Tue, Feb 28, 2023: Two persistent problems in securing commercial loan documents

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Oh, Identity: It’s Bigger

What is a “financial Identity” for a small business?

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The official definition of “identity” is very simple but may be obsolete

Miriam-Webster dictionary defines identity as “the distinguishing character or personality of an individual”. This definition held up well when people communicated mainly in the physical world. A simple example: part of my personal identity in high school included “a vertical cut mark on the forehead”. That was a distinguishing characteristic that was easy to view and verify. However, in today’s digital world, there is often no visible interaction to display the distinguishing characteristics. Hence, the definition needs to be adapted.

“Identity” is so much bigger

Take for example the market definition for a “financial identity” of a business or an individual. A financial identity is the accumulation of all assets, debts, past transactions, credit history, insurance policies, business relationships, officers of the company, and other such pieces of data that together compose the financial strength and trustworthiness.

The broader “identity” definition for an individual can encompass a lot more. For example, languages spoken, addresses, education and qualifications, work experience, skills and accomplishments, professional and personal connections, etc. All this information could be relevant for third parties who want to engage with this individual – like business partners or employers.

Establishing trust requires sharing elements of one’s identity

When we do business, each business and business owner need to establish trust with the other business partner and its respective stakeholders. Trust can be established by sharing relevant data and documents about the business, which form part of the “identity” of that business and its owners. Trust is established only if such conveyed data and documents seem to be real and originated by trusted institutions, such as governments, banks, etc.

How do we setup and verify our identity in a digital world?

When discussing authenticating our identity online, people usually think of “Sign In using ...” Google, LinkedIn, Apple, and other internet giants let us use our online accounts as a means for identity authentication. While using online accounts is easy and convenient, this form of identity does not prove that there is a real person on the other side of interaction. Anyone can open a new online account under any name, upload any profile picture of any person, and use it for authentication. Adding a two-factor authentication with a mobile phone number proves that we have a phone. What do we actually know of the identity of the person signing in? Not much. We could be talking to an imposter or a bot.

When talking about “Identity Verification”, people usually think of scanning a plastic ID or driver’s license, to match with one’s selfie. That’s called “ID Verification” or IDV. But ID verification is not Identity verification! Such image processing technologies might prove that it is really you who is trying to login, but what do I really know about you? In the era of social networks and deep fake, it’s tricky to trust IDV even for personal identification. Needless to say, IDV can’t verify businesses, only individuals.

Banks and other financial institutes who are subject to KYC regulations usually verify our real identity before assigning us a user name and password to access our accounts online. It can take a bank an average of 27 days, 7 emails, and $6000 in costs to screen and approve a business client prior to opening a new business account. This is due to the fact that the bank usually uses a manual process for the verification of many identity documents that were submitted in paper form, such as incorporation documents, officers’ ID, past business transactions, assets and debt documents, and more. Most businesses cannot go through such a long verification process for new business partners, and even banks now start to realize that these processes are not fit for purpose and do not make sense in the new digital era.

There’s a better way to establish and share our identity online

Nowadays, a lot of the elements that compose our “identity” as individuals and businesses are digital, or can be collected as digital-native documents. The data and documents that prove and establish our identity needs to be stored in a safe and secure location that we control. Let us call this place our “identity vault”. To allow us to establish trust with others, the data in our vault must be obtained from verified sources and saved in a “tamper proof” manner so we can’t change it even if we want to. This way we would have a portfolio of verified identity data and documents that tell others who we are, what we’re worth, and that they can trust us.

Where can we get such as identity vault?

The vault I’ve just described is no longer a dream. An Israeli startup named “AIO” has developed a patented technology that lets any business establish its verified financial identity easily and digitally. AIO bridges the gap between the traditional, document-heavy manual identity processes used by large banks and the new digital reality.

The way that AIO drives immediate trust in business relationships is through digital collection of automatically verified documents. Using AIO’s patented technology, digital documents from any trusted data sources are collected, without any integration, and automatically verified in real-time. AIO’s digital experience protects customers’ privacy by design: all such documents are stored safely in the customer’s own storage in a tamper-proof format, and the customer chooses who to share each document with. AIO’s platform enables financial institutions and enterprises to quickly meet KYC requirements, assess risk levels with just a few clicks, and accelerate business customer onboarding by 80%. You can learn more about AIO on the company’s website: www.aio.network.

To trust someone, especially a business, you need to know a lot about your counterpart, to feel like you’re acquainted. In today’s digital world, you need to get all this information fast and verified. Digital identities or comparing a selfie to a plastic ID won’t tell you much. A broader perspective on identity is needed.

#aio #banking #commercial #credit #lending #futureofbanking #financial #decisionmaking

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