Six ways self-sovereign identity is transforming financial services

“Get involved!” was the resounding message panelists had for the audience of Evernym’s latest monthly webinar, an event that brought together a panel of notable experts to discuss what self-sovereign identity (SSI) means for the finance industry (view the recording here). Over 250 professionals signed up to learn about how self-sovereign identity will affect the future of financial services from some of the foremost experts bringing this technology to life. 

Hosted by Evernym’s VP of Delivery Andy Tobin, the panel featured Jo Spencer (SSI Champion at 460degrees), Julie Esser (Chief Experience Officer at CULedger (now Bonifii), and Mike Brown (Director of Product Innovation at ATB Financial). 

Jo Spencer, Julie Esser, and Mike Brown shared their thoughts on what self-sovereign identity means for financial services

The panelists raised a number of interesting points with regard to the development of self-sovereign identity and its application in the financial sector.

Here are our top five takeaways:

1. Self-sovereign identity improves security while also enhancing customer experience

There has been a long-held maxim in the world of cybersecurity that says a user’s experience can be secure or convenient… but never both.

Security can be statistically “good enough,” but it can never be absolute. And typically, the more secure your systems, the more work the customer has to do to prove their identity and interact with your business.

Consider using a password manager. Getting a password manager may be convenient for a customer with a lot of passwords to manage, but by taking the extra steps of using a complex password, enabling multi-factor authentication, and satisfying those requirements every time you enter a password, the enhanced security basically renders any convenience as null and void.

Self-sovereign identity is a unique technology in that it can actually improve both convenience and security at the same time. During the webinar, ATB Financial’s Director of Product Innovation, Mike Brown, described how ATB has been able to dramatically reduce onboarding times in a pilot test conducted at one of their branches:

“If you walked into a branch you would take about 45 minutes to open an account. Last year we rolled out an in-branch, but digital onboarding experience with a tablet-based program that our employees would use with customers…we’ve got that down to about five minutes or four or five minutes for customer onboarding. Now, with digital credentials, we’re actually looking to get that down to sub-one minute.” – Mike Brown, ATB Financial

In addition to making customer onboarding extremely fast, self-sovereign identity enables consumers to retain greater control over their personal information by giving them the ability to share only the information they choose to share, rather than all of the information on their ID and personal documents. If people open accounts under false pretenses using credentials obtained from bad actors or using fraudulent information, the bank can revoke access to their system the minute they learn about the activity.

2. Self-sovereign identity is among the first applications of blockchain and distributed ledger technology to reach production

As a recent report from Gartner on “Common Mistakes in Enterprise Blockchain Projects” explains, “Given how blockchain is talked about, IT leaders might think the currently available foundational-level technology is essentially a complete application solution. But realistically, blockchain has a lot of evolving to do until it’s ready to fulfill all the potential technologies.” While many applications of blockchain and distributed ledger technology struggle to find their footing, those working on self-sovereign identity have developed a robust foundation of standardized protocols and enterprise-level consortia ready to facilitate its adoption.

CULedger, a Denver-based company providing self-sovereign identity capabilities for credit unions, recently celebrated the launch of its first production credential. CULedger’s Chief Experience Officer, Julie Esser, explained:

“We’re starting with decentralized identity because every interaction that credit union has starts with identifying who they are. We introduced a product called MemberPass, and it will provide the most safe and secure and private way for credit unions to engage them with their members.” – Julie Esser, CULedger

Julie went on to describe how CULedger’s first production credential was issued to a California-based credit union’s call center for high-risk transactions. Members initiating high-risk transactions or who may be suspected of fraudulent activity typically require an average of 40-80 seconds depending on the type of risk involved. Introducing MemberPass enabled the credit union UNIFY to reduce the time required to authenticate members to less than 10 seconds. Julie cited estimates that “for a credit union that has about 40,000 calls a month, that could mean five full-time equivalents (FTEs) that could be redeployed some other way inside the credit unions.”

While many of the applications and proofs-of-concept that leverage blockchain remain stuck in research and development phases, it’s exciting to see examples of self-sovereign identity hitting the market and making a difference.

3. Instead of suffering from regulatory uncertainty, self-sovereign identity helps enhance regulatory compliance

Many of the companies working on financial applications of distributed ledger technology have had to deal with regulatory uncertainty as lawmakers and regulators debate how to deal with blockchain and cryptocurrencies. A number of cryptocurrency companies operating in the U.S. have recently been slapped with fines and lawsuits for their failure to comply with financial regulations and blatant attempts at circumventing securities laws in the excitement of the 2017 ICO craze. In response to a question about the impact of regulation on self-sovereign identity, Mike explained, “that question comes up around blockchain, generally around regulatory impacts, but specifically around SSI and in a lot of cases, there can be no regulatory impact with something like an address change credential.” 

Yet, while governments approach crypto with a natural skepticism, they’re increasingly looking to self-sovereign identity as a way to ensure compliance with existing regulation, like KYC, PSD2, and GDPR. Rather than creating a situation where regulators have to figure out whether or not an application falls under the right jurisdiction and how it can be legally defined, creating applications of self-sovereign identity can allow developers to provide built-in compliance while improving existing tools for digital identity.

On the webinar, 460degrees’ SSI & Payments Champion Jo Spencer talked about how his experience bringing systems into compliance with GDPR, and how those dealing with GDPR have discovered how difficult it can be to strip certain forms of data from databases. Integrating self-sovereign identity with existing systems for onboarding and authentication can help businesses comply with this sort of regulations while upgrading their tools for digital identity:

“The important thing is to be able to see who you’re sharing your information with and for what reason. That’s where SSI provides that really good model because you actually create those connections with the consumers of your data and you can actually see what data you shared with them and what for what reason.” – Jo Spencer, 460degrees

Tools created using protocols for self-sovereign identity enable users to choose exactly what types of information they want to share and how to share it. Instead of handing over a physical ID card to someone and allowing them to sort through all of the information it provides to find the important parts, an SSI user can select the required information and make it available at the push of a button. Taking a proactive approach to compliance by giving customers power over their personal information generates trust, which can also enhance businesses’ ability to deliver services that build brand loyalty.

4. Self-sovereign identity and digital credentials provide businesses with a significant competitive advantage

This potential to develop loyalty through superior security offerings, combined with the ability of self-sovereign identity to provide both convenience and security and enhance regulatory compliance with minimal overhaul of existing systems means that self-sovereign identity can offer businesses a number of competitive advantages over legacy systems for digital identity. A bank that can onboard customers in 45 seconds has endless opportunities to compete with one that takes 45 minutes.

As Mike mentioned, digital offerings can significantly reduce the amount of time required for onboarding new customers and nearly every interaction in a business involving a customer, employee, or workflow requires some form of authentication. As the use of digital platforms becomes more prevalent, using digital identity to streamline onboarding and authentication will enable businesses to establish themselves as innovators and move to the head of the pack.

From cost savings associated with the removal of friction from onboarding and authentication processes to the reduction of losses from problems like phishing, fraud, and errors introduced by administrative complexity, self-sovereign identity can provide a competitive advantage from a number of different vectors. Whether a business wants to cut costs, elevate their customer experience, enhance their flexibility in the face of changing regulations, or protect themselves in a world of increasing data insecurity, self-sovereign identity provides the first step to get there.

5. The chicken-egg problem is solved – but don’t count your chickens just yet!

Part of the difficulty involved in scaling self-sovereign identity for international use has been due to a chicken-and-egg problem. Self-sovereign identity is an example of a technology that requires a network effect, which means that the value the technology can provide to users depends on the number of people and organizations using it.

Enabling governments to provide citizens with ID using self-sovereign identity can help streamline the delivery of public services. Sounds good, right? Now imagine that your local bank decides to accept information from that government-issued ID to reduce the amount of time it takes to open a bank account and receive customer support. Even better!

While the interoperability of credentials issued with self-sovereign identity can be a useful feature, trying to figure out how to bring self-sovereign identity to the masses introduces a tricky question: Who should be the first to receive credentials?

As previously mentioned, the successful deployment of applications of self-sovereign identity has happened, in part, thanks to the development of standardized protocols and enterprise-level consortia supporting the development of this new technology. One community has figured out an effective way of dealing with the chicken-and-egg problem: the Alberta Credentials Ecosystem (ACE).

Established by ATB’s Mike Brown, ACE is the world’s first multi-sector digital credential ecosystem. It represents a collaboration between government, academia, and the private sector committed to deploying tools and services using self-sovereign identity in Alberta. On the webinar, Mike described how ACE approaches the implementation of self-sovereign identity:

“What we do within ACE is we identify different consumer use cases and then we pair up organizations so we have one organization who is an issuer for a particular use case and then one organization who’s a verifier or a recipient of that credential. All designed around an average or typical consumer use case.” – Mike Brown, ATB Financial

Today, ACE’s rapidly growing roster includes ATB Financial, the cities of Calgary and Edmonton, the Alberta Blue Cross, Telus, the Northern Alberta Institute of Technology (NAIT), the Southern Alberta Institute of Technology (SAIT), and the University of Calgary.

By developing pilots within a larger use-case-specific framework, members of ACE can study what works and quickly scale the implementation of self-sovereign identity. We may not have answered the question of who–or what–will be the first class of people or organizations to be equipped with credentials made with self-sovereign identity at a mass scale, but we have developed an effective way to tackle the chicken-and-egg problem.

6. And we’re just scratching the surface

We discussed several prominent use cases on the call: Julie shared how SSI is helping credit unions authenticate customers, Mike shared how SSI is enabling banks to onboard their customers faster, and Jo shared how SSI is helping with compliance across GDPR, KYC/AML, PSD2, and other regulations.

Yet, the transformative impacts of self-sovereign identity go far beyond these early use cases. As Jo commented:

“What a bank addresses first depends on the priorities of the bank, but it’s not a one-shot-wonder solution. SSI can continue to be strategically applied to multiple challenges in digital transformation and customer interaction. The extension to new challenges is easily adapted using the same platform (e.g., Sovrin). We have to show how the evolutionary approach can apply to various scenarios.” – Jo Spencer, 460degrees

To use a popular metaphor, self-sovereign identity is like the operating system on your smart phone. Through it, we can develop a whole lot of very clever apps (in this case, authentication, remote onboarding, KYC checks, secure client messaging, etc.), but the underlying technology is not limited to these initial use cases. Over the coming years (or at the pace the industry is growing, the coming months), we’ll see self-sovereign identity and verifiable credentials embedded in almost all of our digital interactions and open up an entirely new set of business models, similar to what we saw with the rise of the Internet.

The Future of SSI

Hopefully, this article helps make it clear why we at Evernym refer to self-sovereign identity as the “killer app” for blockchain. Not only does it have the potential to affect every digital interaction on the planet; it also comes with an opportunity to change the way we think about consent and security in the context of sharing our personal information. Digital platforms will play a critical role in the continuing evolution of financial services, and self-sovereign identity offers an amazing opportunity for businesses ready to set themselves apart.

If you’re interested in learning more about self-sovereign identity, please sign up for our next webinar, An Introduction to Decentralized Identifiers, on Thursday, September 26, or contact us to learn more about our Early Access Program and how you can become a part of the movement to make self-sovereign identity a reality.