In today's fast-paced digital landscape, one persistent challenge for both individuals and organizations is the friction and costs associated with Know Your Customer (KYC) processes and frequent re-verifications. As we use more online platforms, services, and products, the need to repeatedly prove our identities with physical documents has become cumbersome, time-consuming, and costly. These problems affect organizations' operational efficiency and customers' user experience.
Fortunately, reusable identity provides a groundbreaking solution. In this article, we’ll dive into how reusable identity can reduce verification friction, costs, and provide benefits for everyone involved in a digital ID ecosystem. Say goodbye to the old hassles and embrace a future of seamless and secure identity verification.
Dock has customers in diverse industries using our reusable identity platform which gives us valuable insight into how leading organizations are using digital identity to streamline business processes.
What Is a Reusable Identity?
A reusable identity is a secure and portable representation of an individual's or entity's verified information that can be used across multiple online services and platforms. So instead of repeatedly going through identity verification for each online service that requires it, users can simply use a single, verified reusable identity across multiple platforms. This will greatly improve the user experience, reduce the verification costs for identity verification companies (or IDV vendor), and can help increase customer onboarding rates.
Generally, a user would just have to go through the traditional verification process once with an IDV vendor where they check a legal piece of ID, a selfie picture, and other information. Once the verification process is finished, the IDV vendor would issue a reusable identity credential that a user can keep on their digital wallet app on their phone and use it to sign up for other platforms and services.
Verify once, reuse everywhere.
Reusable Digital Identity System
In a reusable identity system, there are three main parties:
- Holder: The individual or entity that owns and manages the digital credential, representing their identity or details (e.g. age, height, or name), which they can present when required.
- Issuer: Trusted entity that creates and provides the digital credential to an individual or organization, confirming that specific claims about the holder are valid.
- Verifier: An entity that requests to verify the digital credential and then checks its authenticity and the legitimacy of the claims made within it. The verifier ensures that it was indeed provided by a trusted issuer like a bank or IDV vendor the entity has a relationship with.
Problems With Traditional Identity Verification Processes
Currently, people have to repeatedly take out their physical identity cards such as their driver’s license or passport whenever they sign up for a new platform that requires a KYC (Know-Your-Customer) or AML (Anti-Money Laundering) check. With a reusable identity, users can simply present their digital credentials without needing to pull out their physical credentials at all and get onboarded faster.
Identity verification companies (IDV vendors) incur more costs whenever they have to reverify the same end customer interacting with different organizations in their client base such as an online trading platform, travel company, and bank. But a pre-verified reusable identity can significantly reduce unnecessary re-verification costs.
Reusable Identity as a Verifiable Credential
A reusable identity can be issued as a verifiable credential and be stored on someone’s individual device like a digital ID Wallet. A verifiable credential is like a digital ID card. Just as your physical driver's license or school ID proves something about you such as your ability to drive or your student status, a verifiable credential does the same thing online. The difference is that it's in a secure and fraud-resistant digital format. Others can instantly check its authenticity without needing to call the issuer.
Benefits of a Reusable Identity as a Verifiable Credential
- Secure, tamper-proof digital credential
- Instantly verifiable without needing to contact the issuer
- Advanced privacy features that enable users to prove information about themselves without revealing the information itself (Zero-Knowledge Proof) or only sending the necessary information (selective disclosure)
- Decentralized data architecture that makes it easier to scale the system at lower costs
- Compliant with international verifiable credential standards set by W3C, an international community that develops standards and guidelines to help everyone build a web based on the principles of accessibility, internationalization, privacy and security.
Growing Demand for Reusable Identity
With the global growth in digital identity initiatives in both the government and private sector, the demand for privacy-preserving digital credentials and identity verification will continue to grow. A reusable identity offers a solution that provides tremendous benefits for individuals, companies, governments, and IDV vendors.
A report from the digital identity advisory firm Liminal claims the ‘reusable’ identity market may grow from $32.8 billion in 2022 to $266.5 billion by 2027 at a compound annual growth rate (CAGR) of 68.9%.
Reusable Identity Use Case Examples
Here are some examples of reusable identity in practice:
1) Faster Financial Services Onboarding
The implementation of reusable identity can significantly streamline the onboarding process. Traditionally, signing up for financial services like opening a new bank account or applying for a loan has been a tedious, paperwork-intensive process. Customers often need to show physical identity documents which is a cumbersome, time-consuming process.
This complexity is one of the main reasons for high drop-off rates during onboarding. In a ABBYY State of Intelligent Automation Report studying various industries, the banking sector experiences the highest customer abandon rate during the onboarding process at almost 1 in 4 dropping out.
But with a reusable identity, people can get verified much faster, securely, and efficiently with their verified digital credentials. This enhanced customer experience can boost customer conversion rates.
2) E-Government Services
Governments can offer a range of e-services, such as tax filing, permit applications, and voting, that leverage reusable identities. Citizens can use their verified digital identities to securely access and interact with government services online.
With a reusable identity, instead of submitting and verifying their personal information every time they interact with a different government service, citizens can use their pre-verified digital identity. This not only simplifies and speeds up the process for the users but also streamlines government operations, reduces paperwork, and enhances overall convenience and efficiency for both the government and its citizens.
2) Age Verification for Online Services
Reusable identities can be used to verify a user's age for age-restricted online services, such as purchasing alcohol or accessing adult content. Users can share their age verification status without disclosing other personal information, enhancing privacy while complying with legal requirements.
3) Mobile Driver's Licenses (mDL)
Several US states and countries are now adopting mobile driver's licenses, where citizens can display their driver's license information securely on their smartphones. The mDL can also be used as a form of identity verification for going through airport security, or checking in hotels. With a mobile driver's license, there's no need to carry a physical card, and users can choose to share only specific parts of their information, which enhances privacy.
Check out our Identi3 podcast episode where our CEO Nick Lambert speaks with Carolyn Manis Sorensen and David Kelts who were both deeply involved in rolling out digital mobile Driver's Licenses (mDLs) in the United States.
Problems With Conventional Forms of Physical Identity Verification
While conventional forms of identity verification have served us in the initial phases of our online evolution, they have a few ongoing challenges that can make online interactions cumbersome, less secure, and even invasive.
- It’s a frustrating process to always pull out their physical identity documents like their driver’s license or passport whenever they want to sign up for a new service or product online.
- Many people don’t feel comfortable giving unnecessary data and are nervous about who will access the data. In a Liminal Industry Report, 88% of consumers acknowledge that the security of their data is the most important factor during the onboarding process. But the current onboarding process makes personal data vulnerable to breaches every time a user creates a new account.
- A high number of users drop-off during the identity verification process because of friction in the process. 74% of potential customers will switch to other solutions if the onboarding process is complicated.
- They have to provide verification support for customers which can delay the sign up process because it is usually an IDV vendor that takes care of this process.
- Data compliance is becoming more challenging, expensive, and complex if they have to store and manage sensitive user data, which creates risk.
- Even though they may want to, companies are hesitant to implement identity verification due to its inherent complexity, friction and cost.
- They incur more costs whenever they re-verify every piece of information about the same end customer of their clients (e.g. banks, travel companies, e-commerce platforms, and healthcare providers). The same IDV vendor is often used by several companies that one customer wants to do business with. This is even worse when manual processing of verifications is required.
- Governments around the world are increasingly providing first-party digital IDs, which will eliminate the need for physical document verification. IDV vendors that rely solely on physical ID verification risk being left behind.
- Have to provide verification support for both their client and the end customer because they don’t have a direct relationship with the end customer that has trouble during the verification process. They have to work through their client to make sure that the end customer gets onboarded.
As our online activities expand, so does the need for more secure, efficient, and user-centric identity solutions.
Current Sign Up Process With Traditional Digital Identity Verification Systems
This is the common, tedious, and frustrating process people go through whenever they sign up for a new platform that requires ID verification. In this example, Janice does most of her business online and each time an organization needs to verify her legal identity, she has to pull out her physical driving license and take a selfie to make sure that it matches the document.
Here are the main parties involved in these types of transactions:
- Holder: Janice is the end-customer
- Issuer: IDV vendor that verifies the physical documents and selfies
- Verifiers: IDV’s bank client that Janice wants to do business with and the rental car company
- Janice just moved to a new city and wants to open a new bank account and the bank needs to verify that she says who she says she is for KYC (Know Your Customer) and AML (Anti-Money Laundering) checks.
- Janice needs to pull out her physical driving license and take a selfie. The check may or may not pass and there could be more manual processes involved.
- The bank requests their third-party IDV vendor to check her identity. Janice has actually been verified twice with two of their other clients that she does business with, but now the IDV vendor has to incur costs of reverifying Janice's identity again based on the same documents as she provided before.
- She doesn’t have a car yet, so she goes to a car rental store that’s recommended by the bank. The bank and the store have a partnership where bank customers get a discount.
- The rental car shop needs to verify her ID to make sure she is licensed to drive and identity. So she pulls out her physical license again.
- The following week, she wants to apply for a loan at the same bank in order to buy supplies for her new business. She goes on the site and in addition to filling out the forms, she has to verify her identity again. She pulls out her physical driver’s license and takes the selfie.
Benefits of Reusable Identity Solutions
A reusable digital identity is a game-changing solution that offers significant benefits to multiple stakeholders.
Here are the key advantages:
- Efficient verification for faster access to services and products: With reusable digital identity, individuals can avoid the tedious task of repeatedly filling out lengthy forms or uploading the same documents for different services. Instead, they can simply scan a QR code and get faster access to the services and products they want.
- Privacy-preserving: Reusable digital identity allows users to present information with their consent and select which data they want to present without revealing all of the details on their credential. The holders know exactly who they’re sharing data with and what the purpose is.
Organizations (IDV Vendor’s Clients)
- Faster customer onboarding and higher conversion rates: Reusable digital identity eliminates the need for businesses to go through lengthy verification processes for each new customer. With pre-verified digital credentials, the onboarding process becomes faster and more efficient, enhancing user experience and potentially boosting conversion rates. There will also be fewer sign up complaints.
- Reduces costs: They can leverage the identity claims and incorporate reusable identity into other parts of their business and automate their processes. This lowers their cost of doing business.
- Smooth transition to new digital ID formats: Expand their services to verify digital credentials instead of physical ones. As new digital formats emerge, they don’t have to change their system to check government native credentials. The IDV vendor is well positioned to offer that service.
- Lower service costs: They no longer have to reverify every detail about the same customer for multiple clients, which streamlines operations and reduces redundancy. They only have to validate holders’ identity the first time.
- More revenue streams: Depending on the needs of customers, businesses can develop unique interoperable networks, public-private partnerships, and digital ID ecosystems.
- Higher client satisfaction: Because of the benefits the organizations experience from easier onboarding process, higher conversion rates, and enhanced compliance, there will be fewer customer complaints and less resources needed to respond to those problems.
- Introduce new credential types: This can be done without changing the API used by the verifier.
- Direct relationship with the identity holder: If the holder has a problem during the verification, they can work directly with the end customer to solve it. The IDV vendor can also tell the holder about the other benefits of the credential by using it with their other clients, which opens up new lines of business.
- Provides privacy-preserving access to services: By implementing reusable digital identity, they can provide citizens with more convenient access to various government services without unnecessarily exposing their data at every touchpoint.
- Streamlined Interactions: Whether it's tax filing, license renewals, or accessing social services, a reusable digital ID can simplify and speed up citizens' interactions with government entities, which enhances trust.
How Reusable Identity Works
The world is becoming digital, but our identity is stuck in the past. To solve this problem, IDV vendors can turn verified identity data into portable and reusable digital credentials. Holders can use this reusable digital identity with other clients in the IDV vendor’s ecosystem such as the bank, rental car company, liquor stores, and the airport.
Returning to the example with Janice, this is the enhanced process that would happen with a reusable identity:
- Janice does the initial verification with the bank where she has to verify her driver’s license and selfie.
- Once she’s verified, the IDV vendor issues a digital credential that she can keep and manage in her digital wallet app on her phone, such as the Dock Wallet or the bank’s app.
- Janice can reuse the credential with any of the IDV vendor’s clients. So now when she goes to a service that requires ID verification, such as a car rental company or to get a loan, she can simply scan the verification request, present her credentials, and access the service much faster without pulling out her physical credential.
- Janet also wants to sign up as a food delivery driver and babysitter on two platforms to earn extra money. Fortunately, these companies use the same IDV vendor and she simply presents the relevant information from her reusable digital identity for her background check. This saves the food delivery company and dog walking platform money from doing the background check from scratch.
How Reusable Identity Works Under the Hood
When the credential is provided, the IDV vendor signs the credential with a cryptographic key and adds the public part of that key somewhere where the verifier can access it. If the holder tries to modify any detail on the credential, it will make the signature fail when someone checks its authenticity. The verifier will know that the document has been tampered with.
In the image above, an "attribute" refers to a quality or characteristic of a specific object or individual such as their name, date of birth, license number, or any other descriptive characteristic.
First picture on the left
The JSON file contains:
- Attributes or claims about the identity holder that is being presented to the verifier (e.g. the rental car company)
- Issuer information that shows their unique digital identifier and signature so the verifier knows that the credential came from a trusted source
This is how the credential appears in a holder’s digital wallet. It has the same pieces of information that we mentioned above, including the signature, digital identifier, and attributes.
This is a web view of the credential with the same information as above.
Whenever a holder presents the credential to a verifier, a cryptographic proof is provided, which is a way to prove that the credential has not been tampered with and was indeed issued by a legitimate source. A "cryptographic proof" is a method of demonstrating the authenticity and integrity of a credential using advanced mathematical techniques that are like secret codes.
Let’s say a verifier uses Dock Certs, our web app, to generate a proof requesting that Janice has a valid driver’s license. The proof request generates a QR Code, and when Janice scans the code and selects the appropriate credential, another JSON file is generated in the wallet. This JSON contains the cryptographic proof and the attributes she wants to present. It shows the signature that can be used to verify the attributes in the credential and the public key that the issuer has published. If the signature matches, the verifier knows it is valid. If it’s not valid, that means something on the document was tampered with.
Reusable identity demo:
Market Factors Driving Demand for Reusable Digital Identity Solutions
Regulatory changes around the world and changing consumer needs are creating a growing demand for reusable identity solutions.
These changes are primarily as a result of a mix of factors, including:
- Government-issued IDs and digital identity regulations such as the EU’s eIDAS and General Data Protection Regulation (GDPR)
- The widespread implementation of data privacy legislation in approximately 70% of countries worldwide
- Online child protection laws
- Stricter age verification laws for online purchases of tobacco, alcohol, and cannabis
- Legalization of online gambling in the US
There is significant momentum within the European Union (EU) for a more interconnected digital identity ecosystem. The EU is actively advancing the deployment of an interoperable European Digital Identity Wallet framework. Under the revised eIDAS 2.0 (Electronic Identification, Authentication and Trust Services) regulations, each EU member state is mandated to develop at least one national wallet application. These regulations also promote open wallet standards, encouraging greater private-sector involvement in the EU's identity landscape.
Learn more about the transformative shift from physical to digital identity initiatives and regulations.
Offer Your Customers a User-Friendly Reusable Identity Wallet Within Your Existing App
With our Wallet SDK, you can integrate a reusable identity wallet within your existing app so your customers don’t have to download an extra app. This way, they won’t have to switch between different applications to manage their digital credentials, creating a more seamless experience.
Benefits of the Wallet SDK
- You have complete control over the user interface
- Easy to set up and flexible customization
- Leverages blockchain and cryptographic techniques to ensure the highest level of security for identity data
Features for Users
- Receive and manage verifiable credentials
- Scan verification QR codes and present their credentials for verification
- Create and manage Decentralized Identifiers (follow W3C standards)
- Turn on biometric security
Financial Benefits of Reusable Digital Identity for IDV Vendors
Given the growing global demand for enhanced efficiency, robust data security, and heightened privacy, IDV vendors have a tremendous opportunity to expand revenue streams and reduce costs including:
- Expanding their services from physical to digital identity verification and leverage automation to provide instant verification
- Enable digital privacy-preserving proof of age for the gaming, gambling, and entertainment sector
- Being able to scale most cost-effectively with a decentralized data architecture
Learn more about the economic benefits of reusable identity solutions for IDV vendors.
A reusable identity is a tremendous shift in the way we manage and verify our digital identity. The global demand for secure, user-centric, and interoperable identity solutions is more significant than ever before as traditional digital identity verification systems often require people to pull out their physical identity documents, need re-verification for the same customers, invade people’s privacy, and incur unnecessary costs for organizations.
Reusable identity solutions provide the following benefits for:
- Individuals: Efficient and user-friendly privacy-preserving verification for faster access to services and products
- Businesses: Faster customer onboarding, reduced costs, and a smooth transition to new digital ID formats
- IDV vendors: More revenue streams, higher client satisfaction, lower service costs, and a direct relationship with identity holders
- Government: Provides secure access to their services and streamlined interactions