These 44 pitch decks helped fintechs disrupting trading, investing, and banking raise millions in funding

<img src="https://static-ssl.businessinsider.com/image/5de57a1efd9db2771d15a925-1200/wall street 2030 4x3.png" alt="wealth management and tech wall street 2030 4x3" />Samantha Lee/Business Insider<ul class="summary-list"><li>Matthew Alfieri is vice president on the investment team at <a href="https://www.centanagrowth.com/" target="_blank" rel="noopener">Centana Growth Partners</a>, a specialized growth-equity firm that invests solely in financial services, fintech and enterprise technology, and he currently serves as a board observer at Centana's portfolio company Beacon. </li><li>In this op-ed, Alfieri, one of <a href="https://www.businessinsider.com/wall-street-rising-stars-investing-trading-dealmaking-2019-10">Business Insider's 2019 Rising Stars of Wall Street</a>, lays out the biggest themes to watch for fintech in 2020. </li><li><a href="https://www.businessinsider.com/?hprecirc-bullet">Click here for BI Prime stories</a>.</li></ul>Fintechs have done it again.It's clear that <a href="https://www.cbinsights.com/research/report/fintech-trends-q2-2019/">investors' appetite for fintech grew</a> in 2019. We continue to be blown away by the level of innovation in the financial services ecosystem, created by companies looking to enable incumbent financial institutions and other early-stage businesses looking to disrupt the status quo.We also continue to see a proliferation in the number and types of firms providing financial products and services to consumers, from traditional banks to technology and ecommerce businesses. Amidst all the rising trends, here are the key ones we're on the lookout for.<h3>Banks roar back</h3>Some fintechs have found success in nabbing small slices of the banking pie. While they have attempted to disrupt the financial services ecosystem at-large, their impact has been limited to date and incumbent financial institutions have refused to remain silent.Banks and institutions <a href="https://www.businessinsider.com/citi-elevate-checking-account-zero-atm-fees-1-percent-interest-2019-11">bolstered investments by creating their own digital services</a> and leveraged fintech startups in <a href="https://www.businessinsider.com/jpmorgan-goldman-sachs-citi-fintech-startup-investments-2019-2019-8">cooperative partnerships</a>. In 2020, one thing is for certain - big banks have no intention of scaling down their efforts as the pressure for incumbents to maintain their competitive edge will only continue to intensify. We're already starting to see this in action. Incumbents are continuing to roll out more attractive offerings in response to the fintech tsunami.A few months ago, we <a href="https://www.forbes.com/sites/benjamincukier/2019/04/11/will-fintechs-drive-etf-fees-below-zero/#780415ad42b8">predicted</a> the "fee war," which only intensified throughout the year. What was the response from major institutions? A rollout of their own commission-free options, such as <a href="https://www.businessinsider.com/e-trade-details-hiring-spending-plans-schwab-td-ameritrade-deal-2020-1">Charles Schwab's decision to eliminate trading fees</a>. Now, with no-fee trading as <a href="https://www.businessinsider.com/investment-platform-all-of-us-challenges-robinhood-pay-for-trade-2019-9">the new norm</a>, established firms are roaring back. On top of incumbents being able to compete effectively on price, overhyped challengers have experienced infrastructure issues resulting in outages and costly margin glitches.<h3>Boomerang effect: Bundling, unbundling to rebundling</h3>A decade ago, fintechs were attempting to take charge at legacy institutions. It was the era when disrupting banks meant unbundling banks, taking over parts of the value chain and making them more customer-friendly, cost-efficient and digital. However, products and services became too dispersed as consumers started expecting more than a single breakthrough product and competitors crowded the field.While there appear to be emerging success stories within the challenger bank community, others are coming under pressure, as evidenced by their struggle to raise capital and sizable staff layoffs. Through the process of unbundling, fintechs realized they had several disadvantages, including: lack of brand recognition, smaller balance sheets/limited access to capital, uncertain regulatory schemes and difficulty in making customer economics work with a monoline financial services offering.From this perspective, many have started to re-bundle. Offering a suite of financial services requires challengers to either partner with existing banks to leverage their balance sheet and regulatory status or be regulated and capitalized like traditional banks. Certain players like Varo Money realized this early on and opted to seek a National Bank Charter, while other challenger banks decided to partner with sponsor banks. Each have their advantages and disadvantages, but to build a long-term, sustainable banking franchise we believe well-capitalized, traditional banks stand a much greater chance. The idea of rebundling banking is nothing new, but only recently has it started to gain real traction. The initial confusion and friction between regulators and fintechs have transitioned the financial services landscape into a building of partnerships. <a href="https://www.businessinsider.com/goldman-jpmorgan-blackrock-citi-define-fintech-2020-1">We're seeing several cooperation avenues for both fintechs and financial institutions</a> as they work together to build an environment of financial services around a single institution.<h3>Cloud: We're still talking about this?</h3>There is no doubt the cloud is booming. By the numbers, the cloud market accounted for <a href="https://www.gartner.com/en/newsroom/press-releases/2018-09-12-gartner-forecasts-worldwide-public-cloud-revenue-to-grow-17-percent-in-2019">$175.8 billion in sales in 2018</a> and Microsoft's cloud revenue reached $11.6 billion in Q3 of 2019. Beyond the numbers, has the cloud proven its value as more than just a buzzword? It's hard to say. Recently, IBM and Bank of America announced their own public cloud system, designed specifically for banks, while Capital One suffered a cloud breach that brought persistent security concerns back in the limelight. It seems as if financial services have dabbled in cloud solutions, and only dabbled. <a href="https://www.ft.com/content/83022e6e-a89f-11e9-b6ee-3cdf3174eb89?shareType=nongift">Nearly half (43%) of banks</a> have no cloud strategy and have not begun to consider migrating their data to the cloud. There is a vast archive of literature on the benefits of investing in the cloud, but we have yet to see the impact of these. 2020 may be the year cloud adoption finally jets to the stars, and our portfolio company Beacon Platform is a key player in enabling financial institutions to successfully and securely transition capital markets workloads to the cloud.<h3>Financial services: Gig economy edition</h3><a href="https://www.forbes.com/sites/tjmccue/2018/08/31/57-million-u-s-workers-are-part-of-the-gig-economy/#7c352d2e7118">One third of U.S. workers are now part of the gig economy</a> thanks to the likes of Uber, Postmates, and Lyft. The modern labor force as we know it has embraced change and all of the pros and cons that come with it. While these companies have lowered the barrier to workforce entry, they have yet to address the lack of HR services, retirement benefits, or occupational insurance that cushion the employment of full-time workers. Only 16% of gig workers reported having a retirement savings plan in place, compared to 52% of full-time employees that have access to an employer-sponsored plan, according to <a href="https://www.prudential.com/wps/wcm/connect/4c7de648-54fb-4ba7-98de-9f0ce03810e8/gig-workers-in-america.pdf?MOD=AJPERES&amp;CVID=mD-yCXo">recent research</a>.There is a huge opportunity for fintechs, such as GreenLight, and financial services to play a pivotal role in providing much-needed HR solutions for independent workers-setting the standard for what's 'normal' and establishing a new paradigm for employee well-being. As workforce structure and dynamics continue to evolve, fintechs will be central in building solutions to meet these new expectations, solidifying the growth and sustainability of the gig economy in the years to come.<h3>AI, data &amp; digital identity: SMS two-factor is dead</h3>Advancements in technology and fraudulent attacks have not only increased in frequency but have become more sophisticated and nuanced as they permeate online. Innovative technology and sophisticated attacks have accelerated at the same pace, without one overcoming the other. Firms need better technology solutions to sufficiently avert digital identity management threats.In 2020, we're expecting better uses of artificial intelligence, machine learning and data in advancing digital authentication and identity. We're already seeing the industry <a href="https://www.pymnts.com/news/digital-banking/2019/how-banks-are-using-ai-ml-fight-account-opening-fraud/">explore AI and ML-powered identity verification solutions</a> to detect fraud and prevent money laundering, and this momentum will only continue.Companies like <a href="https://www.jumio.com/">Jumio</a> offer biometric authentication solutions to reach KYC and AML compliance in customer onboarding. <a href="https://www.bankrate.com/banking/two-factor-authentication-financial-accounts-security/">The two-factor authentication method</a> that so many banks rely on, for instance, will likely become obsolete as financial incumbents and insurgents look to transition into surefire, data-backed, AI solutions.<h3>Payments: Always more to come</h3>2019 - what a year for payments. With the mergers of Fiserv and First Data; FIS and Worldpay; and Global Payments and TSYS, it may seem as if we're trending toward one sole payments provider. But this is far from the case. Instead, we're seeing value in vertical payments applications across different industries. The booming cannabis industry, for instance, has been signaling the need for payments solutions from fintechs as both local and federal regulators add to the complexity of the cannabis supply chain. Within the insurance ecosystem, <a href="https://www.oneincsystems.com/">One Inc</a> offers a single platform for processing premiums and claims payments. Payments innovation continues to be the common denominator across different industries and verticals, and 2020 will see a spike in demand for these embedded solutions in the financial services and adjacent industries.<h3>Special Edition-The fintech myth to bust in 2020</h3>Fintech, in many ways, became the go-to label that's been applied to any type of innovation in financial services.While innovation is crucial, "fintech" companies aren't necessarily just "fintech"-they sit squarely in lending, payments or insurance, or they build enterprise software technology that sells and is of vital use to larger, incumbent institutions. In the end, these divisive lines will blur together and ultimately disappear: all financial services will become fintechs and all fintechs will become financial services. See also: <a href="https://www.businessinsider.com/what-is-a-fintech-wall-street-technology-finance-2020-1">Here's how 44 insiders at powerful banks, buzzy startups, and big investors are thinking about financial innovation - and why the term 'fintech' may be on its last legs</a>See also: <a href="https://www.businessinsider.com/neobank-chime-make-money-in-digital-banking-2019-12">Neobanks like Chime are attracting billions in VC cash, but unlike most retail banks they don't do any lending. Here's how they've built a business on referrals and debit card swipes.</a>See also: <a href="https://www.businessinsider.com/payments-startup-dlocal-just-expanded-its-amazon-partnership-2020-1">Payments startup dLocal just expanded its Amazon partnership. We talked to its CEO about how to build infrastructure that lets Uber and Netflix accept local payments around the world.</a><a href="https://www.businessinsider.com/intelligence/10-up-and-coming-fintechs-2019?IR=T&amp;itm_source=businessinsider&amp;itm_medium=ctgr_bii&amp;itm_term=ctgr_leadgen&amp;itm_content=finance&amp;itm_campaign=10-up-and-coming-fintechs-2019-2"><img src="https://static.businessinsider.com/image/5dcb0cab7eece5025933c502" alt="Exclusive FREE Slide Deck: 10 Up and Coming Fintechs by Business Insider Intelligence" style="margin: 0 auto !important; width: 100% !important; min-width: 280px !important; max-width: 640px !important" /></a> <h3>NOW WATCH: <a href="https://www.businessinsider.com/robert-shiller-narrative-economics-compelling-stories-disrupt-2020-1">Nobel Prize-winning economist Robert Shiller explains how compelling stories are what really shape our economy - from bitcoin to Trump's presidency</a></h3> <iframe class="bijwplayerclass" src="https://content.jwplatform.com/players/n8OefsIs-CEZHWCBG.html" width="100%" height="100%" frameborder="0" scrolling="auto" style="margin:0px;"></iframe>

Here are the 7 biggest fintech trends to watch in 2020, according to a Centana Growth Partners exec

<div class="KonaFilter image-container display-table"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/5c9e8be9569b55574b7ab155-1171/helix dna-6.jpg" border="0" alt="Helix DNA 6" data-mce-source="Hollis Johnson" />Hollis Johnson</div></div></div><ul class="summary-list"><li>On Tuesday, DNA testing startup <a href="https://www.businessinsider.com/helix-dna-testing-marketplace-raises-200-million-2018-2">Helix</a> launched a new <a href="https://www.businessinsider.com/future-healthcare-dna-genetic-testing-23andme-2018-12">test</a> that looks at your risk of diseases like breast cancer, colon cancer, and high cholesterol.</li><li>You can buy the test online for $260, but it must be approved by a physician.</li><li>Helix partnered with clinical diagnostics company PerkinElmer to create the test, which includes genetics counseling. </li><li>The test also uses a type of sequencing that some experts say all DNA-based health <a href="https://www.businessinsider.com/future-healthcare-dna-genetic-testing-23andme-2018-12">tests</a> should use.</li></ul>A genetics testing company you may not have heard of just made a big debut. The startup, called <a href="https://www.businessinsider.com/helix-dna-testing-marketplace-raises-200-million-2018-2">Helix</a>, launched a new DNA test on Tuesday that offers some of the same health insights as those of competing tests like 23andMe, only in a format that the company claims is more comprehensive, more convenient, and more responsible.Available online, the test looks at the impact of several dozen genetic variants on your risk of diseases such as breast cancer, colon cancer, and high cholesterol.Called GenePrism, the new test is the result of a year-long collaboration between Helix and clinical diagnostics company PerkinElmer.Where a 23andMe test looks only at some of the key letters in the book of DNA that makes up someone's genome, Helix's new test looks at chapters. In addition, the test provides access to experts who can help people understand their results, something 23andMe does not do."This is potentially very heavy information," Elissa Levin, Helix's senior director of clinical affairs, told Business Insider. "We're not glossing over it."Helix's test uses a model that's similar to that of another Silicon Valley startup called <a href="https://www.businessinsider.com/genetics-test-for-cancer-cholesterol-2018-5">Color Genomics</a>. Like with Color, a doctor is required to sign-off on the new test, but customers can buy it themselves.Helix also worked with a digital health and genetics startup called Genome Medical so that when people want to talk to a genetics counselor, they can do so digitally without needing to call or make an appointment. The test costs $260. Genetics counseling is included.<h2>Giving people 'what they need to know'</h2><div class="KonaFilter image-container display-table"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/5bf5aa29f556fc28827e9a1a-1778/23andme-4.jpg" border="0" alt="DNA Testing 23andMe" data-mce-source="Hollis Johnson/Business Insider" />Hollis Johnson/Business Insider"People want to know what they need to know," said Justin Kao, Helix's cofounder and senior vice president.</div></div></div>In designing the new test, experts from Helix and PerkinElmer stressed to Business Insider that they had to strike a careful balance. They wanted to give people information that they can use to improve their health without overloading them with data."People want to know what they need to know," <a href="https://www.linkedin.com/in/kaojustin/">Justin Kao</a>, Helix's cofounder and senior vice president, told Business Insider. "At the same time, we don't want to throw the kitchen sink at them."The new test looks at 59 genetic variants that are considered "medically actionable," as defined by the American College of Medical Genetics and Genomics. Genetic variants in this category must have a high impact on someone's risk of disease. When it comes to breast cancer, for example, the genetic tweaks included in the new test significantly impact whether someone will develop the disease. The variants in the test must also be variants that someone can do something about. "These are conditions where if you get a positive result, your physician will be able to walk you through how to intervene," Kao said. For example, if someone learns they have a genetic variant tied to a higher risk of colon cancer, the medical protocol is to have them start getting regular colonoscopies or bowel exams, thereby increasing the chances of finding the disease earlier.Helix's new test also stresses consumer privacy. To download your results, you must pay $499 and use <a href="https://www.businessinsider.com/privacy-security-risks-genetic-testing-23andme-ancestry-dna-2019-2">two-step verification</a>, which experts have previously told Business Insider should be the norm for genetic data.<h2>What a 'negative' DNA test result means - and doesn't</h2><div class="KonaFilter image-container display-table"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/5ca2541c86291312dc0fa115-1896/helix dna-7.jpg" border="0" alt="Helix DNA 7" data-mce-source="Hollis Johnson" />Hollis JohnsonHelix's new test provides a more comprehensive look at your DNA, the company claims.</div></div></div>One of the trickiest components of delivering genetic information has to do with what happens when someone gets a negative result. While a positive result with the new test suggests that someone has a significantly higher risk of a disease like breast cancer, a negative result does not necessarily signify that they are free from risk or at a low risk.Providing this insight to people in a way that is both responsible and helpful can be tricky. Everything from someone's family history to how often they exercise and what they eat can impact their disease risk.For that reason, having a genetics counselor who can walk through a patient's test results is critical, <a href="https://www.linkedin.com/in/madhuri-hegde-68769ba/">Madhuri Hedge</a>, the vice president and chief scientific officer of PerkinElmer's genomics division, told Business Insider."Interpretation is a big piece of this test," Hedge said.Some DNA-based health tests, such as 23andMe's, look only at a snapshot of all the genes in your DNA, otherwise known as SNPs (pronounced "snips"). While that information can have value, it is akin to reading a few thousand letters from the page of a book containing all your DNA data, Levin said.Helix's new test - like Color's - is more comprehensive. It essentially provides a glimpse at several chapters in that book of DNA. According to Hedge, that means there's significantly less wiggle room for interpreting the results incorrectly.Theodora Ross, the director of the cancer-genetics program at the University of Texas Southwestern, believes this more comprehensive approach, also known as exome sequencing, is the only way genetic testing should be done today."Doing this kind of sequencing is a no-brainer. Using SNPs [the method 23andMe uses] is just silly," <a href="https://profiles.utsouthwestern.edu/profile/127180/theodora-ross.html">Ross</a> told Business Insider.Still, Ross was not convinced that the new test is a one-stop solution to delivering genetic insights to people. She said she was surprised that Perkin Elmer and Helix had not yet published a peer-reviewed paper explaining how they interpret people's genetic data."It's a black box," Ross said. "That makes me think, 'buyer beware.'"Ross also stressed that she'd like to see patients connect directly with their personal physician, rather than with someone arranged online, to ensure that the genetic information from the test is entered permanently into their healthcare record.But that doesn't necessarily rule out the utility of Helix's new test, she said. "There's some really good new genetic <keyword id="41551" type="ENTERTAINMENT" weightage="100" keywordseo="science">science</keyword> out there," Ross said. "I'd just like to see more from them."<a href="http://www.businessinsider.com/intelligence/top-5-trends-shaping-the-future-of-digital-health?IR=T&amp;utm_source=businessinsider&amp;utm_medium=ctgr&amp;utm_term=ctgr_leadgen&amp;utm_content=digitalhealth_ctgr_leadgen&amp;utm_campaign=digitalhealth_ctgr_leadgen_5-trends"><img src="https://static.businessinsider.com/image/5c8ac29d6123ca45935ce4b7" alt="Exclusive FREE Report: The Top 5 Trends Shaping the Future of Digital Health by Business Insider Intelligence" border="0" style="display: block !important; margin: 0 auto !important; max-width: 640px !important; width: 100% !important" /></a> <div class="margin-top"> <h3>NOW WATCH: <a href="https://www.businessinsider.com/new-york-city-cockroaches-rats-mice-exterminator-places-avoid-infestation-2019-3">Your apartment location can affect how cockroaches, rats, and mice get in. A New York City exterminator told us the places he'd never live.</a></h3> <div> <iframe class="bijwplayerclass" data-player="jwplayer" src="https://content.jwplatform.com/players/GNGiFeqU-CEZHWCBG.html" width="100%" height="100%" frameborder="0" scrolling="auto" style="margin:0px;" allowfullscreen=""></iframe><script>function receiveMessage(event){ console.log(event.data.fullscreen); Android.fullscreen(event.data.fullscreen); }window.addEventListener("message", receiveMessage, false);</script> </div> </div>

A new DNA test that lets you see your risk of diseases like cancer could compete with 23andMe - here's how it differs

<img class="gwt-Image" src="/photo/49687118.cms" style="width: 800px; height: 600px;" /> At a time when the hospitality industry is seeing new online hotel aggregator entrants that are largely focusing on providing standard affordable stay to any traveler, <keyword id="2825269" type="UNKNOWN" weightage="100" keywordseo="Zo-Rooms">ZO Rooms</keyword> is in efforts to cater to various segment of travelers in the country differently based on their specific needs and demands. For backpackers and leisure travelers, there is <keyword id="2232457" type="UNKNOWN" weightage="100" keywordseo="Zostel">Zostel</keyword> (dorm facility) and ZO homes (bed and breakfast facility); for those traveling with family, they have ZO rooms (budget hotels)/ ZO prime (premium 3 star category)/ ZO star (4-star accommodation) depending on the quality of services customers want and the money they are ready to shell out. Then there is what’s called ZO apartments, largely for corporate travelers who stay for longer duration and want their private space for meetings. 
	 
	<a href="http://www.businessinsider.in/Exclusive-Zostel-eyes-South-East-Asia-and-European-markets-while-expanding-in-India/articleshow/49551763.cms">ALSO READ: Exclusive: Zostel eyes South East Asia and European markets while expanding in India</a>
 

	While their properties Zostel and ZO homes are fresh and new youth-targeted services aimed at breaking the norms of leisure traveling in India, at the same time it’s clear that with ZO Room’s 1,000 properties spread across 50 cities in India already, they are playing it smart. They do not want to lose out on organizing the fragmented market for the traditional, family and corporate traveler. 
 

	“A Zostel caters to backpackers, not corporate or family travelers. These segments want different set of services from what a backpacker would want. So it is essential for us to provide clear and distinguished value proposition for different customers,” says Dharamveer Singh Chauhan, CEO and co-founder, ZO Rooms.
 

	Focused on building these diverse properties, Dharamveer says, the company wants to penetrate everywhere in the country. Currently, ZO Rooms has expanded its network to 11,000 rooms in 1,000 hotels across 50 cities and towns in India. It is targeting 5,000 hotels and 50,000 rooms in the next six months. Where is all the money coming from? 
 For a startup to be able to foray into newer sectors requires backing, and ZO Rooms flaunts of having New York-based investment firm <keyword id="260318" type="COMPANY" weightage="100" keywordseo="Tiger-Global-Management">Tiger Global Management</keyword> and venture capital firm Orios Venture Partners behind them. It is reportedly looking to raise $200 million that will help it in raising capital, but Dharamveer refused to confirm the news or comment on it for now. 

	He, however, said that his company has been lucky in attracting investors from the college days when they raised their first round of funding for Zostels. “Ever since, we have got several offers in our journey. We have decided to go ahead with those who share our vision, have relevant experience and understanding of the ecosystem,” Dharamveer said. He feels if startups have a great team and their business is scalable, attracting funds won't be a problem.
 

	At ZO Rooms, meanwhile, efforts are on to upgrade customer services. “You cannot always expect discounts and cashback offers to get more people to stay at your hotels, a method that our competitors have increasingly resorted to. There needs to be real value for customers to opt for you over others. This is why our hotel partners are much more than somebody we are merely giving bookings to. We give them training, provide them with technology support, infrastructure upgradation, vendor collaboration and most importantly, a feedback mechanism system so that customer concerns can be learnt on an ongoing basis and rectified at the earliest,” says Dharamveer.
 

	In this regard, the company also has what it calls ‘ZO advantage program’ using which the hotel staff at different properties are being trained daily via videos. 
 Also, ZO Rooms has partnered with <keyword id="6354720" type="PERSON" weightage="100" keywordseo="Ola">Ola</keyword>, <keyword id="1042120" type="PERSON" weightage="100" keywordseo="Uber">Uber</keyword> and <keyword id="830092" type="COMPANY" weightage="100" keywordseo="Zomato">Zomato</keyword> in a bid to make the stay experience for customers more seamless. Another crucial area for hotel budget aggregators in enhancing its services is ensuring security. Even as this can prove to be very challenging as they don't own the properties, yet it is imperative to ensure a secure stay for travelers at the same time. ZO Rooms says it has a decent security mechanism in place. Verification is done on every front from customers to hotel partners. Insurances and due licenses are also taken care of by them when they are partnering with hotels. 

	Interestingly, ZO homes, not everyone is entertained. As a security measure, only people who have already stayed at ZO Rooms at least five times are allowed to use the ZO homes category. Also as a concept, this bed and breakfast facility is a western concept just like backpackers. "It’s a fragmented sector," agrees Dharamveer. He feels it will take another five years for bed and breakfast services to emerge in India because trust and security are key essentials here.
 

	As for other ZO properties, the company's aim is to let people travel unplanned with a free mind. 
 

	"Wherever travelers go, they just have to open their apps and easily find ZO properties in the vicinity that match their requirements. That’s the kind of services and level of trust we want to build with our customers. While redefining traveling experience, we are also providing a simple, seamless process of finding, booking and staying at the best customized accommodations for everyone, everywhere,” concludes Dharamveer.

ZO Rooms has a room ‘available’ for every
traveller

Check out the more than 50 pitch decks fintechs used to raise millions in funding from top investors

<img class="float_right" src="https://static-ssl.businessinsider.com/image/53ade4846bb3f70c6d83b203-1200-800/14423258815_f907bb8363_o.jpg?maxX=480" border="0" alt="estonia" width="480" />A national identity scheme goes global.
THE founders of the internet were academics who took users' identities on trust. When only research co-operation was at stake, this was reasonable. But the lack of secure identification is now hampering the development of e-commerce and the provision of public services online.
In day-to-day life, from banking to dating, if you don't know who you are dealing with, you are vulnerable to fraud or deceit, or will have to submit to cumbersome procedures such as scanning and uploading documents to prove who you are.
Much work has gone into making systems that can recognise and verify digital IDs. A standard called OpenID Connect, organised by an international non-profit foundation, was launched this year. Mobile-phone operators have started a complementary service, Mobile Connect, which allows identities of all kinds to be authenticated from smartphones.
But providing a digital ID that will be widely used and trusted is far harder. Businesses can check their employees rigorously, and issue credentials for gaining access to buildings, computers and the like.
But what about outside the workplace? Facebook, Google and Twitter are all trying to make their accounts a form of ID. But these are issued without verification, so pseudonyms are rife and impersonation easy.
Private providers are offering their own schemes; miiCard, for example, uses bank accounts as a way of issuing a verified online identity. But these fall short of the reliability of a state-backed identity, issued by a government official, checked against other databases, using biometric data (such as fingerprints and retinal scans) and backed by law--in effect an electronic passport.
There is one place where this cyberdream is already reality. Secure, authenticated identity is the birthright of every Estonian: before a newborn even arrives home, the hospital will have issued a digital birth certificate and his health insurance will have been started automatically.
All residents of the small Baltic state aged 15 or over have electronic ID cards, which are used in health care, electronic banking and shopping, to sign contracts and encrypt e-mail, as tram tickets, and much more besides--even to vote.
Estonia's approach makes life efficient: taxes take less than an hour to file, and refunds are paid within 48 hours. By law, the state may not ask for any piece of information more than once, people have the right to know what data are held on them and all government databases must be compatible, a system known as the X-road. In all, the Estonian state offers 600 e-services to its citizens and 2,400 to businesses.
Estonia's system uses suitably hefty encryption. Only a minimum of private data are kept on the ID card itself. Lost cards can simply be cancelled. And in over a decade, no security breaches have been reported.
Also issued are two PIN codes, one for authentication (proving who the holder is) and one for authorisation (signing documents or making payments). Asked to authenticate a user, the service concerned queries a central database to check that the card and relevant code match. It also asks for only the minimum information needed: to check a customer's age, for example, it does not ask, "How old is this person?" but merely, "Is this person over 18?"
Other governments have tried to issue electronic identity cards. But costs have been high and public resistance strong. Some have proved careless custodians of their citizens' data.
There are fears of snooping. Britain had spent £257m ($370m) of a planned £4.5 billion on a much-criticised ID card scheme by the time the current coalition government scrapped it after coming to office in 2010.
That has left a gap in the global market--one that Estonia hopes to fill. Starting later this year, it will issue ID cards to non-resident "satellite Estonians", thereby creating a global, government-standard digital identity.
Applicants will pay a small fee, probably around EUR30-50 ($41-68), and provide the same biometric data and documents as Estonian residents. If all is in order, a card will be issued, or its virtual equivalent on a smartphone (held on a special secure module in the SIM card).
Some good ideas never take off because too few people embrace them. And with just 1.3m residents, Estonia is a tiddler--even with the 10m satellite Estonians the government hopes to add over the next decade.
What may provide the necessary scale is a European Union rule soon to come into force that will require member states to accept each others' digital IDs. That means non-resident holders of Estonian IDs, wherever they are, will be able not only to send each other encrypted e-mail and to prove their identity to web-service providers who accept governmentissued identities, but also to do business with governments anywhere in the EU.
Estonia is being "very clever", says Stéphanie de Labriolle of the Secure Identity Alliance, an international working group. Marie Austenaa of the GSMA, a global association of mobile-phone firms, praises it too. Allan Foster of ForgeRock, a firm that is working on government ID schemes in Belgium, New Zealand and elsewhere, thinks that the new satellite Estonians will help change attitudes to secure digital identities in their own countries, too.
The scheme's advantages for Estonia are multiple. It will help it shed the detested "ex-Soviet" tag and promote itself as a paragon of good government and innovation. It will attract investment: once you have an Estonian ID, setting up a company there takes only a few minutes.
And it will create an electronic diaspora all over the world with a stake in the country's survival--no small matter at a time when the threat from Russia is keenly felt. (Estonia is also planning to back up all its national data to secure "digital embassies" in friendly foreign countries.)
Struck by the X-road's scalability and security, and the fact that it has already worked well for over a decade, Finland and other countries are adopting the Estonian system in whole or in part. But for foreign individuals, perhaps its greatest appeal is that it is optional.
Those who like the system's convenience, security and flexibility can apply (though Estonia's chief information officer, Taavi Kotka, who is taking time away from his real-life job running an IT company, stresses that the ID is a privilege, not a right). Those who feel queasy about a foreign state having access to their personal data can steer clear.
Mr Kotka says that Estonia aims to do for identity what American Express cards did for international travel in the 1960s: to simplify life. But the bigger point is that government-verified identity has been divorced from location.
If Estonia's scheme takes off some other countries may well decide to follow its lead. Some may aim at volume; others, to target the top end, as with the market in non-resident investors' passports. Soon, multiple satellite citizenship may even become the norm.
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