DERIVED IDENTITY MODEL
The derived identity model requires no relationship, interaction, or permission from the individual.
A credit bureau would be a classic example of this model, where the relationship between an individual and a credit bureau is distant at its inception. The individual does not initiate the relationship, and the credit bureau asks for no authority from the individual to create a credit identity.
Data helps derive credit identity obtained through various channels and from organizations that may have directly issued an individual identity (account). It includes organizations such as banks, insurers, and telecom companies, or organizations that hold official systems of record such as land registries, electoral data, and national identity.
However, the latter will variously key this data on name or address. The credit bureau will then use a weight of evidence-based algorithm to match the name and address to attribute the data to an individual’s credit identity. The accuracy of the matching algorithm depends on the accuracy of the source data. Each credit bureau will develop its in-house matching algorithm with differing results and accuracy.
The credit bureau has the opportunity to ratify and verify the credit identity of an actual individual only when that individual contacts the credit bureau. Good examples are exercising the right to query a score, correct a data error, and open a direct account with a credit bureau consumer product. An indirect relationship with consumers makes it challenging to ensure appropriate control and consent over identity and PII.
Intermediary organizations such as Credit Karma have taken the opportunity to develop a direct, silo-based relationship with the consumer concerning their credit identity by offering consumers tools and services to understand better and manage their credit scores. These services are provided free to the consumer and curated financial products that best fit the consumer’s credit score. The derived identity model has proved to be very successful and has disintermediated the credit bureau from consumers.