Why The Shared Economy Demands Digital Identities
The following was written by Garrett Gafke, CEO of BGV II portfolio company IdentityMind Global, for Forbes magazine, December 7 2017.
If the digital economy takes our analog products and services and transforms them for the digital channel, the shared economy takes our analog experiences and removes the burden and expense of ownership. Many have taken the shared economy’s taxi cab alternative and maybe even stayed in a hotel alternative. The shared economy is like a modern timeshare without the time requirement or the awkward marketing pitch. However, like all new areas, the transition into it is still built on analog models.
Just as web browser encryption in the early days of the web was treated as a munition by regulators until a more appropriate way to classify or treat it was created, the shared economy often relies on physical identification that represents only a single piece of the risk management puzzle — and one that can’t keep up with our multi-channel world. For instance, the terrorist who recently perpetrated a large scale act of violence in New York had a valid drivers license, which was enough identification for him to rent the van he used in the attack.
On a daily basis, this same type of information is used to identify the people who deliver the packages ordered through major online retailers, drive for ride-sharing services, run errands for on-demand task services and more. As it turns out, companies today are far too reliant on drivers licenses, passports, birth certificates and even a basic background check. These old methods can’t track relationships and are not very informative of a person’s trustworthiness or reputation. The old methods can’t keep pace with a new generation of criminal and fraudster and, typically, are not very secure.
A poor link in the security chain or a bad decision can open the door for personal information to be discovered. Then the floodgates to a wide variety of fraud types are open. And, while network security and personal security habits can be improved, hackers are savvy and can often gain access to most systems given enough time.
With all the recent data breaches, it is safe to assume that essentially all physical data has been stolen or generally compromised. While physical or static identity data has value, there is too much at risk to solely rely on it. Online activity provides a digital footprint — a footprint that can be analyzed to help better understand users and their relationships. It is this footprint, in combination with physical information, that becomes fundamental to assessing the risk of an individual.
Digital identities combine the digital and physical attributes of an individual. The resulting identity can be an evolving asset that enables better identity proofing and risk assessment. A digital identity can update at the speed of digital transactions to capture the dynamic nature of online behaviors, and those behaviors, in turn, can be used to assess the true identity and the intent of the individual. More importantly, a digital identity can ensure that we can distinguish between the real user behind an identity and a fraudster who has stolen it.
When we started building our platform and patented Electronic DNA (eDNA™) technology, it was the only commercial technology focused on and speaking about how to connect the digital and physical aspects of an identity to perform a better risk assessment. Fast forward a few years and digital identity is a term that the market is starting to accept as fundamental in identifying the risk of dealing with online users and in establishing trust online.
Ultimately, digital identities can become assets that can be monitored for changes in behaviors. That is how one can detect compromised accounts and identity theft. You definitely want to know that the person you originally vetted is really the person you continue to deal with, and you want to know that the data that is being presented to you by a user actually belongs to that user and hasn’t been stolen.
Back to shared economies, we would all certainly feel safer if we knew that the driver we were riding with, the guests in our shared house or our food delivery person had been properly vetted by the service we were using. The growing economy around these services could be severely damaged if it chooses to ignore the risks of dealing with poorly validated members — both as providers and consumers of these services. As pointed out earlier, it only takes a quick review of the New York incident or Colorado’s nearly $9 million dollar fine on Uber to begin seeing the risk these services face. The shared economy is not going away. Nor is the need to vet people at a digital identity level.