The concept of self-sovereign identities are not new in the physical world - most homes have a drawer or cabinet that contains passports, birth certificates and other important documents. With the rise of blockchain, consumers now have the opportunity to create a more secure, and digital, form of these drawers and cabinets.
With the hype around blockchain reaching fever pitch, it’s easy to dismiss the idea of blockchain-backed self-sovereign identity management as a concept largely aimed at benefiting consumers. In reality, it offers financial institutions significant benefits.
Eliminating trust issues
Winning consumers’ trust with their sensitive personal data is going to be an uphill battle for most institutions - particularly as the memory of data breaches like Equifax will be slow to fade.
Putting consumers in charge of their own data means that they get all the control - but also assume all the risk. They choose what to share, with whom, and when. Institutions they transact with only gain access to the data when the consumers grant it to them - and once the data has been used for its intended purpose, the consumer can revoke access.
Rather than divert precious resources towards building that trust with consumers, blockchain-based self-sovereign identity management means that institutions can focus on their core business, while still transacting with consumers.
Removing regulatory and compliance related risk
Freeing institutions up from regulatory and compliance related risks is a significant benefit of blockchain-enabled self-sovereign identity management. Data privacy and security legislation only set to increase, particularly with the upcoming activation of GDPR. Consequently, institutions currently carry a heavy, expensive burden: Gartner forecasts that global security spend, driven largely by concern over hacks and legislation compliance, will reach US$96 billion in 2018.
But when consumers own their data, they retain full control over how and who they share it with. Suddenly, the burden of responsibility for data privacy and security shifts, resting with the individual, not the institution.
Speeding up transaction times
Current accepted practices for identity verification are slow and time-consuming, typically involving sending, receiving, examining and then returning physical documents. And as the world speeds up, the significant delays caused by this process not only grate on those involved with them - they’re also slowing the pace of financial transactions, with real-world consequences.
In a blockchain-backed self-sovereign identity world, consumers and institutions pick up the pace by sharing data on a digital basis. Secure viewing access to relevant data can be granted to an institution literally in minutes, removing the time lag due to couriers and postal services, and significantly speeding up transaction times.
The new era of open banking doesn’t just benefit consumers - it offers significant advantages for financial institutions as well. The rise of blockchain-backed self-sovereign identity management presents financial institutions with a unique opportunity to shed the considerable burdens of consumer trust and regulatory compliance, while also creating significant time and cost savings.
Indeed, the potential benefits are so significant that we can expect true financial leaders to not only embrace blockchain-backed self-sovereign identity management, but to become its biggest advocates and champions.
About The Author: Jed Grant is founder and CEO of Peer Mountain, a blockchain-based software platform focused on giving individuals secure ownership of their personal data. It’s the world's first peer-to-peer self-sovereign identity, compliance and commerce delivery solution, empowering consumers with ownership of their data and control over who they trust to access it without the need for third party involvement. The company has recently launched from stealth mode developed the platform in conjunction with a major Swiss financial institution.