How Digital Passports Can Benefit the Global Society
Digitalisation is what has made our lives much easier in the last 30 years. The possibility to shop, book tickets, pay bills, and do banking online has become an essential part of our daily life. However, when it comes to passports, it seems that more progress is yet to be made: we still use paper ID documents and have to present them numerous times whenever our identities need to be verified.
Digital passports could facilitate traveling, ordering services online, and completing KYC checks both for individuals and businesses. There are relatively few solutions in the field of electronic ID documents — but year by year, their number is increasing.
What is a digital passport?
There are multiple approaches to digital ID documents.
One kind of digital passport, often referred to as e-passport, is commonly known as a biometric ID. In addition to the paper-based identity data, it features an electronic microprocessor chip containing information like fingerprints and photos. Such passports are significantly more resistant to forgery and enhance the travel experience for their owners. This type of document is widely used.
However, a biometric passport is still a physical document with limited usability for online services. In this article, we are focusing on documents that exist entirely in a digital format. There are very few such solutions available so far. These encompass official documents issued by the authorities of a specific country, as well as specialised technical solutions for storing and exchanging ID data, developed by businesses for other enterprises and individuals.
Here are a few examples of digital passports available today.
Finland’s digital passport: Facilitating border checks
The Finnish government is conducting an experiment: they have introduced a digital passport aimed at significantly accelerating travelers' border crossings. It's the world's first digital travel document.
The ID, called the Digital Travel Credentials (DTC), is currently available only to Finnish citizens. To get it, they need to install the app, schedule an appointment at the police station, and bring their passport. The police will take a photo and convert the passport information into a digital format.
Here's how it works at the border. A traveler arrives at the airport, heads to the special control line, and scans the QR code with their information. The border guard verifies their photo, and the traveler proceeds.
It is only possible now to use DTC for Finnair flights to three cities in the UK. The project is in a trial phase until 2024, during which authorities will assess how much it expedites border crossings. Importantly, the passport isn't completely converted into digital format; its physical counterpart still remains with the traveler.
If the trial proves successful, DTC might be introduced across the entire EU in the future. The European Union aims to achieve a minimum of 80% digital ID adoption among citizens in the bloc by 2030.
EY: Digital passport for businesses
Another type of digital passport was created by EY – a global consulting and auditing firm – for small and medium-sized enterprises (SMEs). SMEs, defined as companies with up to 250 employees, make up 99.5% of businesses in G7 nations, but banks worldwide struggle to serve them. The key challenge is the time-consuming and complex onboarding process due to rigorous KYC requirements. Banks need to invest time and money in keeping their SME customer information refreshed, which is both expensive for the banks and inconvenient for the enterprises.
The solution is a digital passport for businesses that is issued and maintained by the EY. The passport acts as an ecosystem portal: it helps enterprises easily share their information with others. Small and medium businesses are in charge of their data and can share it with different companies as needed. They can update their information while working with different service providers, making things convenient for them.
The EY digital passport ecosystem. Image source
The Digital Passport technology allows small and medium-sized businesses to securely share information through authorized digital channels, ensuring a secure and traceable process.
Digital passport: Facilitated KYC flow
Another solution in the digital passport field is dedicated to optimizing the KYC process for businesses and their customers. It reduces the time users spend on a repeated KYC routine and lowers acquisition costs for businesses.
Today, many digital services aim to identify their customers through KYC checks. This applies not only to banks and cryptocurrency exchanges but also to booking platforms, government services, e-commerce platforms, car rentals, and much more.
When clients sign up on a new platform, they're required to undergo a comprehensive KYC check. This is time-consuming, inconvenient, and raises privacy concerns. It also escalates user acquisition costs for businesses and lowers conversion rates: a lot of users are reluctant to undergo a complete KYC check, and occasionally, they either forget about it or give up during the process.
A possible solution to this problem is being researched by Choise.com – a versatile cryptocurrency platform offering tools to profit from digital assets. Let's just imagine the digital ID, that is a unified digital passport service: users complete KYC once and can then use it across various platforms. Once the client has their digital passport, sharing it with other services is as easy as a single click whenever a KYC check is required. This way, businesses won't have to persuade every new customer to go through KYC; they'll just need to request access to the user's data and pay a small fee if the user consents. How do you feel about it?
Digital passports will change the way we manage our ID data
There aren't many solutions for the complete digitization of passport data so far, but existing and upcoming ones suggest that ID exchange will be simplified in the coming years. Travelers will pass through border control more quickly, businesses and banks will find it easier to exchange data, and users of digital services won't need to repeatedly present their passports online. These are just a few specific examples, and we expect many new use cases for digital passports in the near future.
