Defining the Future of Digital Verification

By Leon Ifayemi, Director of Coalitions and Research

We are excited to share the second post in our ‘Digital Verification in Focus’ mini-series, delving into two more key issues surrounding digital IDs.

It comes as we approach the launch of the latest CFIT coalition’s final blueprint report on fighting economic crime through digital verification. On March 6th, we will announce our findings and recommendations on how UK institutions could implement a digital verification solution, based on months of collaboration with leading finance and tech firms. The announcement will be followed by a showcase event.

The first instalment in this series asked ‘What is Digital Verification?’ and outlined the necessary attributes of a digital company ID to successfully prevent fraud, improve efficiency, reduce compliance costs, and support a secure smart-data economy. In this post, we explore the interaction between individual and digital IDs and the debate around centralised and decentralised digital ID systems.

Bridging the Divide

Digital IDs represent a major step toward a society where individuals and organisations can trust each other online. The concept is gaining traction, but we remain a long way from a future where digital IDs enjoy widespread acceptance and adoption amongst both individuals and organisations.

To date, although progress has been made in personal digital IDs (a digital passport for individuals), the UK is yet to apply this to businesses. This has been the focus of CFIT’s coalition.

In the UK, the Data (Use & Access) Bill, currently progressing through Parliament, is set to establish the statutory framework for personal digital verification. Over 50 pre-certified personal digital identity providers are awaiting finalisation of the bill, which will enable the government’s plan to integrate digital identity products into processes such as age verification for buying alcohol through to property purchases.

This sequencing, with digital personal IDs coming first, is entirely logical. Verifiable, personal digital identities are a foundation on which a ?digital company ID can then be built

Simply put, the foundation of a strong digital company ID is the counterparties being empowered to verify the company’s purported representatives are the people they claim to be. We need the systems and processes in place that verify the identity of directors, shareholders and other individuals acting on behalf of a company.

Once the business attributes and related individuals of the business have been verified by the Digital Company ID provider, it can issue time-stamped digital certificates, like verification badges, to the business and its representatives.

(De-)Centralisation

?A key early discussion in developing our Blueprint was the binary choice of whether to design a centralised or decentralised digital verification system.

Leveraging blockchain technology, decentralised ID systems enable self-sovereign identity (SSI) and are designed to give individuals control over their personal information. An example of this is the QuarkID, developed by the Government of the City of Buenos Aires, which has pioneered in the field. Aiming to enhance digital interactions, this decentralised architecture allows users to securely exchange identity attestations, such as ID cards or driver's licenses, at scale, without the need for intermediaries. By contrast, a centralised digital ID architecture contains and manages all elements of an individual’s or organisation’s digital identity. This could be a digital driving license issued by a government, for instance.

Such an approach offers streamlined access and control for an administrative power, but may raise concerns about privacy, data breaches, and single points of failure.

Ultimately, by centralising responsibility, this architecture can drive coordinated efforts to address systemic challenges, promote interoperability and alignment across use cases, and accelerate the adoption of this transformative solution – crucial attributes, especially as the technology matures.

The roadmap set out in the blueprint report published next month is the product of comprehensive research conducted by our coalition partners and hours of discussions just like these.

What’s Next?

CFIT’s work on digital verification is just the beginning. Our blueprint report, launching on March 6th, will define the changing face of fraud in the UK, and how to combat it with a digital company ID – watch this space.

?