Article 4 min

What global payment providers can teach us about building digital identity networks

Identity networks
Identity networks

The digital economy runs on trust, and digital identity verification is the key to building that trust. In fact, verification could be called the passport to the digital economy —  it gives businesses the assurance they need to allow consumers access to goods and services. In order to provide that assurance, identity verification must go wherever the global digital economy goes. 

It’s a simple concept, but the reality is much more complex. The problem is the internet. It wasn’t built to support the trust framework required for global businesses and consumers to securely engage in digital transactions. While there are layers of protocols and methodologies for transporting data over networks, there is no protocol for transporting assurance. On the internet, there is no standardized way to establish that an individual is who they say they are — the essence of identity.

The inspiring infrastructure of global payment networks

Global payment providers are the masters of standardization and interoperability. For decades, they have enabled cross-border payments in one form or another, and digital identity providers can benefit from their expertise. 

“The writing’s on the wall from the payments space,” Trulioo founder and chairman Stephen Ufford told PYMNTS last September. “The card networks have essentially given us the roadmap on how to solve identity when they solved card payments.”

This is how it works: Visa, MasterCard and other payment providers have created “rails,” or networks. These rails enable a business or individual to quickly and securely transfer funds to another business or individual. According to PYMNTS, a consumer whose card is on the payment network holds a trusted identity for transacting business anywhere the network is accepted. The cardholder doesn’t need their credentials verified each time they use their card. 

Enabling digital payments without reinventing the wheel

Countless payment providers “ride the rails” — use the existing global payment networks — to build and deliver their own solutions. Three well-known examples of this include mobile wallets, mobile payment providers and Click to Pay:

  • Mobile wallets such as Apple Pay, Google Pay and Samsung Pay simulate physical wallets. Consumers store digital versions of their cards in a “wallet” on their smartphone, which they can use at checkout. Since consumers still use MasterCard, Visa or other payment cards, mobile wallet providers rely on the card network rails to enable transactions.
  • Mobile payment providers such as PayPal or Skrill also must link to debit or credit card accounts for their solutions to work. For example, Skrill’s Quick Checkout offers businesses a single integration for accepting multiple payments, including cards, wallets and instant bank transfers.
  • Click to Pay is a technology built on the EMV Secure Remote Commerce standard that makes online shopping easier with faster payments. Rather than fill out their card information for every purchase, customers simply press the “Click to Pay” button on a merchant site. For online businesses, Click to Pay provides a single virtual terminal — similar to a terminal in a brick-and-mortar store — that accepts cards from multiple payment providers.

Riding the rails with digital identity networks

Digital identity can take a similar approach by creating networks. Anyone on a digital identity network issues or accepts an identity, and users choose which counterparties on the network to trust. When combined, these networks create a global, interoperable system for identity verification. The World Economic Forum describes it this way: “A global system for identity initially requires the construction of discrete identity networks, and then the creation of rails between them.” 

The use of digital identity networks enables a holistic approach to verification. The identity network infrastructure — or rails —includes all the verification methods and data sources needed for secure transactions. Each time a company wants to verify a customer or business identity, the network does the hard job of verification based on the company’s risk tolerance and the workflow (such as onboarding). In this way, the identity network rails offer multiple levels of assurance that the individual is who they say they are.

For consumers, the digital identity network reduces friction during onboarding or other processes. They avoid the frustration of multiple attempts to verify their identity or in-person identity checks. Perhaps most importantly, the identity network infrastructure allows digital access across borders, so any customer anywhere can bank, shop, transfer funds or sell products and services. 

Regarding global payment networks and digital identity, Ufford said, “Why shouldn’t identity function the same way? Why shouldn’t we ask all the governments and all of the commercial parties involved to still continue to innovate and build all these different identity solutions? Why shouldn’t there be a network approach that stitches together all these pieces just like the payment networks? It’s a great solution.”