Digital-identity solutions are addressing a suite of use cases—from KYC challenges to humanitarian issues. While these solutions are still in the works, and their infrastructural shape isn’t fully certain yet, fintechs and financial institutions can already prepare operationally for their arrival:

Identifying market leaders

The digital-identity space is currently crowded, with each player highlighting their respective unique selling points. Some flaunt their technological and security-focused knowhow, others the speed of onboarding, others their scope. Fintech and FI leaders have to both prioritize certain features over others, while also building out a tech stack that can integrate with different solutions as the space solidifies.

In conjunction with tech and strategy teams, operations teams will have to identify which private solutions offer the greatest longevity as well as the lowest long-term operational overhead. That calculus can minimize onboarding and KYC costs, while also offering clues to which market solutions will come out on top.

Complying across borders

Digital-identity solutions like the one currently being built by Mastercard provide potentially global reach to fintech partners through international rails and cross-border compliance frameworks.

“Singapore is an example of a country that’s… way ahead of the curve with essentially a fully government-run reusable digital ID ecosystem that’s working for KYC as well as everything else,” Sarah Clark, Senior Vice President of Digital Identity at Mastercard, told The Financial Revolutionist. “But they might want their citizens to be able to get a bank account if they become expats or are temporarily moving to the UK or the US, so that's where someone like Mastercard could come in and help extend the utility of what they've done as a pure government play.”

These new use cases could help expedite the onboarding process for international customers at domestic banks, but may also force relevant fintechs and FIs to expand compliance teams to meet the larger range of jurisdictions that customers may come from.

Remediating false fraud cases

Reusable digital identities can help expedite KYC processes and minimize fraud by connecting user IDs across platforms. However, it also raises the risk that consumers falsely accused of fraud can be accidentally kicked off an entire network of financial platforms—not just one.

Given that other financial institutions may have anti-fraud operations more likely to cause false positives, fintechs and financial institutions may have to prepare for a greater influx of remediation cases in which a consumer was kicked off their platforms for activity on other platforms. These networks may have to communicate with one another more frequently as a result—leading to robust intra-network operability and shared anti-fraud practices over time.