Digital Identity Tech Reduces Fraud and Onboarding Friction by Simplifying KYC Processes – Report

Digital identity passports refer to a technology that allows users to aggregate their identification credentials—such as government-issued IDs, banking information, and health data—into a single digital format. This, according to an update from PitchBook.

PitchBook explained that this digital passport “ensures frictionless, secure access to services that require identity verification, allowing users to store, share, and manage their credentials easily.”

As noted in the research report from PitchBook, the primary goal is “to reduce inefficiencies in identity verification processes, ensure secure transmission, and create a more seamless user experience in a digital-first world.”

PitchBook added that digital identity passports allow users “to securely store and manage various credentials, such as government-issued IDs and financial documents, while maintaining control over who can access this information.”

PitchBook also mentioned that these passports act “as digital wallets, streamlining processes like account openings and loan applications by enabling quick sharing of verified credentials”

PitchBook pointed out that the encryption employed “by these passports ensures privacy by preventing unauthorized  access, even from the passport provider.”

For both consumers as well as businesses, this technology “reduces fraud and onboarding friction by simplifying Know Your Customer (KYC) processes, leading to higher conversion rates and lower verification costs.”

PitchBook also noted that the “benefits extend to both B2C and B2B sectors, as the quick access to pre-verified information aligns with the growth of digital financial services and broader digital-first services.”

Additionally, this system helps address “a key pain point for financial services companies—high abandonment rates for financial product applications—by offering a smoother, more secure identity verification process.”

The digital identity process involves three key roles: the issuer, holder, and verifier.

The issuer, such as a university, creates and “signs credentials for diplomas, for example.”

The holder, often an individual, securely stores the credential in a digital wallet.”

When needed, the verifier (such as an employer) requests and “checks the credential’s authenticity using cryptographic methods, ensuring it has not been altered.”

This process, based on World Wide Web Consortium (W3C) standards, “ensures secure, decentralized, and verifiable exchanges of digital credentials, maintaining trust between parties.”

UltraPass is a startup that works with “both issuers and verifiers to increase data linkages and verification processes while retaining privacy.”

As noted by PitchBook, several key technologies underpin the functionality of digital identity passports:

  • Blockchain: A tamper-proof, decentralized system for storing and verifying credentials is ensured through blockchains. It is important to note, however, that not all digital identity passports use blockchains.
  • Decentralized identifiers (DIDs): These are a type of digital identifier that enables individuals, organizations, and devices to establish verifiable, selfsovereign identities without relying on centralized authorities. Unlike traditional identifiers—email or usernames—DIDs are created and managed by users themselves. They are often used in conjunction with verifiable credentials and blockchain technology, allowing for secure, tamper-proof identity verification. DIDs enhance privacy and give users more control over their personal data by allowing them to choose what information to share and with whom.
  • Biometric verification: Fingerprint scans, facial recognition, or iris scans add an additional layer of security.
  • Encryption and cryptography: Data is encrypted both in storage and during transmission to ensure that it cannot be accessed by unauthorized parties. Portabl is a startup that encrypts its users’ data into a digital passport and gives the user full control over how this data is shared.


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