Digital ID Management: Why the World Needs the LEI
- Stephan Wolf, CEO at the Global LEI Foundation
- 03.08.2020 01:15 pm Legal Entity Identifier
It is the only open, standardized and regulatory-endorsed system capable of establishing digitized trust between all legal entities, everywhere.
There is a fundamental principle which often hinders development in the digital economy: trust. How can an organization trust that a supplier located hundreds of kilometers away is who they say they are? Or, as a person, how can I verify that the organization receiving my personal data is indeed who I believe them to be? The process of establishing a stakeholder’s legal identity digitally has become a foundational requirement for digital life; it enables the determination of ‘who’s who’ within a digital community.
In 2020, the digitization of all kinds of personal and organizational activities has accelerated, driven in no small part by regional lockdowns and social distancing measures imposed by governments in response to Covid-19. Digital innovations in IoT, blockchain, cloud computing and open APIs, among others, are also driving digital transformation, enabling new business propositions, and redefining how organizations connect and engage with one another. Amid this sea of change, more processes and interactions are making the switch to digital, and stakeholders are having to work harder than ever to mitigate doubt. As a result, digital identity management has never been more important.
Yet the field is becoming increasingly siloed. In a globalized digital economy, verifying the identity of legal entities such as customers, partners and suppliers is becoming an increasingly complex and costly challenge. For example, a survey conducted by GLEIF demonstrated that 50% of financial institutions use, on average, four identifiers to help identify client organizations. Even within single jurisdictions it is common for multiple identity systems to coexist, and frequently offer conflicting information.
Ultimately, this fragmentation will lead to frustration and high costs for users caused by the need to repeatedly re-establish their identity across different networks. It may also lead to monopolies, created by those that can build the biggest, fastest networks, usually with proprietary platforms and without leveraging the benefits of standards.
The LEI: A uniquely powerful proposition for digital ID management
These conditions present a unique opportunity for the Global Legal Entity Identifier System to step in and play an important enabling role. The Legal Entity Identifier (LEI) is a 20-character, alpha-numeric code based on the ISO 17442 standard that connects to key reference information to enable clear and unique identification of legally significant persons, companies and organizations collectively known as ‘legal entities’. Designed to provide greater transparency for governments and industries around the world, the Global LEI System enables the issuance of LEIs, and provides open, unrestricted access to LEI data on a global scale.
Put another way, the Global LEI System is the linchpin that connects the dots across the universe of entity identification and solves the problem of trust for all legal entities, everywhere. This means the LEI is uniquely powerful in its ability to enable digital transformation in a way that is truly interoperable for everyone.
As a regulatory-endorsed system overseen by the LEI Regulatory Oversight Commission (LEI ROC), it is the only system that establishes a recognized, monitored and standardized global identity for legal entities, linked to the entity’s national ID system.
It is also underpinned by open data, meaning any person or company can access the LEI and its associated reference data. This prevents user lock-in for vendors and consumers alike. Furthermore, the system bridges traditional and online processes by serving as a tool to identify the counterparty in any transaction, and can aggregate data on legal entities held in repositories.
As the global economy continues to go digital, overcoming the challenges associated with digital identity management is crucial. The ability to accurately identify legal entities represents a huge part of that effort. Only by establishing trust between legal counterparties can the true benefits of a digitally enabled world be realized. Happily, the solutions are there already. It is now up to us to apply them appropriately.
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