Blockchain-based digital identity is becoming mainstream with banks, financial organizations rise to the adoption challenge.
Digital identity solutions are on the rise as consumers seek security and accessibility in a digitized world. A new report from 360iResearch shows that the global digital identity market is expected to have reached about $37 Million by the end of 2025. As COVID-19 continues to wreak havoc, this number could grow even larger.
Unsurprisingly, the trillion-dollar banking industry has already expressed interest in digital identity solutions. For example, Everest, a blockchain-based digital payments provider, has recently formed a partnership with BRI Remittance, a subsidiary of one of Indonesia’s largest banks. Everest has been collaborating with BRI to offer bank users a blockchain-based digital commerce platform that will allow Indonesians and Europeans to easily exchange value across international borders.
Bob Reid, the CEO and co-founder of Everest, told Cointelegraph that BRI Remittance’s digital commerce platform is already being implemented and will officially launch in the second quarter of this year. Reid noted that the goal of the project is to ensure that remittance transfers between Europe and Indonesia are settled within 24-hours — the time it usually takes for domestic wire transfers to be completed. Sending money across international borders could take up to five days in some cases. Reid added:
“The partnership is expected to drive business within the Indonesia–Europe corridor and afford Indonesians and Europeans the opportunity to seamlessly execute exchange of value across international borders.”
This is important, as Indonesia’s $11 billion global personal remittance market has more than doubled since 2005, with remittances between Indonesia and Europe representing more than $500 million. Moreover, with a population of 275 million people and a trillion-dollar economy, Indonesia arguably still lacks the digital infrastructure needed to provide value exchange between identity-verified individuals.
How can blockchain solve this problem?
Everest has integrated blockchain into BRI’s banking system to provide users with a digital identity, known as an “EverID.” According to Reid, the Everest Platform is built upon two private, permissioned Ethereum blockchain networks.
The “identity chain” allows BRI users to share certain elements of their identity, such as their name, address and income. This information is required to ensure Know Your Customer and Anti-Money Laundering verification. A user’s identity is then linked directly to a digital account, called an “EverWallet,” which contains Everest’s CRDT token. Reid explained:
“A CRDT token is a digital voucher used to capture the sender’s selected identity elements, like KYC/AML, or 5AMLD in the case of Europeans, along with foreign exchange transactions. The tokenized voucher is stable and can be conditional, programmable ‘money’ to ensure that it can only be spent on, for example, paying bills or food.”
Reid noted that once a user is on-boarded to the EverWallet in Europe, remittances can easily be sent to Indonesia. The same wallet can also be used for banking, peer-to-peer payments and cryptocurrency transactions, as everything is connected to a verified digital identity.
Moreover, since transactions take place across a blockchain network, each payment is tracked with a user’s associated identity. Smart contracts are also leveraged to ensure transactions adhere to legal requirements within the participating jurisdictions.
Why a digital commerce platform is important for Indonesia
BRI Remittance’s executive director, Gigieh Perkasa, told Cointelegraph the company was looking for a partner that could provide a combination of identity compliance, transaction tracking and use of tokenized stable vouchers. Perkasa noted that money transfers, especially those being made by migrant workers and SMEs, account for a large portion of the bank’s remittance business. According to Perkasa, BRI recorded $8.8 billion in remittance transactions in 2019.
According to the European Commission, the European Union is Indonesia’s third-largest trading partner. However, it’s been noted that remittances sent by migrant workers in Indonesia have yet to create a lasting impact on the local economy.
Silvia Mila Arini, a researcher at Singapore-based think-tank Asia Research Institute, stated in an article, “Money sent by workers is generally used to meet daily needs and to fund education and the needs of children.”
Douglas Borthwick, the chief marketing officer of INX, a crypto exchange, told Cointelegraph that identity management is key to all banking activities and that a digital solution could provide a number of benefits both for users and financial markets:
“Legacy banking systems have trouble following basic identification information, such as the identification of final beneficiaries for securities and cap-table ownership of companies. Blockchain is the perfect technology for both private and institutional investment banking, and it has the promise of changing the identity management dogma with real-time ownership transfer settlements and other important identification management related ‘relics.’”
Borthwick further noted that while INX plans to enable regulated trading of cryptocurrencies, such as Bitcoin (BTC), Ether (ETH) and Ripple (XRP), the exchange has been working with several major banks to provide solutions for investment banking with advanced digital identification management features. He said: “This is still in its early days, but we see this as one of the key factors to the success of the rise in digital assets in the financial markets.”
Digital identity for banking is beneficial
Digital identity solutions will not only disrupt the remittance market in countries like Indonesia but will also create benefits globally, especially as the coronavirus pandemic continues. Julie Esser, the senior vice president of communications of CULedger, a credit union service organization, told Cointelegraph that digital identity for the banking industry is more important than ever before. She said:
“As concerns over the coronavirus pandemic began to spread, credit unions started closing their lobbies, urging members to use alternative ways to access their accounts — becoming a digital credit union overnight. The volumes in these ‘open’ channels have skyrocketed.”
CULedger currently provides 11 United States-based credit unions with a digital identity solution called MemberPass, powered by the Sovrin Network’s blockchain platform. Borthwick also commented that the coronavirus crisis is likely to cause a global movement toward digital money and assets, adding:
“Identity management will become central for authorizing transactions and keeping procedures and records in order. Nothing that swipes or is separate from a ‘collective’ hive brain will be sufficient to support the wide range of identity profiles all of us will need to live in the digital age of online commerce, banking, information gathering, personalization, communities and more.”