According to IDC, 79% of digitally mature companies will make trust programmes a priority in 2023. But for digital trust to truly transform global value chains, a universal approach is required, argues Stephan Wolf, CEO of GLEIF. Secure and trusted identities are essential to solving a whole range of issues currently hindering trade flows, from fraud and risk mitigation to sustainability and environmental protection, financial inclusion and supply chain efficiency.
The world’s businesses are hungry for change. According to a recent IDC Technology Spotlight* conducted on behalf of GLEIF, 79% of organisations globally are prioritising ‘trust programmes’ this year, investing in security, privacy and compliance to improve their risk posture.
37% of these companies said that mitigating risks that threaten digital trust is one of the biggest challenges in running a digital business. This willingness to invest is also reflected in IDC’s forecasts: despite the challenging economic conditions in the region, the identity and digital trust technology (IDT) market is expected to see double-digit year-on-year growth across EMEA.
A significant portion of the market also sees this topic as a competitive opportunity: about 50% of companies surveyed by IDC said that identity security is either a source of operational savings, a linchpin for overall security, or a technology they want to spend more on.” Some 74% of companies already have formal trust programmes in place at varying levels of maturity, some of which focus solely on security and privacy, while others already incorporate customer experience, reputation, sustainability and diversity.
None of this comes as a surprise. While the pandemic is going down in history, the global economy now has to deal with unprecedented levels of identity fraud. This increase in digital crime is causing enormous financial damage around the world and destroying vital trust between counterparties, especially those operating across borders and in different jurisdictions.
These acute conditions suggest that the world cannot – and should not – wait for traditional market forces to present a ‘solution’. The usual technology market life cycle of innovation, then fragmentation and finally consolidation around a few dominant proprietary solutions will take too long to settle down. Even then, this model would only lead to the emergence of competing solutions that favour commercial biases that favour some regions over others, preventing widespread adoption. Instead, commercial neutrality and standardisation are needed to promote national and international use.
Global companies and supply chains today need to be more flexible and resilient
IDC believes that three key success factors will determine the future of digital identity and the digitisation of commerce: Connectivity, ease of access and a critical mass of participants. In addition, the analyst firm entices with a big carrot. If trade ecosystems can be made interoperable, standardised, technology-independent and easily accessible, the firm expects digital trade finance to account for 30% of all trade finance by 2028.
Simply put, global supply chains need a global identity solution, and they need it fast. This makes the availability of secure, reliable and globally recognised organisational identities a key requirement and foundation for thriving global trade.
The Global Legal Entity Identifier (LEI) system is perfectly suited to play this role. Established in June 2014 by the Financial Stability Board (FSB), the Global Legal Entity Identifier Foundation (GLEIF) is a supranational, non-profit organisation that regulates and supports the adoption and use of the LEI – a truly universal corporate identity system supported and overseen by the G20, the FSB and the Regulatory Oversight Committee (ROC), a group of global authorities.
LEI is a cross-border business identification solution that is open, reliable and easily integrated into regulated frameworks.
More than two million legal entities around the world already identify themselves internationally with an LEI. This is a 20-digit code linked to a verified company registration and a record in the Global LEI Index, a database managed by GLEIF and available to everyone free of charge. No two LEIs are ever the same. An LEI stands for a legal entity. This means that any third party – from a curious consumer to a regulator – anywhere in the world can match an organisation’s identity to a legitimate and verified data source.
In the fight against money laundering, terrorist financing and other forms of financial crime, more than 200 financial regulators worldwide have now mandated the LEI for legal entities operating in capital markets. The system now goes beyond regulated use and focuses on helping organisations use the LEI to create greater trust, efficiency and transparency in trading of all kinds. To this end, GLEIF has developed a new model of decentralised corporate identity, the verifiable LEI (vLEI), which allows businesses anywhere in the world to use the global LEI system to identify themselves and digitally verify the authenticity of counterparties. The vLEI is in line with the popular “never trust, always verify” mantra embodied by the counterintuitively named “Zero Trust Architecture” movement that is rapidly growing in the cybersecurity industry. It provides a new, verifiable layer of digital trust that sits beneath the conventional information exchanged between supply chain companies.