Today, even the tiniest business processes are being digitized. This allows companies and public authorities to quickly and cost-efficiently serve their customers and citizens. A new white paper shows that in a world where online data about individuals is abundant, using social media to identify yourself seems to be the next logical step.
“What we’re witnessing now is the slow death of the traditional identity verification methods that we have been used to for many years. But as traditional analogue methods are slow and the new digital ones are fast, it was bound to happen at some point. Thanks to the widespread use of social media that time is now,” says Rasmus Groth, CEO and founder of London-based Veridu. The startup brings trust to the Internet by scoring how trustworthy one’s digital footprint is and sharing that information — with the user’s consent — with, for example, FinTech or alternative finance companies. Veridu recently secured funding from Worldpay and is expected to reach a valuation of £20-25 million during 2017.
“Being based in London, Europe’s undisputed FinTech hub, we constantly come across nimble new players struggling to implement regulatory compliance programmes that were just not developed with the digital age in mind,” says Rasmus Groth and continues:
“The result can be a disjointed and completely unsatisfactory customer experience, as users are taken out of the digital realm in order to share physical documents to prove their identity in compliance with Know your Customer regulation.”
Identity in the digital age
Since Know Your Customer (KYC) regulation in its present form was introduced in the wake of 9/11, the world has moved online. We all have some form of digital footprint based on our social media and online activity, and FinTech firms are well placed to embrace this wealth of identification data for compliance purposes.
“The amount of personal data that is available online now is truly astonishing,” states Peter Howitt, Director of Ramparts, a European law firm based in Gibraltar and adds:
“Subject to compliance with data protection requirements, it seems that use of electronic data and verification is the next wave of FinTech ready for disruption. So called ‘RegTech’ is a fascinating area where new ways of doing business online can be married to new ways of managing risk and compliance obligations, relying upon electronic verification and the use of new technologies, like cryptocurrencies. Thankfully regulators are waking up to the potential value of social identity verification and KYC as a means to meet social inclusion and cross-border business requirements, whilst also better managing anti-money laundering and terrorist financing risks.”
“Imagine what it would mean to the world economy if a billion more people from the emerging markets could access alternative finance solutions, or shop from online shops all over the world. We all have an interest in including these people and we can do so using digital solutions that are available today. Social KYC, especially, is the obvious choice at this moment in time,” says Rasmus Groth.
Social KYC is a new way of identifying people based on the details and depth of their social media profiles and the footprint that everyone leaves behind when using their social media profiles online. It’s a method that most of us are already using today without even thinking about it. If you’re signing up to a new service today, often you’ll be presented by the choice of logging in with your Facebook account instead. Social KYC is an extension of this as the user is merely asked to sign in to a variety of online accounts to prove their identity.
Another challenge of traditional identity checks is that they often require a person at the other end to do a manual check of the documents. Besides being slow it’s also substantially more expensive.
“It’s very likely that in 10 years from now, people simply can’t understand why we kept hanging on to passports and driver’s licenses as being reliable documents to prove our identity. They can be faked quite easy if you know the right people. When it comes to faking social media profiles it’s a lot harder. Yes, you can fake an online profile, but you can’t fake a whole life online. That is exactly what Social KYC is built upon,” says Rasmus Groth.
The white paper “Stop losing customers to KYC” can be download here: