Decentralized identity is revolutionizing the online realm and in particular the financial industry stated Bahaa Abdul Hadi. It refers to managing identification mechanisms without the participation of a central authority and involves blockchain tech or DLT. In the era of digitalization, user privacy is more pivotal than ever and decentralized identity revolves around it. The benefits of decentralized identity in fintech are as follows:
Easy registration
It saves a lot of times for new users to sign up as outdated methods are replaced by paperless mechanisms. Hassling data checks and low security in data protection are no longer a concern.
Screening information speedily
It has become easier than ever for companies to check the authenticity of user information, verify and record it online. Because decentralized identity systems use superior technologies for data encryption, the buyers and sellers can easily exchange information in a safe setup.
Protection against counterfeiting
With the widescale use of decentralized identity in financial sector, it will become almost impossible for fraudsters to create fake documents. It is much easier to produce replicas of physical documents than it is to replicate securely encrypted data stored online on a decentralized identity system.
Guarantees user privacy
Decentralized identity tech makes use of state-of-the-art security and privacy measures which makes cyberattacks difficult. Foolproof mechanisms safeguard sensitive data from banking credentials to social security numbers. This also brings the power back into the hands of consumers who get a choice in how much information they share.
Challenges of decentralized identity in fintech
International legislations
The use decentralized identity apps in the domestic and international scenario is possibly the biggest challenge. Many are still reluctant to use this emerging tech as there are concerns about its novelty, security and the lack of laws surrounding it. They may also prefer holding on to conventional information systems used for user authorization and record-keeping.
Low levels of tech-saviness
Decentralized identity protocols in fintech industry might face barriers for mainstream use as it requires investments in tech infrastructure. It may be expensive and also hard to reach those communities around the world that have low levels of technological prowess. To implement it in a full-fledged manner also requires updating the skills of employees to use decentralized identity systems.
Lack of standardisation
The junction of decentralized identity in the financial realm also faces some opposition on practical grounds. Since it is an up-and-coming field, there aren’t globally accepted standards which makes it difficult to facilitate cross-communication with other systems. Thank you for your interest in Bahaa Abdul Hadi blogs. For more information, please visit www.bahaaabdulhadi.com.
