How Self-Sovereign Identity can be integrated into KYC processes

October 19th, 2022

Today, most of the risks consumers face from cyber criminals are tied back to credentials or data theft.

For this reason, creating and implementing effective customer identity verification processes is a top priority for organizations to reduce the risk of fraudulent transactions and ensure regulatory compliance.

Know Your Customer (KYC) procedures help establish the legitimacy of a customer's identity and identify risk factors. Recently, the inevitable trend in this market is user-centricity and the concept of reusable KYC.

Self-Sovereign Identity (SSI) is a new identity model with these concepts at its core that can help solve the existing KYC challenges.

What is a reusable KYC?

With reusable KYC, the user completes the KYC process once, can save the proof of successful completion in the form of a digital document/credential, and share the result instantly with the next service provider that requires it without going through the entire process again.

This is possible by cryptographically verifying and storing the completed KYC result as a verifiable credential on their mobile ID wallet.

While the concept of reusable KYC can pose a risk to the current KYC business model, novel commercial approaches are being explored where KYC providers greatly stand to benefit in the long run. Here is where Self-Sovereign Identity comes into action, helping the sector move toward a more sustainable business model.

Self-Sovereign Identity is a nascent technology combining the simplicity and usability of a single sign-on with advanced cryptography that provide government-grade secured access to digital services.

Why should KYC solutions integrate SSI technology?

While Self-Sovereign Identity has the potential to revolutionize the majority of industries, KYC providers can particularly take advantage of this new authentication paradigm by integrating it into their existing KYC user journey.

Especially when identity verification and authentication checks are often due to compliance or regulatory pressure, SSI can significantly reduce the friction for users to improve the customer experience while providing a compliant service.

Some KYC providers are already looking into SSI as part of their strategic product roadmap by becoming issuers of Verifiable Credentials (trustworthy, tamper-proof, and machine-verifiable digital identity documents).

As issuers, KYC providers can attest to the authenticity and ownership of this KYC credential, transfer this to a user and manage the status lifecycle, including revocation mechanisms to force its renewal according to local laws.

Trust triangle - Self Sovereign Identity and KYC

The issuance of these verifiable credentials can be issued at any time in the current process or triggered proactively by a user.

So, what are the benefits of integrating SSI into a KYC process?

  • SSI is the ideal partner to transition into a user-centric identity model

Over the last few years, new technologies such as AI, machine learning, IoT, and blockchain have gained traction, and attitudes and solutions have evolved from centralized, business-centric methods to decentralized, user-centric ones.

As a consequence, KYC providers must ensure they are ready to integrate with near-future technological evolutions to offer their clients the most innovative, and user-friendly experience in the market.

Governments and businesses are already using SSI technology for different use cases. However, its mass adoption is fast approaching through emerging regulations like the new European proposal for eIDAS.

eIDAS 2.0 will require Member States to provide certified digital ID wallets to citizens and for businesses to accept them as forms of identification. Self-Sovereign Identity has the user-centric identity verification that the new regulation will impose in Europe at its core, so KYC providers that adopt SSI may offer eIDAS-compliant solutions to their citizens.

An essential benefit of SSI and reusable KYC is that the user is in control of their data rather than handing it over to a digital service. This progressive privacy strategy builds trust and fosters customer loyalty.

  • SSI enhances customer experience

Although recent KYC checks have replaced the tedious process of physically verifying documents in person with more efficient online solutions, customers still struggle with these onboarding processes, being a bureaucratic step for all parties involved.

New and secure cryptographic capabilities and the preference for mobile devices have opened new ways to improve the customer experience while adhering to legislation and consumer expectations around data protection - precisely what organizations are asking for.

Self-Sovereign Identity allows seamless identity verification in seconds. Users only have to complete the KYC successfully once, and when the KYC credential is issued and transferred to their mobile device, it can be reused multiple times.

With a verifiable KYC credential, any new onboarding process for end users would be as simple as navigating to a service provider's website, scanning a QR code with their ID Wallet, consenting to share their verifiable KYC credential in 1-click, and they’d be instantly in!

  • SSI reduces the operational costs of KYC

For regulated firms, continuous KYC monitoring is necessary for compliance officers to stay ahead of cybercriminals and satisfy the regulators.

However, current KYC procedures to check alerts, such as potential positives for money laundering and other financial crimes within the organization, are manually reviewed over and over again for the same user. This results in significant time and economic resources spent investigating.

The concept of reusable KYC can improve the current business model by increasing effectively reducing such operational costs, increasing the profit margin, and adding recurrent revenues to verify KYC credentials.

The operational cost of a KYC process falls remarkably as the same user data (ie. passport scan, liveness detection test, etc) no longer needs to be verified multiple times across different services.

As a result, KYC providers can charge a lower price per verification with a higher margin instead of a high transaction-based price with lower margins. Naturally, these lower prices would be welcomed by third-party verifiers, such as banks, as their high KYC costs would also be reduced.

  • SSI protects you from cyberattacks

Organizations can concentrate millions of records and sensitive user information in their databases, making them desirable targets for hackers. Changing from a centralized to a decentralized identity model can solve this massive issue.

In contrast to centralized solutions, decentralized systems ensure private data remains immutable and secure and can only be shared when outlined users consent to provide information.

With Self-Sovereign Identity, data is decentralized and stored by users in their wallets, which reduces the risk of large-scale data breaches and provides increased security and risk protection for identities, data, and online interactions.

Moreover, as SSI technology is cryptographically secured and private by design, it reduces identity fraud drastically and complies with data protection regulations.

Meet Gataca

Until now, the implementation of Self-Sovereign Identity technology involved complex workflows requiring many hours of consultation and expert deployment guidance, creating a massive barrier to adoption. Gataca Studio crushes this barrier.

Gataca Studio is a low-code decentralized identity verification platform designed for businesses that wish to implement full-stack SSI tech with little integration effort.

Gataca Studio - Self Sovereign Identity and KYC

Through a monthly subscription, KYC providers can implement SSI into their solution in just a few clicks. The platform’s intuitive, user-friendly interface and W3C standard-compliant core:

  • Enables instant & reusable KYC through passwordless authentication and strategic partnership integrations
  • Streamlines the issuance and verification of verifiable credentials, as well as the management of users in one place
  • Is fully integrated with EBSI, the European Blockchain Services Infrastructure, while maintaining its blockchain-agnostic capabilities

Gataca Studio will be officially launching in the next few weeks, but we already have strategic partners successfully testing out the technology and believing in the power of Self-Sovereign Identity. Want to try it out? Get early access here.

Conclusion: Why should KYC providers be interested in SSI?

The future of digital identity is instant & reusable KYC, and SSI is the technology empowering this change.

The benefits of integrating Self-Sovereign Identity into existing KYC solutions are clear: increased profit margin and recurrent revenues, compliance with current laws and upcoming user-centric regulations, and improved user experience and data protection for all parties involved.

Join GATACA in leading the digital identity revolution.

Get early access to Gataca Studio - If you’re curious to see the benefits of our technology on your workflows today, submit your application here.

Chat with us - We’d love to start building conversations and create synergies. Join our Telegram group or get in touch at hello@gataca.io.