Many companies want seamless end-customer verification solutions in a digital landscape with a growing number of regulations and growing adoption of digital identity formats around the world. But the friction of traditional KYC has constrained them. By offering reusable ID verification through Verifiable Credentials, identity verification companies (IDVs) can tap into entirely new markets.
The traditional methods of identity verification often require repeated verification for each transaction or service enrollment, leading to friction for end-customers, lower onboarding success rates for your clients, and increased operational costs for you. Reusable identity is the solution to these problems because it can increase onboarding success rates by enabling instant verification, avoid re-verifications for the same end-customer, and reduce the need to verify physical documents. Identity verification companies who are at the forefront of this shift to reusable digital identity credentials will reduce costs, unlock lucrative new market opportunities with higher margins, and offer more comprehensive verification services.
In this post, we'll explain how reusable identity solutions unlock potential market opportunities for IDV vendors.
The Growing Market for Reusable Identity Solutions
The increasing adoption of global digital identity verification solutions is a result of public and private demand for more efficiency, privacy, data security, and increasing requirements for data compliance. The development of government initiatives such as the EU’s Digital Identity Wallet and digital driver’s licenses are also expected to drive the demand for identity verification.
- The global market size for shareable or reusable identity will grow from $32.8 billion in 2022 to $266.5 billion by 2027 (Liminal Industry Report)
- The Identity Verification Market is expected to reach USD 11.63 billion in 2023 and grow at a CAGR of 12.62% to reach USD 21.07 billion by 2028. Digital identity initiatives play a key role in this growth (Mordor Intelligence Report).
- Public-led reusable identity schemes account for 72% of the market (The Paypers)
According to MarketsandMarkets, increasing online operations, such as bank transactions and online onboarding, have boosted business identity verification in global marketplaces.
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Opportunity #1: IDV companies can augment the first-party digital IDs that governments will soon provide
Governments around the world are increasingly providing first-party digital IDs, which will eliminate the need for physical document verification. Though this presents a threat to traditional IDV business models, it also creates a significant opportunity for IDV vendors to expand their services from physical to digital ID verification, combine third party data with the government credential, and leverage automation to provide instant verification services.
Using data from multiple sources yields a higher quality credential that better fits into specific verification flows than the governmental offering. Verifiers can use these advanced credentials to reduce friction in authentication, simplify integration and compliance with privacy regulations, and minimize the risk of fraud and data breaches.
These are just a few of many examples of national digital eID initiatives:
- Singapore’s Singpass
- European Digital Identity System
- India's Aadhaar system
- Pan-Canadian Trust Framework
Opportunity #2: Convert existing credentials to a privacy-preserving credential format for additional use cases
As governments replace plastic ID cards with first-party digital IDs, many government agencies and organizations are adopting the ISO Mobile Driver’s License (mDLs) standard. For example, in 2023, California expanded a pilot program to allow citizens to get a digital driver’s license that’s accessible on their mobile phones. This mDL can be used to go through Transportation Security Administration checkpoints in participating airports across the US and buy age-restricted products at select retail locations. However, mDLs only support selective disclosure in a limited way and do not have Zero Knowledge Proof (ZKP) capabilities, which limits their reusability and makes them inappropriate in some scenarios where privacy must be protected.
This provides IDV vendors with an opportunity to convert mDLs to a privacy-preserving credential format that allows for additional use cases like private proof of age. This can be done by creating a Verifiable Credential (VC) from the mDL which can be presented to verifiers with ZKP capabilities. Credential holders can then truly minimize the personal information shared, which increases privacy and individual data sovereignty. Of course, an IDV vendor can also support these use cases by providing ZKP proofs after verifying physical ID documents using their traditional processes.
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Opportunity #3: Enabling digital and privacy-preserving proof of age for gaming, gambling, and entertainment
Age verification regulations are playing an increasing role in the online gaming, gambling, and entertainment industries. While legal approaches towards secure age verification vary depending on each region, the main goal of all of them is to protect minors from adult and inappropriate content. Increasingly, jurisdictions also see the need for preserving the privacy of legitimate consumers of the content as they go through the process. ZKP credentials allow this to be done without revealing the exact age of the consumer, or even the consumer’s name. There is a significant market opportunity for IDV vendors to help their clients comply with the various age verification laws by offering a more secure, low friction, age verification process that also maintains user privacy.
Examples of global age verification regulations
This legislation aims to limit minors' access to adult or inappropriate internet content by requiring platforms to implement strong age-validation processes. The requirement for strict age confirmation across various online platforms creates a new opportunity for identity verification companies to provide innovative services not only in the UK, but also for any platform used by UK residents.
As an aside, the bill also includes two additional provisions that can benefit from identity-based solutions:
1) Allow grieving parents to access the social media profiles of deceased minors
2) Enable the government to explore ways to identity credible online sources and reduce false information
Age verification in Europe
General Data Protection Regulation’s Article 8 allows the age of consent to be set between 13 and 16 by the member states. This means that anyone in Europe who is over the age of 16 is legally allowed to consume age-restricted products and services.
Age verification in the US
The Federal Trade Commission’s minor protection law, Children’s Online Privacy Protection Act, is one of the most significant laws for online child safety in the country. It determines how companies collect and process information related to children under 13 years old.
Benefits of using reusable identity for proof of age
- Regulatory compliance: Reusable identity as verifiable credentials can help companies meet their regulatory requirements, ensuring that gaming, gambling, and entertainment companies meet their legal obligations.
- Enhanced user experience with a simplified verification process: Users can verify their age once and use it across multiple platforms which eliminates the need for repetitive onboarding journeys and complicated verification processes.
- Enhanced privacy and security: Reusable identity allows users to share only the necessary information required for age verification, without revealing their full identity, which promotes data minimization during the verification process. This protects their privacy and reduces the risk of identity theft. If Zero-Knowledge Proof technology is enabled, end customers won’t have to reveal the credential details at all to prove a claim.
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Opportunity #4: Reduced friction and higher customer onboarding rates
Currently, it’s common for the same IDV company to run multiple identity verification processes for the same end-customer signing up for different businesses, and often even within the same business. This added friction can drastically reduce onboarding success rates. With a reusable identity, the end-customer goes through the friction of establishing their identity with the IDV company only once, receives a verified digital ID, and can be quickly onboarded on every subsequent verification from different service providers that access that credential.
End customer onboarding statistics
Reusable digital identity can solve the problem of delayed, inefficient, or complex end-customer onboarding by offering a streamlined and personalized onboarding experience.
- According to a survey, 82% of enterprise organizations consider their user onboarding strategy to be a crucial factor in driving value for their business.
- 63% of customers think that user onboarding is key in deciding whether to subscribe to a product or not.
- 74% of potential customers will switch to other solutions if the onboarding process is complicated. 70% of customers are likely to abandon the digital onboarding process altogether if the process of opening an account takes more than 20 minutes.
- 90% of consumers expressed their willingness to spend more money with companies that provide personalized customer service experiences.
Opportunity #5: Your clients can often avoid storing and managing end-customer data
A side-effect of providing reusable identity as a verifiable credential is that end customers store and control their data using digital wallets, and can re-share the data with verifiers whenever it’s needed for completing their business. This shift away from traditional centralized data storage systems comes with benefits for IDV vendors and their clients who can reduce costs by not having to manage and scale databases of end-customer data. There are also savings from not having to deal with large-scale data breaches that are more likely to happen with centralized databases and result in severe consequences for victim businesses.
These benefits can manifest in multiple ways:
- Your clients can reduce the costs of setting up expensive and robust infrastructure to store large amounts of customer data.
- With end customers managing their own data through digital wallets, there's no centralized database to attack, significantly reducing the risk of large-scale data breaches.
- Shifting data ownership to end customers can simplify compliance. When the end customer delivers data, it inherently comes with consent for a specific purpose. Since the verifying company isn't storing the data, compliance with regulatory requirements such as data retention to rights of erasure become straightforward.
- Since end customers manage their own data, they can easily identify when it is out-of-date or inaccurate and request a new credential. This helps verifying companies to always access the most recent data without getting in the way of the customer completing their transaction.
- Empowering customers to control their own data enhances trust. They feel more secure knowing their information isn't stored on some distant server but is instead in their hands. This trust can translate to higher customer loyalty and satisfaction.
Opportunity #6: Reduce costs in identity verification by reducing the need to verify physical documents
Providing reusable digital identities to end customers can help IDV vendors reduce identity verification costs. With traditional identity verification methods, businesses have to repeatedly verify physical documents, which can be time-consuming and costly because of all of the staff, training, and infrastructure needed to check the physical documents. Manual processes are still often needed for IDV companies to resolve exceptions when the automated verification fails.
How reusable identity reduces verification costs
- When the end-customer is asked to validate their identity, they only need to present their government ID a single time to receive a verifiable credential. Based on the IDV vendors’ business rules, reverification could be postponed for an extended period of time. This significantly reduces laborious exception management, and the associated infrastructure and staff resulting in substantial cost savings for IDV companies.
- This innovation not only optimizes operational efficiency but also enhances the accuracy and speed of identity verification which also decreases the cost of supporting end-customers through the document verification process.
- IDV companies can scale most cost-effectively because they can accommodate a growing user base without proportional increases in operational costs.
- And IDV companies are positioned to work with first-party digital credentials as they become more common.
Opportunity #7: A decentralized data architecture is easier to scale cost-effectively
The way data is managed and stored plays a pivotal role in determining the efficiency and scalability of operations. One of the most significant shifts in recent years is the move from centralized to decentralized data architectures enabled by reusable identity as verifiable credentials. End-customer data is stored on their devices and verifications are peer-to-peer, which reduces the amount of infrastructure needed and can allows more cost-effective scalability.
This decentralized data architecture also simplifies integration with IDV customer systems, as they can consume the data using open standards and flexibly adapt to new use cases. This reduced integration means that IDV customers can leverage identity data in more business processes, which strengthens their relationship with the IDV vendor.
Centralized vs. decentralized data architecture
- Centralized: All data is stored, managed, and accessed from a single point or a central server. While it’s straightforward, it comes with several challenges, especially as a company grows.
- Decentralized: Data is spread out across multiple nodes or systems. Instead of a single point of control, each unit in this architecture operates autonomously.
Decentralized data architecture use case: IBM’s Digital Health Pass
Dock’s CEO Nick Lambert spoke with Marie Wallace, the Managing Director and Digital Identity Lead at Accenture, on our Identi3 podcast. She demonstrated the benefits she experienced of using a decentralized data architecture with the implementation of IBM’s Digital Health Pass. Digital Health Pass was designed to enable organizations to verify COVID-19 test results or vaccination status for employees, customers, and visitors entering public areas such as a sports stadium, airplane, university, or workplace. People who used the Digital Health Pass could securely share their personal health credentials in a way that gives them control over their data and protects the privacy of their health information.
She felt like the deployment of Digital Health Pass in New York as the Excelsior Pass mobile app was exceptionally smooth because of the decentralized data architecture.
Marie said, “We were issuing millions of these credentials and hundreds of millions of verifications, and our systems were super lightweight because ultimately what you’re doing is you’re caching keys on the verifier apps, you’re syncing things up depending on how regularly the verifier apps want to sync the policies for the verification, and everything else is peer-to-peer. So you didn’t have these situations where you were concerned about servers going down or the internet glitching because that just never ever was an issue.”
Compared to a centralized approach, decentralization may frontload some of the implementation costs, but the resulting lightweight operational model will often quickly recoup those costs.
How reusable identity reduces costs to enable efficiency and scalability
- Lower infrastructure costs: When scaling a decentralized architecture, fewer infrastructure upgrades are needed to support the same volume of transactions. This leads to more predictable infrastructure costs as usage grows.
- The reduced vulnerabilities: Verifiable credentials have been designed to withstand many types of attacks, so an architecture that relies on them will benefit from their security guarantees. Further, data is distributed across various devices, widespread data breaches are more challenging, which greatly reduces the potential costs of that result from a large-scale data breach and damage control.
- Improved data integrity and reduced maintenance costs: With a verifiable credential system, data integrity is maintained by cryptography within the credential and any tampering or corruption will be immediately recognized and can be easily corrected by getting a new credential from the IDV vendor.
- In decentralized architectures, if one node fails, the system continues to operate normally. This is in stark contrast to centralized systems where a single point of failure can lead to significant downtimes, translating to potential revenue losses and reputational damage.
Conclusion
As the world becomes increasingly digital, the need for efficient and accurate identity verification methods has never been more crucial. By embracing this shift towards reusable digital identity credentials, identity verification companies can tap into new market opportunities and provide a more streamlined and convenient experience for end customers.
A reusable identity can:
- Reduce verification costs
- Reduce the need to re-verify end customers
- Verify credentials in a privacy-preserving way without storing and managing databases of end-customer data
- Improve onboarding success rates because of instant verification
- Help organizations comply with data regulations
If you're interested in offering a reusable identity with our platform, get in touch with us. We can provide you with the necessary tools and guidance from our expert developers to stay at the forefront of this evolving industry.
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