Digital acceleration is at its peak, yet the global phenomenon also compromises the digital security of users. For business owners, the top priority is to protect user information and prevent identity theft. Businesses often collect and store user information through a centralized data repository owned by various organizations, which can be a poor data architecture. As a result, losing track of structured data and sensitive information is common and can trigger data breach exposure. Self-sovereign identity (SSI) shifts that threat and secures the digital interaction experience for users and companies no matter the business type.
How Self-Sovereign Identity Builds Trust and Security for Businesses
As businesses seek to prevent non-compliance risks and give users top-level trust, security, and reliability, a self-sovereign identity model is set to satisfy the business demand and expectations in a variety of ways, especially for banking and financial services. Below, we break down the key ways SSI can safeguard your business.
1. Reduces Identity Theft and Fraud Loss
As per the Federal Trade Commission, about 5.7 million cases of identity theft and fraud were reported in 2021. It is alarming to discover identity theft alone costs U.S. businesses $5.8 billion in financial losses that same year. Every 22 seconds, there will be a new victim of identity theft, the ratio of which is likely to increase in 2023, as per the National Council on Theft Protection.
That said, data breaches are at the center of all of these identity and fraud loss vulnerabilities. SSI can minimize the risk of data breaches. Since users maintain ownership of their personal information through a decentralized, verifiable credential wallet, they can easily protect their data cryptographically, limiting the exposure to theft.
Decentralized identity also ensures that financial services and credit unions can leverage top-line benefits from an SSI model. That’s why SSI or decentralized identity is driving business interest and adoption, translating SSI into an $8.9 billion worth of business opportunity by 2028.
2. Improves Digital Customer Onboarding Experience
For financial services, digital customer onboarding and customer acceptance can be a lengthy and mundane process for all involved. Many organizations still practice traditional methods and point solutions in silos. With multiple steps to follow during KYC processes across different touchpoints, it friction increases for users. On top of that, manual interventions are highly likely if any documents raise conflicts. As a result, customer onboarding can take up to days if not weeks or months.
With the SSI verification process, users only need to share the verifiable credentials with the verifier or banks/entities and authenticate personal information by scanning a QR code or decrypting via a decentralized identifier or private keys. It’s just that easy.
Verifiable credential solution providers can help businesses create this mechanism under their customer signup flows and enable accept customers in a frictionless manner.
3. Optimizes Operational Costs
As per reports by Reuters, KYC digital onboarding processes costs 10% of the top financial institutions as much as $100 million annually. An SSI model is beneficial for financial services to drive cost efficiency across digital customer onboarding and compliance maintenance.
In digital customer onboarding mechanisms, such as centralized and federated identity systems, the loss liability rests with the financial services, forcing them to allocate a regulatory compliance budget. With a higher risk of exposure to identity theft, businesses run the risk of compensating for the fraud loss and also paying hefty amounts as penalties for KYC non-compliance.
Not only does SSI help the business avoid the risks of non-compliance, but it also reduces the time to onboard a customer during KYC verification processes. Businesses can save a staggering amount on their balance sheet that they would otherwise need to spend on operational expenses while removing the threat of fraud loss. Simply put, SSI ensures a secure and reliable environment where all three stakeholders 一 customers, financial institutions, and regulatory authorities grow mutually.
4. Increase Business Avenues With Decentralized Digital Identity
Customers want frictionless onboarding every time they need to navigate to other products and services. Yet, the growing challenge for most financial services is that they employ an outdated customer onboarding solution that requires supplying all related information all over again to access a new line of products or services. This results in customers going elsewhere which offers more friction-free KYC onboarding.
SSI makes the KYC process frictionless by removing the need to supply information repeatedly and enabling users to log in with verifiable credentials and decentralized identifiers (DID) authentication process.
In addition, SSI works as a portable KYC solution, which allows users to leverage products with one click on a different platform. The technology is more secure than the federated single sign-in process as the former encrypts information on distributed ledger technologies and prevents bot attacks. For example, Instnt AccessTM , the first portable KYC solution, employs the Web3 decentralized identity standards, including verifiable credentials, alongside Hyperledger blockchain to allow businesses to further eliminate this friction and reduce risks and liabilities from data breaches while gaining decentralized identity capabilities.
Another added advantage of SSI is that it helps fast-track the loan or lending application processes. The traditional identity verification process takes multiple verification rounds for income proof, bank statements, and tax details, including age. Yet, applicants with verifiable credentials in their decentralized wallet can share all of these pieces of information with just a swipe of a button, instantly facilitating a successful authentication.
5. Secure Online Transactions
Online shopping on e-commerce platforms is continuously surging. In 2022, online shopping on e-commerce reached $1 trillion. Unfortunately, this surge also evokes a higher increase in credit or debit card fraud. In 2021, nearly 127 million American people experienced fraud on their credit or debit cards. This is largely due to many individuals using credit card vaults for the convenience of autopay with the same credit or debit cards, making it an easy catch for credit card fraud.
Thankfully, e-commerce businesses can build a relationship of trust with their consumers by leveraging SSI-powered transaction process on the checkout. The advantage here is that the self-sovereign identity only discloses customer identity and creditworthiness while preventing the disclosure of other information (say, credit card number, CVV number, expiry date, etc.).
In addition, B2B and DTC can also unleash benefits with an SSI approach that simplifies and secures digital payments across ACH networks, real-time payments, and so on.
Self-sovereign identity approach is a game changer for businesses looking at ways to curb financial fraud, account takeovers, and non-compliance issues. Designed with decentralized identifiers and verifiable credentials, SSI models provide a convenient, secure, transparent, and trustworthy framework to improve KYC processes during digital customer onboarding and help businesses accept more good customers.
Leverage all That SSI Has to Offer with Instnt
Instnt makes it easy for all types of businesses to abandon the legacy digital onboarding approach and transition to a more secure and flexible SSI auto-authentication framework at scale. With Instnt as a digital onboarding solution platform, businesses customize their onboarding steps with checkable options, including biometric verification, document verification, and selfie verification, and then create an encrypted PKI code. By copying and pasting this code into the customer sign-up flow, Instnt enables businesses to leverage portable and decentralized KYC verification processes for their users and offer seamless and frictionless onboarding to convert more good customers.
With Instnt Access™ customers can sign-up and sign-on to any product or service with a single click, without having to go through multiple sign-ups, repeated personal data collection and re-authentication friction.
To learn more about SSI-model for the customer onboarding process, book a demo today.
Sources:Dock.io- Decentralized Identity: The Ultimate Guide 2023
Microsoft - Introduction to Microsoft Entra Verified ID
Instnt - Choosing a Digital Onboarding Solution
TechTarget - Explore self-sovereign identity use cases and benefits