What is the cost of convenience? Wondering, right? Well, let me explain it to you through an example. Have you tried booking a movie ticket online? In case you have done that, there’s a convenience fee added on top of the actual price. And, likely, the same scenario happens when you are booking flight tickets or any other thing from a third-party website.
Now, a case in point for such a reference is that when you receive some amount of convenience, you do a value trade. In the above example, a small fee. Or, on social media, your data. But when reputed financial institutions use individual/customer identity as a force multiplier for expanding their ambitious pursuits, the trust erodes in the financial institution because they already charge a convenience fee in the form of minimal balance payment charges. Still, when they abuse the custodianship of identities for personal gains, things get murkier.
How Are Financial Institutions Abusing Custodial of Identities?
The Bank’s modus operandi for transaction validation of its customers is through a network of authentication that uses government IDs and private keys/ authorized passwords through OTPs as a base. However, the sad part of such an intersection is non-restrictive measures when sharing identities with the banks. As a result, banks have the liberty to use your IDs without your permission. In case you might beg to differ from such claims, a recent case that surfaced explicitly exposed the point of failures in the TradFi.
Bank of Baroda, an Indian bank, had launched a new application named Bob World, and they wanted the maximum number of users to board the application. The staff was designated with the task of onboarding at least 150 users for every specific branch. As challenges increased with respect to onboarding new users, the bank staff from the Bhopal region resorted to unethical practices.
They dug out all accounts which weren’t linked to a mobile number and attached them to respective mobile numbers using the government ID and emails to meet their targets.
When such incidents happen, one can easily measure inefficiencies of custodial identities by banks when technologies like generative AI could use such grey areas for engineering financial crimes. The safe refuge, as a result, is to own your identity and define accessibility criteria to limit abuse. How’d we do that?
Blockchains are force multipliers not only from the standpoint of stimulating the AI’s potential in a new world order but also act as a balance equalizer to keep the disadvantages of AI at bay.
How Blockchain Bundled With AI Can Put Restrictive Measures On Such Financial Frauds?
Identifying Suspicious Activities
As implied by the above case of Bank of Baroda of Bhopal, the identities were misused by banking officials, and banks had no other option but to accept the request. The point of failures of financial institutions can be mapped when AI and blockchains work in unison. For example, AI can identify specific patterns, and blockchains can eliminate the custodianship of owning identities by financial institutions. In this way, it can easily handle abuse by banking employees, even if the banks/financial institutions do not intend to do so. This could be game-changing when it comes to restoring faith in financial institutions through the use of AI and blockchains.
Since financial institutions control the customer identities, the risk element that comes when they have full control can be mitigated through the use of AI and blockchain working together. In this, AI would potentially identify the risks associated with the transactions, and blockchains shall validate the access. In this way, the gross abuse of customer identities can be easily verified through specific nodes that would be storing the customer data, accessible by banks and other institutions, only under the permission of the customers validated through their retinal scans. With such a way forward, not only are customer’s identities getting decentralized, but they have greater control to eliminate any type of risks.
Eliminating Identity Thefts
Identity thefts have been a pressing challenge when the world has been using archaic 2FA systems. The 2FA systems can be easily compromised because of a number of reasons. But when AI can identify the way accounts are interacting, analyzing patterns and blockchains can be applied for verifiability, it can easily mitigate the instances of account compromise. For example, AI can analyze accessibility through either biometrics or 2FA. Since 2FA is more prone to risks, biometrics can be brought into the record, and blockchains can be used for validation. In this way, customers could feel safer when interacting with banks since they would now know that their data is completely in their own control without the third party, even the banks, using the same for their personal vested interest.
However, with time, it has been evidently clear that TradFi is looking for innovations, yet innovations should come under the umbrella of accountability. With AI in the picture, the potential of ease has been amplified, but in the process, it has exposed points of failure. Hence, trusting a single organization with identities could be a great miscalculation when one knows the potential of AI if used in an unscrupulous manner. AI, blockchains and distributed identity solutions undoubtedly pave the way for the rise of the next-gen of financial supremacy in the future.