Fingerprint on a touch ID screen on a phone

Why Businesses Should Prioritise Consent-Based Identity Verification

Why Data Privacy Laws Mandate User Consent Transparency

Data privacy regulations are evolving rapidly, placing greater emphasis on user consent and transparency in identity verification processes. Governments worldwide have introduced stringent data protection laws, including GDPR (General Data Protection Regulation), CCPA (California Consumer Privacy Act), and PDPA (Personal Data Protection Act), to ensure that organisations handle personal data responsibly. These regulations mandate that businesses must:

  • Obtain explicit user consent before collecting, processing, or sharing personal data.
  • Allow users to control how their data is used through clear opt-in and opt-out mechanisms.
  • Ensure data minimisation, collecting only what is necessary for a specific purpose.
  • Provide audit-ready records of user consent to demonstrate compliance with regulatory frameworks.

As businesses handle increasing volumes of sensitive user data, ensuring compliance with GDPR, CCPA, and PDPA has become a strategic priority. However, traditional identity verification models often lead to over-collection of user data, creating significant compliance risks and privacy concerns.

By adopting consent-based identity verification, businesses can enhance data privacy, reduce regulatory risks, and build trust with users—all while ensuring compliance with global data protection standards.


The Problem: How Over-Collection of Data Increases Compliance Risks

Many organisations continue to use centralised identity verification systems that collect and store excessive amounts of personal data. This practice not only exposes businesses to higher security risks but also violates data protection principles under GDPR and other regulations.

1. The Risks of Over-Collection

  • Regulatory Non-Compliance: Laws such as GDPR and PDPA enforce strict data minimisation principles, meaning businesses must collect only the information necessary for a specific purpose. Failure to comply can result in fines of up to 4% of global annual revenue under GDPR.
  • Increased Attack Surface for Data Breaches: The more personal data an organisation holds, the more attractive it becomes to cybercriminals. Mass data breaches can lead to severe legal, financial, and reputational damage.
  • User Distrust: Consumers are increasingly aware of privacy risks and demand greater control over their personal information. Over-collection of data without clear consent undermines user confidence.

2. Lack of User Control Over Data

Many businesses still operate under legacy identity verification models that:

  • Require users to submit full identity documents, even when only partial verification is needed.
  • Lack consent tracking mechanisms, making it difficult to prove regulatory compliance.
  • Store user data indefinitely, increasing long-term security and privacy risks.

To address these challenges, businesses must prioritise privacy-first identity verification, ensuring that user-controlled data remains secure, accessible, and compliant.


The Solution: How Real-Time Consent Workflows and Selective Disclosure Improve Security

A consent-based identity verification framework ensures that businesses collect, store, and process data only with the user’s explicit permission. This is achieved through real-time consent management and selective disclosure, which provide:

1. Real-Time Consent Management

Consent management platforms allow businesses to:

  • Obtain real-time user consent before collecting or sharing identity data.
  • Track and manage user consent preferencs dynamically.
  • Provide users with a transparent audit trail of how their data is used.

By automating consent workflows, businesses ensure regulatory compliance while reducing the burden of manual consent tracking.

2. Selective Disclosure for Data Minimisation

Selective disclosure allows users to share only the necessary identity attributes rather than submitting full documents. This prevents the over-collection of data and ensures compliance with privacy-first identity verification standards.

  • Instead of sharing a full driver’s licence, users can prove they are above 18 without exposing unnecessary personal information.
  • Businesses can verify a user’s residency status without requiring an entire address history.
  • Financial institutions can perform KYC compliance checks without permanently storing sensitive customer details.
3. Self-Sovereign Identity (SSI) for User-Controlled Data

Self-Sovereign Identity (SSI) enables users to own and control their identity credentials without relying on centralised databases. Businesses can:

  • Allow users to store identity credentials in secure digital wallets.
  • Verify credentials without storing or managing sensitive user data.
  • Reduce reliance on third-party identity providers, enhancing privacy-first authentication.

By combining real-time consent management, selective disclosure, and self-sovereign identity, businesses can achieve regulatory compliance, reduce security risks, and improve user experience.


Use Cases: BFSI, Healthcare, and Government Adoption of Consent-Based Identity

Several industries are already transitioning to consent-based identity verification to enhance security, privacy, and compliance.

1. BFSI: Enhancing Compliance & KYC Security

Banks and financial institutions must comply with stringent KYC (Know Your Customer) and AML (Anti-Money Laundering) regulations. A consent-based identity model allows financial institutions to:

  • Verify customer identities securely without storing unnecessary personal data.
  • Meet GDPR compliance by enabling users to revoke consent at any time.
  • Prevent KYC fraud by using selective disclosure for risk-based authentication.

 

2. Healthcare: Protecting Patient Data & Regulatory Compliance

Healthcare providers handle highly sensitive patient data, making data security and compliance a priority. By integrating consent-based identity verification, healthcare organisations can:

  • Ensure compliance with HIPAA, GDPR, and PDPA regulations.
  • Enable secure access to medical records while maintaining patient consent transparency.
  • Reduce the risk of healthcare identity fraud by allowing patients to control how their medical data is shared.
3. Government: Secure Digital Identity & Public Services

Governments are adopting self-sovereign identity solutions to enhance digital identity management for citizens. By leveraging consent-based frameworks, governments can:

  • Provide secure digital identities for citizens without centralised data storage.
  • Enable privacy-first e-Government services, allowing users to control their personal data.
  • Improve trust and transparency in public sector digital identity programs.

These use cases demonstrate how consent-based identity verification is becoming a critical component of digital security and regulatory compliance across multiple industries.


Empower Users with Consent-Based Identity

The future of identity management is privacy-first, user-controlled, and consent-driven. As regulatory pressures increase, businesses must adopt compliance-first identity solutions that enhance security, transparency, and trust.

By implementing real-time consent management, selective disclosure, and self-sovereign identity, organisations can:

  • Ensure compliance with GDPR, CCPA, and PDPA.
  • Reduce compliance risks by minimising data collection.
  • Improve customer trust by giving users control over their identity data.

Empower users with consent-based identity—Learn how Block Identity works.

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