Blockchain technology, financial and self-sovereign digital identities

Imagine if it were possible for your identity to be available at any time, where third parties could only access it with your consent. The discourse that everyone has the right to own their digital identity has been gaining momentum around the world. And the path to this is the development of “decentralized digital identity” solutions.

Here, it is important to clarify that according to the concept of self-sovereign digital identity, owners (holders) of the digital identity are responsible for the control and management of their data. And that not only includes basic personal data but also information about your relationships with other people, companies and even things.

It is users who control their data, which is in line with the objective of data protection laws such as General Data Protection Regulation, or GDPR, and the General Law for the Protection of Personal Data in Brazil, commonly known as LGPD, which comes into force in August 2020. Decentralized digital identity consists of several electronic credentials issued by different participating identifiers (also called agents) that are part of a blockchain network.

FinID is a project developed through CPqD, one of the largest telecommunications research and development centers in Latin America which uses the concept of decentralized digital identity.

In Brazil, the intention is to use the FinID in other projects coordinated by the national central bank, such as open banking, which involves the exchange of user information between banks and the new instant payment platform. FinID makes it possible to implement these projects, as it gives users control and management of access to their data.

With decentralized digital identity, this credential, formed by personal data and various identifiers, is in the user’s possession, who can present it to other financial institutions with which they do not relate, but which have an offer of interest. So, FinID basically works like a passport that a person can use at several banks. Let’s take a look at what it is in more detail.

According to a FinID report published at LIFT, a virtual laboratory that promotes prototypes of financial and technological innovation with support from the Central Bank of Brazil, the implementation of the open financial system and the new instant payment platform, known as PIX, will be an evolution of the Brazilian financial sector that will happen in the short or medium term.

A major challenge associated with this evolution is the protection and portability of customers’ personal data, from registration information to data relating to deposit accounts and credit operations. Thus, it appears in the report that the FinID project aims to create a unique, portable and secure identity for financial institutions, with clients in control of their own personal data and enabling easy access to contract financial services.

The solution will also allow customers, through this financial identification and their connections, to initiate transactions such as bank transfers and payments to other users or institutions in the FinID solution network. The FinID project aims to develop a decentralized financial identity management solution, comprising: identity creation and management; digital account accreditation (called onboarding); and authentication of identities and information.

To meet the proposed objectives, the main FinID goals pointed out in the report are:

Make the identification process less bureaucratic for the final borrower. This allows the use of a unique financial credential for the identification and access to financial services, empowering the final borrower to control the use of their financial data. The intention here is to allow the final borrower to manage which financial institutions they wish to share their data with, what data and for what purposes that data will be used through notifications and consent requests to access the information managed by the solution.

Also facilitate and automate the process of admitting new customers to financial institutions, also known as onboarding, through the decentralized management of keys and the use of unique credentials for different sectors. This will mainly assist the onboarding process for new startups in the financial sector (the so-called fintech) because they emerge without a customer portfolio. The fintech that participates in the FinID network can consider all service providers that have a valid credential as potential customers and enable the implementation of the Know Your Customer concept.