While the world shouts loudly about Web 3.0, a quieter conversation is happening about digital identity 3.0.
The first evolution of Digital Identities came when passing from a centralised, password-based identity that would only work with one company, to a decentralised way of verifying identities, allowing users to sign up using existing social accounts such as Google or Facebook.
Now we’re in the heat of the third revolution. Digital identity 3.0 makes use of biometric data to verify user’s identities and is mostly consumer-centric.
As many in the Open Banking space know, the first layer of the India Stack is an excellent example of an avant-garde digital identity program. The India Stack consists of three layers: Identity verification, Interoperable Payments and Consent-based data sharing.
The first layer is based on Aadhaar, an identification system launched in 2010 by the Unique Identification Authority of India (UIDAI), which acts as custodian for all the information collected. Citizens can apply for an identification number that’s based on their biometric information such as fingerprints, iris scans, and other data. This has since then extended to the banking sector to facilitate authentication.
The European Union also announced that they would be moving towards digital identities, using a digital identity wallet to verify users online and offline. This would hopefully result in a unified digital identity that can be used across various disconnected services without the need for a central repository.
In addition, with blockchain comes a certain degree of anonymity, and thus a need for more sophisticated identity verification methods. To address this, OBP and our partner API3 have already developed dAuth, a decentralised authentication mechanism that successfully pins an on-chain actor to an off-chain legal entity (or a representative of that entity).
The gap between digital and physical identities is growing ever narrower.
In 2022, we’ll see different evolutions of auth and digital identities come into being and consolidate to find their place in the financial services industry. While banks in some countries may be either limited or enabled by regulation, it makes sense to get ahead of the curve and start thinking about how identity verification will be changing in the next few years.