins, biometrics, facial recognition etc. are susceptible to flaws.
The BFSI sector, which includes all banking, insurance and non-banking financial institutions, makes up a sizeable component of any growing or developed economy globally. The financial sector's institutions are experiencing a revolution in how they engage with their clients, staff, and other stakeholders due to the quick spread of digitisation in the various financial sectors, disruptive technological innovations around multiple services, and constantly evolving user behaviours. The majority of digital identities management technology solutions and services are mostly seen in the BFSI industry, highlighting the crucial function of a strong identity authentication process within the industry.
Digital Identity Technology
New technologies increasingly mediate identity verification and identification of individuals in the digital era. Life elements such as the date and place of birth, origins, ethnicity, country, and bodily characteristics like eye and hair colour are still routinely employed, allowing the BFSI industry to authenticate individuals' identities successfully. The use of AML programmes involves KYC processes with no loopholes for the identification and verification of users, thus ensuring a secure cyberspace.
Identity verification and identification heavily rely on biometric data, such as fingerprint and iris scans. The Aadhaar programme in India, which uses biometric technology to capture fingerprint and iris scans together with personal data like name, date of birth, and residence for the authentication process, presents the right example to understand how digital identification technology is used for financial inclusion.
The development of digital technology has also enabled the BFSI sector to use video KYC and E-KYC to verify identities. Companies can leverage facial matching and video KYC to verify a customer's identity while also determining their exact location. Officially Valid Documents (OVDs) are photographed and information is extracted from those images using technology, which is then immediately validated. This is an essential building block for video KYC and allows for quicker, more accurate verification.
DLT
DLT is an unalterable decentralised ledger that serves as both a transaction medium and a repository for all transactions in the form of blocks, which are hashed digital packets. A DLT-based identification system has the benefit over traditional ones in that it can keep track of every identity shared in the global network and maintain continuously reconciled data throughout the network.
The use of digital technology in India has also seen exponential growth. The growth of digital solutions in recent years has prompted a boom in fintech and microfinance in the country, with digital lending reaching US$ 75 billion in FY18 and expected to reach US$ 1 trillion by FY23, owing to a five-fold increase in digital disbursements. Financial institutions have taken the initiative to use the latest digital identities technologies like AI, AML, and DLT solutions for trade finance and cross-border remittance solutions.
To Conclude
In the age of linked intelligence, which encompasses point-of-sale systems, payment gateways, artificial intelligence, and IoT-enabled items, digital identity verification is widely used by organisations. Financial institutions gradually realise that identification can be about much more than just security. The use of biometrics, cutting-edge analytics, and numerous other identification sources is being utilised to combat fraud, improve overall operational efficiencies, and raise the relevancy of customer service. Increased access to digital ID by the BFSI industry is reducing the pressures of ID theft, guaranteeing high levels of confidence in the digital identification system, and enabling people to engage in the digital economy fully.
--By Mr Siddharth Kukatlapalli, Co-founder and CBO Syntizen Technologies