It’s not money that makes the world go round--it’s credit. That’s why banks, which invest trillions of dollars every day, are so powerful--if their customers withdrew all their money at the same time, the banks wouldn’t be able to pay out. Likewise, to lack credit is to lack power. If you can’t spend more than you have, it’s more difficult to increase the amount of money you earn.
Billions of people can’t access products like loan or insurance because they don’t have the documents--like bank details, passports, and credit scores - that financial service providers need to issue loans. According to data from the UN, over a billion people lack the adequate documentation that proves they are who they say they are, and World Bank data says 1.7 billion don’t even have bank accounts.
But advances in cloud and blockchain technology mean that tech companies finally have the tools to stitch together different kinds of information--like fingerprint scans and social media checks--to create so-called 'digital identities’. They claim that these identities are so credible, they could finally allow the billions without traditional forms of documentation to gain access to credit.
Creditworthy
Bob Reid, previously an executive at file-sharing giant uTorrent, has spent his life working out ways to share digital information as fast and securely as possible. In 2016, Reid noticed that two types of technology were now so advanced that they could completely replace normal identity checks.
First, scanners that register biometric information, irises, and fingerprints have dramatically fallen in price in recent years and become easy to implement. So drastic is the change that India, through its “Aadhaar program” has started using the technology to scan the faces, fingerprints and irises of over a billion of its citizens.
Second, such information can be processed efficiently and securely through blockchain technology. Blockchain’s ingenious twist on information storage is that it renders data immutably upon a global network of computers, which makes it a highly secure way to hold information about a person’s identity.
“When you start getting into the distributed database and the user privacy that comes with the tokenization of moving money around, you have a kind of ‘Oh my God’ moment - this happens once in a generation,” says Reid.
Realising the potential of these two technologies, Reid created his digital identity platform, Everest--one of a host of different organizations working on ways to stitch different types of information together to create a unified, digital identity. Reid says digital identity could give also financial companies a compelling reason to service billions of people without bank accounts.
“With mass market biometrics and the blockchain… we can finally take 1.7 billion people for the first time in generations out of 7th century economics, and onto the digital economy.” Bob Reid, founder of Everest
If enough information is entered into Everest, a combination of this data could create a complex picture of an individual that “de-risks” them for financial companies, meaning that more people could gain access to affordable loans or insurance. Imagine a farmer in Vietnam, who isn’t eligible for the affordable loans that financial services usually offer because he might not have the right papers that prove his identity.
But if his papers and biometric identity were digitized, companies like Everest could store the information that confirms the identity of the farmer—his fingerprint scan, or his credit history—in conjunction with the information about his business production—like his land title, and the value of the farm—that can be used as collateral to give the bank the confidence that the farmer has enough skin in the game to repay his loan.
Reid says that by making it profitable for large financial institutions to service these ‘unbanked’, the interest rate of the loan would sharply decrease. The Vietnamese farmer who might have previously paid 40 percent interest, could now pay 15 percent - an affordable amount that could allow him to grow his business.
Everest uses a stablecoin that’s pegged to the US dollar, which means that both the bank and the farmer would transact using a stable currency. “By giving people identity--giving them credit, insurance--you give people a way to get onto the digital economy. You start changing how long they live, how happy they are, literally everything about their lives. Offering them credit, that alone offers them everything,” says Reid.
Everest isn’t the only company in the digital identity space. OmiseGo is working to ‘unbank the banked’, and Stellar is a platform for currency transactions targeted at the developing world. The app Humaniq does something similar to Everest--with 400,000 users linked by biometric identity to a digital wallet, but Reid maintains that Everest is different because it’s a platform on the cloud, and not just an app for your phone - a device that might be too expensive for some users, or easily lost.
Reid says that Everest is the only platform that attaches a verifiable biometric identity with a digital wallet. To translate, that means its identity product, Ever-ID, is linked to its wallet, EverChain. That means that users have more control over their data, and it’s cheaper and safer for financial services and governments to provide services like loans and remittances.
But David Gerard, a journalist and author of Attack of the 50 Foot Blockchain: Bitcoin, Blockchain, Ethereum & Smart Contracts, is skeptical of companies who make ambitious promises about digital identity.
“Saying it’s on the blockchain is an attempt to aggravate responsibility,” says Gerard.
“Companies like Everest involve building up a global panopticon, a surveillance mechanism controlled by this company.”David Gerard, author of Attack of the 50 Foot Blockchain
Everest says Gerard’s criticisms don’t apply to them: users have complete control over who accesses their biometric data; third parties, without the requisite private keys, have no means of snooping.
But Gerard still doesn’t buy the idea of self-sovereignty; “To put a butt load of public information on blockchain, that’s insane behaviour,” he says.
Nor does Gerard believe that something like Everest could work in practice. In Europe alone, Gerard says the idea of an immutable permanent database comprised of information about users’ is in contradiction with new GDPR rules, which say that data must be redactable.
But Everest has this covered: they don’t store ID information on the blockchain, but instead reference data held off the blockchain in something called an IPFS storage array.
But Gerard might be swayed by movement in the digital identity sector that’s outside of the blockchain space. Monese, a current account originally created with migrants to Europe in mind, uses non-traditional methods to confirm the identity of a customer. Since its launch in 2015, over 500,000 people have opened accounts with the bank.
Money moves
Founder Norris Koppel wants to solve a problem closer to home: in Europe alone, 140 million don’t have bank accounts, and many find it difficult to access financial services because of banks’ strict requirements for documentation. In Europe, having a bank account is often necessary to find a job and a house. Without a bank account, you can’t get either--a perversely circular system.
If new customers don’t have documents like credit reports and utility statements, Monese can check users’ identities by conducting video interviews, sifting through their social media accounts, and even their gym membership details. “Pretty much anything (can be used),” says Koppel. Using these data points, Monese builds up a picture of its customers, which can then be used to provide low-interest loans of up to £5000, confident that users can pay them back.
Since its launch, Monese has veered its marketing angle towards what Koppel calls the ‘borderless generation’: cross-border entrepreneurs and expats, but still remains committed to helping migrants.
Later down the line, digital identity providers--blockchain or not--could use even more obscure information to verify someone’s identity.
If someone arrives at a country with no records, they could not only show their biometrics, but they could submit their school records, or prove they played for the soccer team in their hometown. On their own, these elements aren’t enough, but they could be added together to provide assurance about someone’s identity. The hope is that over time, digital identity technology could build up such a convincing picture through non-traditional methods, that the identity would be recognized by governments and large financial institutions.
Yet we would do well to heed critic David Gerard’s warnings. The technology is coming, that’s for sure. But who should we trust with that information? Blockchain promises to hold that information securely, providing users with a ‘self-sovereign’ identity.
But “promises are cheap,” says Gerard.