By Katherine Noall, CEO of Sphere Identity, a global identity blockchain-based platform for identity storage and on-boarding.
Identity verification poses a significant challenge to businesses in the E-Commerce industry and beyond. Ensuring customers are who they say they are, otherwise known as Know Your Customer (KYC), is the only way to run an efficient business that limits fraud and complies with anti-money laundering regulations.
In the same vein, storing vast amounts of consumer data is not only an ethical grey area depending on how that data is used, but also creates centralized databases, or honeypots, which are attractive targets for hackers.
Over the past several years as blockchain technology has begun to seep into mainstream consciousness, much has been done behind the scenes to incorporate its trustless, transparent characteristics to tackle these challenges from both sides, for both businesses and customers.
When KYC is required for the customer in the E-Commerce space, it typically involves typing information such as names, contact numbers, and email addresses, in addition to uploading documents, such as driver’s licenses and passports. However, storing vast amounts of consumer data is not only an ethical grey area depending on how that data is used, but the information and documents customers must provide are also generally unencrypted, making them easily interceptable. The information is then centrally stored and a database, or honeypot, is created, leaving an attractive paper trail for hackers and other bad actors.
As it stands, the customer journey is designed to improve the user experience for sign-ups, breaking down the process into a series of pages. This might make it look less daunting on the surface, but instead causes increased onboarding fatigue for customers who have to endure page after page of form filling.
Research has shown that 22% of online abandonment is caused by customers balking at online forms, and this trend further adds to this figure. E-commerce businesses that continue to use online forms — whether on one page or segregated across many, are leaving revenue and opportunities on the table.
Enter blockchain technology.
The use of blockchain for KYC positively impacts time, money and other resources required for on-boarding. Applying blockchain technology causes KYC automation to be highly scalable and more secure. Scalable, because it is inherently global; secure, because the technology is tamper-resistant and has inbuilt security, including encryption and time stamping. This makes the distributed, encrypted storage of identity documents and data possible, and with this, identity honeypots will reduce as the industry matures. In time, these honeypots with be replaced with improved mechanisms for self-sovereign identity.
The beauty of self-sovereign identity is that it is distributed, and puts the user in control of the information that makes up their identity, who the information is shared with, how much is shared, and how that information is stored. It is infinitely more secure and requires blockchain technology to build.
Importantly, blockchain-based identity solutions look like any other identity solution. This underlying technology, security-by-default, and complex self-sovereign architecture are all operating at the back-end, meaning a change in infrastructure is invisible to the end user.
What the industry is currently missing is a mainstream tool that is so ingrained that users don’t know it’s there until asked to take charge of their digital identities.
2019 will undoubtedly witness an emergence of new tools that can not only transform the way customers are on-boarded but bring the concept of self-sovereign identity to life. However, the benefits must be two-fold. The identity verification process for businesses needs to be streamlined and provide clear value in time and cost savings, while placing control back in the hands of individuals.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
