Tulek quickly gathered together our few identifying documents and tied them into a small bundle. My father urged restraint, wait our turn, but Tulek pushed his way through the crowd as close to the door as he could get. Then, with all his might, he threw our papers through the transom. It was a huge risk; everything could have been lost.
Fortunately the bundle landed on the floor near the desk of a person in charge. He picked them up, leafed through them, and, “Who are these people?” he asked. “Let them come through.”
We were called into the room. We were processed as displaced persons.Excerpt from “I Didn’t Tell them Anything” by Aleena Rieger
What do people’s Facebook account, Twitter profile, driver’s license, cell phone number and email address all have in common? Collectively they form a person’s identity and are shared either by the owner or by a third party. For most people to function in society on a daily basis, it is necessary to carry at least one form of an original piece of identification, not a copy, to conduct basic transactions that require proof of identity, including details such as name, address and age. Most commonly, people present a driver’s license.
The need to present a form of identity is required in the most mundane of activities: cashing a check, obtaining tickets at will-call, retrieving medical records and almost any type of travel-related activity such as renting a car, checking in at a hotel and, of course, air travel. Sometimes people must present additional forms of identity including a passport, driver’s license, social security card and birth certificate. These are necessary for almost any type of financial loan and access to credit, as well as obtaining government records.
In many parts of the world, identification documents may not be available to people. According to the World Bank, in 2017, 1.1 billion people across the globe lacked any form of accessible identification materials. This World Bank study notes the negative results from a lack of a valid form of identification: poverty, human trafficking, inaccessibility to health and education, inability to access and obtain the protection of government services, as well as the deprivation of other basic rights.
Blockchain and digital identity
The use of blockchain technology has expanded dramatically during the past several years. Blockchain is a form of distributed ledger technology and is the underlying technology platform that was introduced about 10 years ago alongside the advent of bitcoin, the first cryptocurrency.
It has since expanded into an underlying technology platform for more than a thousand cryptocurrencies. Essentially, blockchain provides a ledger enabling the storage and transfer of information from a variety of sources. It has been compared to workflow systems, however in blockchain technology the parties do not necessarily have all the same access controls in the system and they may have limited views as to what they need.
This allows for “untrusted” parties to utilize the same technology platform enabling them access to shared data points.
The data on a blockchain platform is not stored on one server, but on a distributed set of servers that can span geographically (thus the name DLT). These servers are computers, called “nodes,” and they do not all have access to the actual data that is stored on the blockchain unless such node is granted permission to see the data. Private information can be stored and transferred securely on the blockchain, viewed only by the intended recipient, because the technology includes cryptography.
This is a method of encrypting and decrypting data through complex mathematical algorithms. In blockchain technology, the cryptography that is used turns the data into a unique string of texts, known as hashes, so that the data is not exposed to be read by unintended recipients.
Blockchain technology, however, is utilized as much more than just the underlying platform of cryptocurrencies. It is a nascent technology that is being tested across a multitude of industries, primarily for sharing information and data among unrelated (and untrusted) parties in a supply chain. Such information sharing can include many things such the properties that constitute identity and a variety of data points about individuals. Collectively these data points form a digital identity.
A digital identity is essentially a collection of data points about an individual stored on a computer-based platform. A digital identity can be created by external platforms that collect data attributes to comprise the identity. For the most part, there is not one single owner of digital identities; pieces of such identities are collected in many places. For example, Facebook has social identities, credit agencies own attributes about creditworthiness and so on. The attributes of digital identities can also be collected by the individual owning such data attributes, in what is called self-sovereign identity. The creation and implementation of a digital identity system alleviates many inconveniences associated with the current norm of presenting paper identification documents.
Digital identity subset: sovereign identity
One type of digital identity is called self-sovereign identity, in which individuals or businesses have control over how their own data is disseminated. Owners of such data store and utilize the personal data and accounts on their own devices and provide such data upon request for validation.
A benefit of SSI is that the owner of the data has control of his or her identification attributes. Management and control of such data is not dependent upon a third-party depository, including a centralized database or authority such as Google or Facebook, who collects such identity data points for their business advantage.
In SSI, the identity owner can pick and choose who sees what: providing the government access to a driver’s license number, contacts to a social media account and doctors to specific medical information. Because identification attributes are distributed to other parties only with the owner’s permission, SSI is considered to empower the identity owner.
Essentially, SSI works as follows: identification data is first stored on individual devices in a machine-readable manner. With that data, an individual can request digitally signed attestations of important identification documents from authorities, such as the Department of Motor Vehicles. If the request is approved, the applicable authority executes electronic versions of the documents and provides the verifications to the individual. After receiving these authorized electronic files, the individual controls access to the digital identification documents and can share vital identification information when requested.
SSI permits an individual to have full control over with whom, what and when their personal data is shared. No single organization can improperly monetize individual information or otherwise share personal information without the individual’s express permission or authorization. Thus, for example, if SSI is implemented in the healthcare industry, individuals would own their own medical records and history.
SSI does, of course, have some downsides. These include the fact that individuals have more responsibility for security of their own identity. In a world in which individuals must remember hundreds of passwords, SSI requires increased tracking of computer applications, passwords, biometrics and the like. Further, the potential for fraud is not fully eliminated, such as where the underlying proof of data point is fake, such as a fake birth certificate.
Lastly, while blockchain technology helps in cyber security, there can still be weak access points, particularly where the technology is not properly built or adequately tested for weaknesses.
Adoption identity platforms
Digital platforms are not all SSI platforms. Many are built to enable enhancements within very specific industries and with targeted purposes. Such advancements in digital identity platforms are evolving most rapidly in medical and healthcare, consumer products and financial services. Globally there are also a number of digital identity platforms enabling electronic voting for both public and private purposes.
It is not uncommon today to have to complete pages of paperwork every time a person sees a different doctor, submits insurance paperwork, obtains a new prescription and other healthcare related benefits. The advantages of using digital identity are therefore obvious in the healthcare industry – not just for the patient, but also for the provider. Imagine a world in which the patient had his or her identity that could be one quick scan upon each new doctor’s visit? The benefits of digital identity systems for the provider are equally as powerful, including efficiency for patient management and treatment, health insurance and benefits, credentialing of medical professionals, data collection for planning and research, pharmaceutical records, as well as tracking information in a variety of systems for both accuracy and permanency.
Consumers want speed and convenience when shopping online, but they also want solid security. Merchants want to ensure that all consumer information is recorded in a secure manner for many reasons, but especially to avoid negative financial and publicity implications of a security breach of consumer information. Thus, it is clear that digital identity could enhance retail shopping for both the consumer and the merchants involved.
Digital identity measures are being used by financial institutions in their risk prevention measures related to Anti-Money Laundering and Know Your Customer. The technology allows institutions to enhance their compliance processes and create more effective and transparent due diligence research in their AML and KYC efforts. This is done through several different means of identity and document verification that can be completed and assessed collectively and simultaneously. Furthermore, data gathered by institutions can be shared with risk officers and regulatory bodies almost instantly, improving the process of identity management from both sides.
Finally, blockchain technology can be used to verify identity and specific identification information to make the process of casting votes electronically easier, in both the public and private sector. One company, Votem, uses the technology to authenticate the identity of voters, provide for an audit trail of votes cast, and make the voting experience for the user convenient, fast and secure.
“One of the most important factors in voting is knowing that the voter is qualified to vote and that they are who they say they are,” Votem CEO Peter Martin said. “This is not an easy problem to solve for any type of remote voting including absentee and mail-in ballots. We are working hard on processes and technology to make voter identity almost as accurate as in-person voting, but in many cases our technical capabilities using biometrics (finger scan, facial recognition) outpaces the legislation and what is legally allowed.”
Digital identity and mortgage lending
In the mortgage process, digital identity platforms could be used early in the process, starting with the initial borrower paperwork for a loan origination and credit verification. Digital identity platforms can be utilized for verifications along the entire process leading up to and including the closing and the platforms could eventually completely replace the need for notarization on loan documents.
The platforms could extend to have the identity attributes that may be needed in servicing a loan or in the loan’s trade to the secondary market. Looking at the greater housing ecosystem, digital identity platforms can extend to the process prior to loan origination, including the consumer’s search for houses.
Not unlike other industries, including voting as noted above, the concept of using digital identity in the mortgage process cannot be achieved for the entire mortgage lifecycle until there are regulatory changes to include the acceptance of electronic documents and closings in all states. This includes electronic notarizations. That being said, the entire concept of a notary is not needed with implementation of digital identity platforms because it is intrinsic to the technology.
Cost and inefficiencies in the mortgage lending processes will be greatly reduced with the implementation of digital identity and the overall enablement of a complete digital mortgage. For example, there will be no need for any printing, mailing or faxing loan documents between parties. Closings will not have to occur in person and notaries will not be necessary.
The entire process will not only be more efficient for the borrower/home purchaser, it will be what is expected in today’s digital society where all transactions have become seamless on-line user experiences.
With the implementation of blockchain technology to enable a complete digital mortgage process, including verification of digital identity related to borrower information, the time and costs associated with mortgage origination and servicing could be greatly reduced.
“Digital transformation continues its march in digitizing the mortgage experience,” Finicity Co-founder Nick Thomas said. “One of the next areas to be impacted is identity and verifiable data.” Today, lenders rely on third parties who maintain consumer records to verify identity and data of a potential borrower.
“As we go forward, that data will be pre-verified when provided to the consumer and that verification will be maintained until revoked by the issuer,” Thomas said. “All with the permission of the consumer. These processes, called verifiable credentials and decentralized identifiers, will dramatically simplify and speed up the process.”
Eilon Shalev, founder of Elphi, a technology company utilizing blockchain to streamline the mortgage lifecycle, notes that the critical factor with regard to identity within the boundaries of mortgage is data integrity.
“When all stakeholders are using the same ledger, or several ledgers with seamless interoperability capabilities, borrowers will have their financial information stored in one place, and they will push specific data fields to potential creditor(s); this data will populate the necessary datasets that said creditor(s) need for the specific loan type approval,” Shalev said.
He further notes that by doing this, data integrity is solved on three levels:
There is no error as with manual inputs
Data verification will be intrinsic to the process
The entire transactional history will be time-stamped, recorded, and synchronized among all relevant parties.
While the concept of digital identity is emerging and not yet mainstream, there is no question it will enhance the mortgage lending supply chain. Similar to other industries like healthcare, in the mortgage lending ecosystem, the consumer credentials are a vital part of the process.
Despite the fact that mortgage technology development does not move at lightning speed, it is without question that the innovators in the industry will recognize that moving to implement a digital identify platform will put them front and center ahead of their competitors.
While the concept of digital identity being used in mortgage lending is extremely new and not yet mainstream, there are many emerging platforms that allow the integration of digital identity systems to enhance processes across other industries. The companies behind these identity management protocols promote the benefits of digital identity, including operational efficiencies and consumer satisfaction. The following are just a sampling of such companies:
Mastercard and Microsoft announced in December 2018 that they were collaborating to develop a digital identity platform. The announcement touted that they want to, “unlock new and enhanced experiences for people as they interact with businesses, services providers and their community online,” including financial services, commerce, government services and digital services.
A leading company in blockchain development, ConsenSys, announced in September 2019 that it is partnering with Onfido and PwC to further develop uPort, its identity management platform, in the financial sector. These companies state that they want to improve the customer process and reduce compliance costs.
Civic is a company that focuses on digital identity using blockchain technology. The Civic platform enables the storage of individual identification information – including legal names, birth dates, e-mail addresses, social security numbers and phone numbers – in one central location. Individuals can control the access to and sharing of this information when visiting different websites. When integrated into other businesses, the Civic platform enables such businesses to verify identity documents and to satisfy their necessary KYC requirements by validating consumer information.
Sovrin is a SSI platform from a non-profit foundation that touts an open source code so that individuals can manage their own identity. It stores personal data and credentials that are stored in digital devices, or computer applications called wallets.
Social Good has been working to develop a mobile application for the homeless population in New York called Fummi. The company has noted that the goal of this application would be to allow the homeless in New York City to, “manage their digital identity, access shelters and food pantries and make use of financial services.”
Lastly, the United Nations Office of Drugs and Crime has been working to develop a digital documentation system which would provide refugees and other currently undocumented individuals with some control over their identification without being reliant on a government to provide them with this information.
Having to keep track of personal identification documents and carrying identification cards to verify personal details is inefficient, inconvenient and simply not necessary given the digital age in which we live. The use of blockchain technology to enable digital identity platforms will allow for operational efficiencies and enhance consumer experiences. It will not be long before digital identity platforms are integrated into many industries, streamlining processes and, in some cases, enabling consumers to have more control over their own data. The mortgage ecosystem can be greatly enhanced by integrating digital identity standards into the current process.