Massive Growth in Identity and Digital Trust Technology Signals a Sea Change in Global Trade
According to IDC, 79% of digitally mature organizations will prioritize trust programs in 2023. Yet for digitized trust to truly transform global value chains a universal approach is needed, argues Stephan Wolf, CEO, GLEIF. Secure and reliable identities are vital prerequisite for solving a whole basket of problems currently inhibiting trade flows relating to fraud and risk mitigation together with sustainability and environmental stewardship, financial inclusion, and supply chain efficiency.
Author: Stephan Wolf
The world's businesses are hungry for change. According to a recent IDC Technology Spotlight* conducted on behalf of GLEIF, some 79% of organizations globally are prioritizing 'trust programs' this year, making investments in security, privacy, and compliance to improve their risk posture.
37% of those firms cited 'mitigating the risk that threatens digital trust' as one of the most challenging facets of running a digital business. These investment appetites are also reflected in IDC’s forecasting where, despite the region’s troublesome economic conditions, double digit year-on-year growth across EMEA is expected in the market for Identity and Digital Trust (IDT) technologies.
A significant portion of the market also views this issue as a competitive opportunity: about 50% of the companies interviewed by IDC stated that identity security is either ‘a source of operational savings, a linchpin for overall security or a technology they wished to spend more on’. About 74% already have formal trust programs of variable maturity in place, some focused solely on security and privacy, with others already encompassing customer experience, reputation, sustainability, and diversity.
None of this comes as any surprise. As the pandemic fades into history, the global economy must now wrestle with never-before-seen levels of identity related fraud. This increase in digital crime is causing huge financial damage globally and destroying vital trust between counterparty organizations, particularly those operating across borders and legal jurisdictions.
Such acute conditions suggest that the world cannot - should not - wait for conventional market forces to present 'a solution'. The common tech market lifecycle of innovation, then fragmentation, before ultimate consolidation around a few dominating proprietary solutions, will take too long to shake out. Even then, this model would only succeed in producing competing solutions that foster commercial biases that favor some regions over others, thus deterring universal uptake. Instead, commercial neutrality and standardization are needed to foster national and international usage.
Worldwide businesses and supply chains must now be more agile and resilient
IDC posits that three key success factors will determine the future of digital identity and trade digitalization: interconnectivity, ease of access, and a critical mass of participants. Moreover, the analyst firm also dangles a huge carrot. If trade ecosystems can become interoperable, standardized, technology-agnostic, and easily accessible, by 2028, it expects digital trade finance transactions to account for 30% of all trade finance.
Put simply, global supply chains need a global identity solution and quickly. This makes the availability of secure, reliable, and globally recognized organizational identities a vital prerequisite and a foundation for prospering global trade.
The Global Legal Entity Identifier (LEI) System is perfectly suited to play this role. Established by the Financial Stability Board (FSB) in June 2014, the Global Legal Entity Identifier Foundation (GLEIF) is a supra-national, not-for-profit organization that regulates and supports the implementation and use of the LEI - a genuinely universal business identity system backed and overseen by the G20, the FSB and the Regulatory Oversight Committee (ROC), a group of worldwide public authorities.
LEI is a cross-border solution for entity identification that is open, reliable, and easily integrated into regulated frameworks
Over two million legal entities around the world already identify themselves internationally using an LEI. It is a 20-character code connected to a verified business registration and information record in the Global LEI Index, a data bank maintained by GLEIF and made available to everyone, free of charge. No two LEIs are ever the same. One LEI represents one legal entity. This means that any third party - from a curious consumer to a regulatory supervisor - anywhere in the world can cross-reference who an organization claims to be against a legitimate and verified data source.
In the fight against money laundering, terrorism financing, and other forms of financial crime, more than 200 financial regulators worldwide have now mandated the LEI among legal entities engaging in capital markets. The system is now expanding beyond regulated use and re-focusing on helping organizations use the LEI to bring greater trust, efficiencies, and transparency to trade of all kinds. In doing so, GLEIF has developed a new model of decentralized business identity, the verifiable LEI (vLEI), that enables businesses everywhere to use the Global LEI System to identify themselves and verify the authenticity of counterparty organizations digitally. The vLEI conforms to the popular "never trust, always verify” mantra, embodied by the counterintuitively labeled “Zero Trust Architecture” movement, which is rapidly growing within the cybersecurity industry. It provides a new, verifiable digital trust layer that sits beneath the conventional information exchanged between supply chain organizations.
The LEI and vLEI system can foster dramatic improvements in trading dynamics among those using it, streamlining Know Your Customer and other supplier onboarding due diligence checks, improving risk management, and instilling greater confidence amongst trading parties resulting in more transparent and efficient cross-border exchanges of goods and data. This doesn't just improve the experience for the customer, it improves it for everyone involved. And because the LEI and vLEI system is a cross-border entity identification solution that is open, reliable, massively scalable, and easily integrated into regulated frameworks, it is uniquely positioned to answer the call that can be heard so clearly from all corners of the digital economy.
*IDC Technology Spotlight: Ensuring and Driving Trusted Business with Secure and Reliable Identities, March 2023, sponsored by GLEIF.
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Stephan Wolf is the CEO of the Global Legal Entity Identifier Foundation (GLEIF). In 2021, he was appointed to an all-new Industry Advisory Board (IAB) as part of the International Chamber of Commerce’s (ICC) Digital Standards Initiative (DSI). In that capacity, he serves as co-chair of the workstream on ‚Trusted Technology Environment‘. Between January 2017 and June 2020, Mr. Wolf was Co-convener of the International Organization for Standardization Technical Committee 68 FinTech Technical Advisory Group (ISO TC 68 FinTech TAG). In January 2017, Mr. Wolf was named one of the Top 100 Leaders in Identity by One World Identity. He has extensive experience in establishing data operations and global implementation strategy. He has led the advancement of key business and product development strategies throughout his career. Mr. Wolf co-founded IS Innovative Software GmbH in 1989 and served first as its managing director. He was later named spokesman of the executive board of its successor IS.Teledata AG. This company ultimately became part of Interactive Data Corporation where Mr. Wolf held the role of CTO. Mr. Wolf holds a university degree in business administration from J. W. Goethe University, Frankfurt am Main.