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Bank identities are the key to creating a digital culture of privacy and security


Louie Gasparini
Louie Gasparini, CEO of Covault

A 1993 cartoon published in the New Yorker depicts two dogs sitting at a computer desk. One dog, seated in a swivel chair, looks at the other and says, “On the Internet, nobody knows you’re a dog.”

The underlying humor of this cartoon has persisted well into the digital age, with a dark twist: The anonymity hinted at in the original cartoon is just one part of an environment where large-scale leaks of personal data, “fake news” spread on the Internet, and identity theft are common threats to digital life.

But there are already steps we can take to prove we’re not “dogs,” according to Louie Gasparini, CEO and founder of Covault. “We envision a future where verifiable digital identities are more commonplace,” he said. “In the future, you’re not going to have scams telling you that your best friend is stuck in Turkey and you need to wire them $1,000 immediately.”

Covault, a BBVA New Digital Businesses portfolio company, is a digital identity platform “striving to create a world where consumers have control of all their personal identity information across devices, and can share this information with institutions on their own terms” — all through their secure bank identities.

Why bank identities?

Bank identities are key to brokering trust between merchants and consumers for many reasons, according to Gasparini. “The root of trust in identities starts with government-issued IDs, but in the case of the United States, the government doesn’t want to be Big Brother in the sky — so you’re not seeing them issuing digital identities,” he said.

But banks have to verify a customer’s identity before allowing them to open a bank account, which they do using the information on customer’s government-issued ID.

“Banks go through an extensive know your customer (KYC) process. Banks have rules for compliance with local laws. Not a lot of other sectors must do that,” Gasparini said. “Banks are in a good spot to verify that you are who you say you are.”

Benefits of bank-based digital identity platforms

Digital-identity platforms offer benefits to merchants and consumers alike, Gasparini says, from the environment of trust that banks create to the measure of data protection they offer. They can even make the registration process simpler, benefiting all involved.

A ‘halo effect’ of trust
In general, banks are inherently trustworthy institutions. So, in the case of a platform like Covault, using banking data to verify identity creates a “halo effect” where trust is conveyed on both sides, merchant and customer.

Because banks do the heavy lifting on identity verification, merchants can automatically trust that their users have gone through the necessary steps to prove who they are.

You don’t need your personal information all over the place; you can store it in one spot with somebody you trust, then pass that identity along when it’s requested,” Gasparini said.

On the other hand, customers can trust that their data is safe when using Covault: “Becoming part of a network like ours opens merchants up to scrutiny: In the Covault network, only those with a contract can be part of the network, and to be accepted, merchants have to be vetted,” Gasparini said.

Data privacy and protection
Identity-verification platforms also protect users’ sensitive data — and protect merchants by allowing them to ask only for secure identity verification via “data escrow” rather than collecting stores of information that could later implicate them in a data breach or other security leak.
And, of course, when consumers no longer want a merchant to have access to their information, they can revoke it as easily as they granted it.

Streamlined user registration
In one use case, Covault worked with a merchant to streamline its registration process from more than 20 screens of questions and data input to 4 simple screens.

Supplying the merchant with verified identity data from Covault behind the scenes removed the need for users to directly input all but about a quarter of their personal information, saving time and creating a more secure process overall.

In general, smoothing processes like these to include fewer steps can reduce friction and increase merchants’ user acquisition — while decreasing acquisition costs — and make it easier for new customers to get up and running (and spending, in many cases) after registration.

Why banks should be on board

At a time when banks are looking for more meaningful ways to integrate with their customers’ everyday lives, leveraging bank identities across a spectrum of merchant-customer relationships is one such solution.

Payment platforms like PayPal are already using bank identities and account information to provide value for consumers — why can’t banks cut out the middleman and offer that service directly?

“The banks do all the hard work of verifying their customers’ identities, but they’re allowing other businesses to co-opt the front-end user interface and have the relationships with users,” Gasparini said. “Banks should be able to directly leverage their relationships with customers.”

Covault is leading the charge to create a future where banks play a larger role in their customers lives by providing ways to protect their data, share it judiciously, and speed them through their everyday transactions and sign-up processes.

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