Unlocking Financial Innovation with Digital identities and Open Finance
Open banking data is hugely valuable as it allows us to address the lack of trust that innately exists in a digital-first financial services engagement. In actuality, it is our bank accounts that best reflect us as physical people, spending money every day and creating a footprint of data. By using open banking data we can leverage the identity and data we already have with our banks, so that third parties (like lenders) can understand us just as well as our bank understands us.
James Varga, Founder of DirectID, is passionate about Open Banking and the opportunities it provides to redefine the credit and risk industry. In 2011 he founded DirectID with a mission to leverage the identity and data that users have with their bank accounts, helping them prove their identity, financial health, and credit risk in seconds.
“One of my core fundamental beliefs is this idea that we should be able to manage our own individual data,” says Varga. “In the very near future, I think we're going to start to hit that challenge around the sharing of identities and related standards, which will push us towards a consumer-centric data sharing model, where consumers are empowered to manage their varying sources of data and share them with third parties. But we're not quite ready for it yet.“
Over the past few years, he notes that the industry has started to view digital identities as an enabler and opportunity, largely because we need to rely on a trusted exchange of information to make decisions. In a centralised view of the consumer-centric data sharing model, identities are treated as a utility with control over identifiers as a result. However, it is extremely difficult to maintain control within this centralised system due to the sheer scale of data relationships that exist. The decentralised model, meanwhile, places the consumer at the middle. This model recognises that value is found, not from controlling the identifiers, but from within the data and services related to that data. There are examples of decentralised models that we can draw on, for example, the domain name network and mobile phone numbers. Such a decentralised model won’t come without challenges: a framework and methodology still need to be ironed out, but prior to this Varga believes that the first big industry challenge is to realise that we shouldn't own people's identity and give up ownership over that.
As we move into a world where consumers have an increasing amount of access and control in managing their data, we move from open banking to open finance, which can incorporate all sorts of data occurring over a person’s lifespan. Once the decentralised framework of identity sharing is agreed on, issues around security, compliance and tech standards can then also be agreed upon. “This isn't a technical problem,” says Varga. “What we want is for people to use multiple identities, and give that control back to the individual to help them to understand who sees your data, who is accessing it, and who is sharing it. And even, ideally, here is the money that you can make from enabling or the benefit that you can get from enabling.”