Fraud is on the rise. Artificial intelligence, especially generative AI, has enabled synthetic fraud to proliferate, flying under the radar of existing security solutions to generate counterfeit claims, KYC documents, and other key (former) safeguards.

But fintechs and other private-sector players are responding in turn. As part of this effort, a mix of blockchain-based and more traditional solutions are building out immutable and resilient identity solutions, which can bolster KYC and AML efforts across a range of use cases.

Worldcoin

Worldcoin officially launched its decentralized identity solution in July, generating substantial buzz in the process. Centered around iris scans, Worldcoin uses an ominous-looking orb to collect users’ biometric data, part of a larger effort to create the world’s ​​largest identity and financial public utility.

But the solution has already faced substantial backlash. Using their orb-shaped scanners, Worldcoin’s contractors—known as “orb operators”—have collected images of hundreds of thousands of people’s eyes. The contractors are paid per person they register, which has led to local corruption as well as scammy onboarding processes that fail to explain the privacy implications of this work. Subjects who were told they’d receive money in exchange for their eye scan have yet to receive any material benefit from the process, leading to understandably disgruntled users who think they were exploited, as well as an increasingly damaged reputation for Worldcoin in many communities.

“You can't play around with such personal information,” wrote one user who had their eyes scanned by an orb operator. “I’m coming after you if I don’t see any benefits from whatever you made us sign up for.”

Mastercard’s response

At the same time, giants like Mastercard are working to establish a digital-identity network that leverages the company’s international reach and focus on compliance to meet a comprehensive suite of commercial and regulatory use cases.

In an interview with The Financial Revolutionist, Sarah Clark, Senior Vice President of Digital Identity at Mastercard, explained how a decentralized infrastructure helps bolster privacy and ensure the long-term viability of the project:

When it comes to privacy it’s pretty simple—it means not being willing to negotiate on being privacy preserving, and not building centralized databases. When we equip an individual with a digital identity that's attached to the ID network, it's a decentralized design so your digital identity exists on your own device, it’s not stored in a Mastercard database. We can't track you. No party on the network can track what you're doing elsewhere on the network.

Within this framework, becoming the preeminent identity framework matters far more than an ability to profit off user data. By safeguarding consumer information beyond minimum compliance standards, Mastercard can help create a privacy-focused solution, while also securing a sizable market share.

What’s next?

We should expect major incumbents to continue launching pilot programs, the way Mastercard has in Australia and the UK. At the same time, blockchain-based solutions like Worldcoin may attempt to scale rapidly across beachhead geographies, while attempting to address user skepticism.