As digital transaction trends accelerate, financial firms must stay one step ahead to ensure security and prevent fraud. In Latin America the annual cost of cybercrime mounts up to $90 billion USD so it’s no surprise that companies are increasingly supporting digital tools that verify customer identity quickly and efficiently. This is a good sign, as it reflects the priority of several countries to provide identity validation services to public administration and the private sector, while pursuing data protection initiatives.
Imagine traveling, checking into a hotel, accessing government services, healthcare, logging into a digital bank or verifying discounts with just a digital identity. Thanks to artificial intelligence and facial recognition, digital identity is verified in an automated way and generates the highest security ever. In the coming years, physical IDs will be used as backups and will gradually disappear. With digital identity, privacy will increase, fraud will be prevented and the ecosystem of companies that use it will grow, prioritizing the user experience.
The Power of Reusable Digital Identity
The way people prove their identity is migrating massively: from physical to digital, from offline to online, and across a wide range of sectors, from banking to healthcare. It is increasingly relevant and a key factor for organizations to prove that people are who they say they are. As consumers increase their financial transactions, fraudsters are becoming increasingly sophisticated. In recent years, cybercrime (especially fraud) in Latin America has become a big target that financial institutions need to be aware of and therefore strengthen their cybersecurity systems.
Unfortunately, there have been several major cybercrimes in recent years that have exposed security vulnerabilities in Latin America. In fact, in 2021 Brazil scored the 2nd in the global ranking of largest cybercrime-related financial losses. In January that same year, a hacker published the personal data of 10,000 American Express customers based in Mexico. The publication included credit card numbers, full names and addresses of these customers. In September 2020, a cyberattack on the Chilean state-owned bank Banco Estado forced the temporary closure of more than 400 of its branches. These are just some of the examples. Plus, as a consequence of the pandemic, there is a trend towards distrust. Security has become a must-have, as it is believed that cybercriminals will continue to innovate and take advantage of new opportunities.
A digital identity is a reusable electronic proof of identity issued by a trusted authority with a known level of security. A digital identity is much more secure and difficult to forge, as it allows consumers to share the exact information they need without having to provide information that compromises their security. This bestows users full control of their privacy. For example, you may not want a supplier to have access to your driver’s license number, address or other personal information such as height and weight. Furthermore, a digital identity can be stored in a digital wallet and used for a variety of use cases in different industries. As it is cryptographically protected, only the necessary data required by the supplier is allowed to be disclosed.
It is important to clarify that digital identity is much more than an ID. It includes a verified identity, biometric data that proves identity, as well as data from social networks, KYC providers, bank statements and more. Hence, companies are riding the digital identity wave to prevent fraud crimes. According to a survey conducted by Jumio, 80% of consumers worldwide prefer digital identity verification measures when choosing brands online. Soon everyone will be able to access government and health services, easily check into a hotel or travel without having to present an identity document at the counter. Robust identity verification is a strong incentive when using online services, especially in an emerging sector such as Mexico. 92% of consumers surveyed say Mexico is a country that values the need for digital identity to manage their personal information securely. However, when this online process becomes too complicated, 43% of Mexican adults abandon it.
The research also revealed that Mexican consumers believe that the financial services industry is the most important industry for using digital identity (69%), followed by social media (52%). In turn, among those Mexicans who have scheduled the most virtual health care appointments since the start of the pandemic, 41% believe it is important to use digital identity to verify that the user is who they say they are before accessing services.
In the near future the user will be able to use the same digital identity for any of the entities that are uploaded to the reusable identity ecosystem without requiring a separate verification process with different levels of KYC and AML from various merchants. This is why digital identity is so exciting, since it solves a central issue: the current model is inefficient and does not provide control over what data to share.
The Future of Digital Identity, featuring Gordon Harrison of Jumio
A Frictionless User Experience
Currently, Jumio is building its own ecosystem in Latin America and worldwide to provide security to entities and offer a positive user experience. As additional entities join the ecosystem, digital identity will become more widespread and the user will feel increasingly secure. Through its KYX Platform, Jumio provides an API with a single integration point and a single risk score that streamlines validating identity for different products. In this way, the user experience will be more pleasant, without friction or complicated checkout processes.
Instead of taking ID photos to prove a person’s identity, the digital identity will simply be shared. You will verify who you are only once, and then be able to reuse that digital identity whenever you want. Efficiency will be much greater. since the identity will be stored in a wallet without needing to take a photo of the ID every time the user wants to open an online account. In addition, it avoids the risk of rejection from a low-light photo or a low-quality camera.
Just as the trend indicates that people are looking for security in their identification process and companies are on the way to integrating reusable digital identity into their products, the future of digital identity is also on the way to integrating financial technology into their services in order to mitigate fraud and provide security to users. This is relevant to digital identities given that all of these financial products will need the best technology to authenticate users in a safe and secure manner.
From the users’ point of view, embedded finance not only brings added value but also facilitates the possibility of resolving everything in one place. Put simply, embedded finance is the placing of a financial product in a nonfinancial customer experience, journey, or platform. Thus, from a single platform, it is possible to make a payment, access a loan, make an investment or buy insurance. Nowadays thanks to the digitization of commerce and business management, new opportunities to embed finance in nonfinancial customer experiences have massively expanded.
This concept is increasingly recurrent in Latin America. Rappi, for example, is a delivery company that incorporated Rappi Pay in order to offer payment methods to its customers, integrating and verifying the user’s identity on the same platform, without the need to enter payment card data manually. Like Rappi, large platforms such as Uber, Didi and Amazon offer a comprehensive service to meet the needs of their customers. By having large communities with extensive knowledge about their users, they seek to offer embedded finance to minimize transaction frictions and so users can perceive an experience as a homogeneous one, generating trust.
Digital Identity: An Exploding Market
Although it will take some time to install digital identity in all markets, this is the trend with more traditional IDs being replaced. Like Bank ID and Mastercard, there are many companies using digital identity, and it is expected that within five years larger private companies will be incorporating this for their consumers, as it will become a fundamental requirement of any identity and access management (IAM) strategy. As this evolves, enterprises will have no choice but to integrate. By 2027, the reusable digital identity market is expected to reach USD 266.5 million, at a CAGR of 68.9%.
Jumio, the leader in online identity verification, makes the Internet a safer place for users and businesses to both validate identity and prevent fraud. With the help of artificial intelligence, it identifies patterns and performs security checks, without adding too much friction to the user experience. As Samer Atassi, Jumio’s vice president for Latin America states, “this way we lower friction, improve the user experience, lower fraud and build an ecosystem that is much easier for everyone to manage”. Jumio has processed over 1 billion transactions and is well positioned to become a leader in digital identity.
Adapt or Be Left Behind
In an increasingly interconnected world, those entities that listen to their users and seek solutions to facilitate their experience are the ones that will be able to make a difference and stand out from the rest. Those who do not act quickly will be left behind by new business and customers.
In a post-pandemic world with more and more data violations, reusable digital identities are the future of identity proofing, with end-to-end propositions that make people’s lives easier. For this, it is essential to have technology allies like Jumio promoting interoperability to ensure that users have a seamless customer experience and can use their identity everywhere, sharing the information they want, whenever they want.