Privacy-Driven Bridges Between Open Finance & Web3 Iden #Humanity
The collaboration between Mastercard’s open finance connectivity solution and Humanity Protocol's decentralized identity solution, named Human ID, represents a big step towards the merge of conventional finance and blockchain identity solutions. On a fundamental level, the joint effort solves a problem long-experienced within both frameworks: how to grant access to actual world financial services while not requiring handing over personal, sensitive information.
Mastercard has been developing trustworthy infrastructure for years that enables the secure exchange of financial information between financial institutions and customers using open financial channels. The Humanity Protocol tackles the same issue but from a completely different direction and aims to give users control of the information they share through the use of decentralized identity and cryptography. By leveraging the benefits of both systems, the coming integration will enable users to prove financial credibility on-chain without revealing financial information.
This is more than a technological improvement. It is a paradigm change in the management of trust, compliance, and access relating to Web2 and Web3 platforms, particularly with the growing need for integration of blockchain solutions with the world of finance.
Based on the explanation provided, the following represents how the human identity data enables the conversion of financial information
For holders of Human ID, this integration means a shift in financial verification. Previously, credit, loans, and quality financial services entail uploading documents like banking statements, tax returns, and payslips. Every new platform involves this process, making this process a larger attack surface.
Through Human ID, one is able to confirm aspects of income, income stability, or asset holdings, thereby confirming attributes at the identity level. After being confirmed by connections with Mastercard's open finance, said attributes are then turned into claims that are cryptographic in nature and portable, allowing for the reuse of confirmations across multiple sites without having to begin afresh every single time.
For instance, instead of uploading proof of income, the individual can prove the statement "I earn more than $75,000 per year." For the transaction history, the individual can verify the statement "I pay my credit card bills on time." Even the proof of ownership of shares of a publicly held company can be verified without the need to show account balances.
These proof types are created with the usage of zero-knowledge methods. This helps third-party sources rely on the outcome without having access to the underlying information. It increases ease for the user. It is an improvement on the compliance costs incurred on the platform with confidence in the process of verification. It will start with the USA since the open finance infrastructure is deeply developed.
Understanding Open Finance in a Blockchain Environment
Open finance has been described as the next generation of open banking. Open finance makes it possible for users to access their financial information securely through APIs in apps that are external to their own financial institutions, unlike screen-scraping technology that involved uploading information manually. Open banking has facilitated innovation in credit scoring and lending applications.
The problem with traditional open finance systems is that they are nonetheless heavily dependent on a centralized data handling process. The minute the information is shared, the users do not understand how the information is stored and shared later on. It is where the blockchain identity system provides a crucial advancement.
With the combination of Mastercard's open finance tech and Human ID, the need for data to reside within apps is eliminated. Instead, the data is simply used once to create a verifiable claim, and the claim is the actual asset. Data is still stored at the original financial institution.
In a crypto setting, this is an important consideration. While decentralized applications are rapidly growing in need of signals of trust, reputation, and financial trustworthiness, they cannot accommodate a full KYC process. A way to achieve a balance through open finance-backed zero-knowledge proofs has been discovered.
This method also satisfies regulatory requirements. Instead of side-stepping compliance, it transforms it into an effective and privacy-centric model that is traceable and standardizable.
How and Why this Relates to Financial Inclusion & Web3 Adoption
O una das mais importantes consequências de parceria é potencial de afetar financial inclusion. Muitos usuários são excluduidos de serviços financeiros com as razões menos creditícias de, por exemplo, renda e fiabilidade. O motivo é que têm acesso limitado documental, ou, simplesmente, são demasiado tímidos para compartilhar informação pessoal.
The problem of having to verify similar credentials multiple times is alleviated by Human ID’s reusable credentials. Now, once a user has created their own reliable set of financial traits, they can access multiple services without having to verify those traits once again. This would be very helpful for freelancers, remote workers, or people operating in multiple countries, where traditional methods of creditworthiness don't actually measure real-world behavior.
With regard to Web3, the incorporation has broadened the use cases for the proof of identity offered by the decentralized network. Human identity will not only be a proof of uniqueness or a proof of humanity. Rather, it will be an interface that connects the financial world to the real world. Thus, it will increase the relevance of decentralized applications. For conventional finance, it’s about reach. Lenders can now offer their services to new market segments with lower barriers of entry even as they provide assurances of privacy. While data regulations continue to restrict access across borders, this consideration is more relevant now. Looking to the future, this kind of integration points to a direction in which identity, finance, and infrastructure built on the blockchain must work together, not in parallel. What Mastercard is doing with Humanity Protocol is not merely enabling a new range of functionality. They are also establishing a vision of how verification of trust, in an open economy that also maintains privacy, is possible.$BTC
