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Digital identities - how and why we are where we are, what it's proposed we do about it and whether it will work.

The fintech world is at last waking up to the biggest problem facing real-world businesses: how to perform KYC on customers you will never physically meet and who live lives which do not intersect with your own except for one specific purpose - the provision of a service. Of course, being tech-driven, fintechs are looking for a tech solution and they've even got a name for it - Digital Identities. The world is full of "White Papers" but there are no practical applications nearing real-world testing, so far as we can ascertain. It appears that, as in so many cases, people are starting with the tech and trying to make the problem fit it, rather than looking at the problem and trying to build tech around reality, says Nigel Morris-Cotterill.

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**This article has been updated for spelling, grammar and one or two additions or amendments performed to improve clarity.** 11 November 2019.

Who is going to roam the millions of square miles of remote country to meet those of limited literacy and explain it to them? (No-one, in the Basel Institute's supposed solution). Who is going to be prepared to make repeat visits to outback farms because people were out tending their herds or flocks or trying to deal with an outbreak of pests, or because aside from a lock box with the family's birth certificates and maybe a much cherished School of the Air certificate kept in a kitchen cupboard, people may struggle to find the necessary documents. No matter which of the various proposals wins out, the truth is that only face-to-face verification is close to effective. Even more importantly, who is going to approve the certification body? One company that claims to have offices in multiple countries and to be the biggest certification body in at least one country is actually based in India with drop-box, virtual offices, in most (all?) of the countries that it claims to operate in. There is zero prospect of that company handling millions of request for digital identity applications across the the world.

The stated objective of many fintech companies is to bring financial services to those who presently do not have access to such services. In our minds, thoughts turn to two classes of persons - the urban poor and the rural, even remote. But, in fact, in the UK, for example, there are many in urban environments whose access to financial services has been all but abolished by the systematic closure of bank branches in smaller towns and, even, the closure of ATMs which might have been converted to provide kiosk services.

The small Herefordshire town of Ledbury has lost most of its banks and one of the two remaining has reduced its working week to four week days. ATMs have gone with them. In Kuala Lumpur, Malaysia's capital city, over the past decade the closure of a number of city centre bank branches with ATMs in convenience stores taking their place. Malaysia has an enviable system of integrated ATM facilities which are useful kiosks but which do not accept cash deposits, a significant problem for businesses. The most suggested solution is to move customers and businesses to mobile transaction banking. Malaysia has an obsession with identification: almost everything, from receiving a parcel from a courier to subscribing to cable TV requires the taking (but not verification) of an identification number from a national identify card or a passport. Using a money transfer system or a bureau de change, even for small amounts, requires the production of similar identification, a copy of which is retained, so raising data security questions at micro-businesses.

The initial question is straightforward and it's been plaguing all businesses that are subject to money laundering control measures for a quarter of a century: how do I know who I am dealing with? While much attention has been put into business done at a distance, the reality is that face to face business is subject to similar challenges.

Technology exists (but it not confirmed as reliable) to identify forged or altered passports and driving licences, even photocopies of such documents when they are submitted on-line. But they do not overcome the single biggest problem: how to confirm that the person producing that identification is in fact the person to whom it refers.

Let's go back to Ledbury and use my own personal experience.

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