Data is the new oil. Our personal information flows through countless digital pipelines, often beyond our control or understanding. In my previous blog post, I laid bare the inefficiencies and risks inherent in traditional onboarding processes. Today, we're exploring a more secure, efficient future with portable (reusable) identities. This innovative approach isn't just an incremental improvement—it's a complete reimagining of how we handle personal data.
By dramatically reducing manual intervention, enhancing data usability, and introducing the concept of identity recycling, portable identities offer a solution that's as secure as it is efficient. Moreover, portable identities put users back in the driver's seat, providing clear visibility into the lifecycle of their data.
Part 1: Understanding Portable Identities
What Are Portable Identities?
Portable identities, often referred to as reusable identities, are secure digital representations of an individual’s or entity’s identity information that can be shared across multiple platforms and organizations. Unlike traditional identity verification methods that require repeated data submission and verification, portable identities enable users to create their identity profile once and use it across various services. Think of it as a digital passport that's accepted universally, not just for international travel but for any scenario requiring identity verification.
Key Features of Portable Identities:
Reusability: Create once and utilize across multiple platforms, reducing redundancy.
User Control: Individuals have greater authority over what information is shared and with whom.
Enhanced Security: Employ advanced cryptographic techniques to protect privacy and data integrity.
Interoperability: Function across different systems and platforms, mitigating fragmentation.
Part 2: The Current State of Identity Management
A System in Need of Reform
To appreciate the potential of portable identities, it's crucial to understand the limitations of the current identity management landscape, especially in regulated sectors like finance. Did you know that approximately 80-90% of the information collected during onboarding processes is identical across all financial institutions? This statistic underscores the inefficiency of our current system. Financial institutions, guided by regulations such as the Financial Action Task Force (FATF) Guidelines, repeatedly collect and store the same customer information.
Challenges in the Existing System:
Data Duplication: Sensitive information is stored multiple times across various databases, increasing the risk of data breaches.
Manual Processes: Despite advancements in automation, significant human intervention is still required, leading to higher operational costs.
Fragmentation: Identity verification processes are siloed within organizations, causing inconsistencies and inefficiencies.
Centralization Risks: Centralized data storage creates single points of failure, making large-scale breaches more likely.
Lack of Transparency: Users often have limited insight into who accesses their data and for what purposes.
Part 3: Portable Identity as Recycling
Think of portable identities like a recycling program for your data. Just as recycling reduces waste and conserves resources by reusing materials, portable identities minimize data redundancy and resource expenditure by reusing verified identity information across multiple platforms. Portable identity systems offer significant environmental advantages. By digitizing identity verification, businesses reduce paper documentation, cut down on deforestation and waste, and align with global sustainability goals.
Digital IDs can cut paper use in government services by up to 90%, as demonstrated by Estonia's e-governance system. The shift to portable identities also reduces energy consumption in data centers and decreases carbon emissions by minimizing the need for physical transportation of documents. These environmental savings, when scaled across industries (i.e., linked healthcare data to portable IDs), represent a significant step towards more sustainable business practices in our increasingly digital world.
Let’s Quantify The Impact:
Simplifying the Calculation of Cost Savings with Portable Identities
Total Cost = Number of Clients × Time per Onboarding × Cost per Hour
Current Onboarding Costs:
Number of Clients onboarded annually: 5,000
Time per Onboarding (Manual Process): 5 hours
Cost per Hour per Employee: $40
Total Cost
= 5,000 × 5 hours × $40/hour
= 25,000 hours × $40/hour = $1,000,000
After Implementing Portable Identities:
Reduction in Onboarding Time: 50%
New Time per Onboarding: 2.5 hours
New Total Cost
= 5,000 × 2.5 hours × $40/hour
=12,500 hours × $40/hour = $500,000
By adopting portable identity protocols, the organization saves $500,000 annually on explicit onboarding costs alone. This significant saving highlights the financial benefits of streamlining the onboarding process with portable identities, allowing the organization to:
Allocate Resources More Efficiently: Free up funds for other strategic initiatives or investments.
Improve Operational Efficiency: Reduce the time employees spend on repetitive tasks.
Enhance Customer Experience: Faster onboarding can lead to higher customer satisfaction and retention.
Increase Competitive Advantage: Lower operational costs can improve pricing strategies and market positioning.
Part 4: Portable Identities: A Paradigm Shift
Portable identities offer a solution to these challenges, promising to change how we approach identity management, compliance, and economic interactions.
Technologies Enabling Portable Identities
Blockchain and Distributed Ledger Technology (DLT):
Provides a secure, tamper-evident foundation for identity information.
Enables decentralized storage, reducing single points of failure.
Zero-Knowledge Proofs:
Allow verification of information without revealing underlying data.
zk-SNARKs enable efficient, privacy-preserving verification.
Pedersen commitments offer a way to commit to a value without revealing it.
Non-Fungible Tokens (NFTs):
Represent unique identity attributes in a portable, verifiable format.
Enable fine-grained control over identity attributes and their usage.
Near Field Communication (NFC):
Enables secure, contactless sharing of identity information in physical settings.
Supports encrypted communication for enhanced security during data transfer.
Decentralized Identifiers (DIDs):
Provide a standard way to identify and manage portable identities across systems.
Enable self-sovereign identity, giving users control over their digital identities.
Trusted Execution Environments (TEEs):
Offer secure enclaves for processing sensitive identity data.
Ensure integrity and confidentiality of identity operations on untrusted systems.
On-Chain Data Oracles
Data oracles serve as bridges between off-chain data sources and the blockchain.
They can enable real-time verification and updating of identity information, enhancing reliability.
Part 5: New Business Models will Evolve
The advent of portable identities introduces novel economic models that reimagine the value of personal data. One emerging approach is the "pay-per-use" model, where users receive compensation each time their digital ID is accessed or verified. Here's how it works:
Tiered Access Model:
Users set different price tiers for various levels of identity information.
Example: Basic verification (name, age) might cost $0.05, while in-depth verification (credit score, employment history) could cost $2.00.
Organizations choose the level of verification they need, paying accordingly.
Reputation-Based Pricing:
The cost of verification varies based on the user's "identity score."
Users with consistently accurate, up-to-date information command higher fees.
Example: A user with a 95% accuracy rating might earn $0.50 per verification, while one with 75% accuracy earns $0.20.
Pay-It-Forward Model:
Organizations pay for verifications, with a portion of fees funding free access for underserved populations.
Example: For every $1 spent on verification, $0.10 goes towards providing free IDs in developing regions.
Identity-as-a-Service (IDaaS):
Users maintain their identity for “free” through decentralized clouds. Organizations subscribe to access the verification network.
Tiered organizational subscriptions based on volume and features.
Example: A small business pays $50/month for up to 200 verifications, while a large corporation might pay $10,000/month for unlimited, global access.
Data Escrow Model:
Users lock certain data in escrow, releasing it only when specific conditions are met.
Payment is held in escrow and released upon successful verification.
Example: A user escrows their educational credentials, releasing them only to verified educational institutions or employers, earning $5 per successful verification.
Federated Identity Ecosystem:
Multiple identity providers interoperate, with users choosing their preferred provider.
Revenue is shared among providers based on usage and data contribution.
Example: A user verified through Provider A earns 70% of the fee, while 30% is distributed among the federated network.
Each model presents unique advantages and challenges. The Tiered Access Model offers flexibility but may complicate pricing structures. Reputation-based pricing incentivizes data accuracy but could disadvantage new users. The DIF approach promotes community ownership but requires careful governance.
As the portable identity landscape matures, we're likely to see hybrid models emerging. These might combine elements from various approaches to create systems that are economically viable, user-centric, and adaptable to diverse regulatory environments. For instance, a model might incorporate tiered access with reputation-based pricing on a federated network, all built on a decentralized foundation.
Conclusion: The Future of Identity
Portable identities represent more than just a technological advancement; they embody a fundamental shift in how we approach identity, privacy, and economic interaction in the digital age. By reducing manual intervention, enhancing data usability, and empowering users with control over their personal information, portable identities promise to unlock significant economic value while improving security and user experience.
At Ahrvo Labs through our Portable Identity Gateway, we're at the forefront of this revolution. Our focus is unified Know Your Business (KYB) processes, providing access to over 400 payment and banking businesses through a single onboarding process. I envision a future where identity verification is seamless, secure, and user-centric, driving economic growth and improving lives globally. The evolution of a standardized identity protocol is in its infancy, promising to revolutionize digital interactions much like the early days of the World Wide Web.
Looking Ahead
In our next post, we'll explore another exciting frontier in compliance innovation: the use of open banking to further reduce manual intervention and streamline financial processes. We'll examine how this technology complements portable identities and contributes to a more integrated, efficient compliance ecosystem that can further accelerate economic growth.
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About the Author
Appo Agbamu, CFA is the Founder and CEO @ Ahrvo Labs Inc. Ahrvo develops, markets, and sells compliance, payment, and banking solutions. Appo earned a B.Acc. in Accounting and a BBA in Economics, w/a minor in Financial Markets from the University of Minnesota. In addition, Agbamu is a Chartered Financial Analyst (CFA) charterholder.
About Ahrvo Labs
Ahrvo Labs offers businesses cutting-edge payment and compliance solutions that optimize payment and banking processes and ensure regulatory compliance. Our state-of-the-art payment gateway features a single onboarding process that provides access to over 400 leading financial institutions worldwide. With secure global transactions and a commitment to regulatory compliance, our cutting-edge payment and banking gateway is designed to simplify workflows and streamline operations for businesses. Learn more @ https://ahrvo.com
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