Identity As Input to Exchange

Identity is an integral part of all but the most trivial economic, social and political transactions. Using transaction cost economics, we determine that identity costs are a distinct and measurable subset of transaction costs. In certain transactions, such as credit arrangements, identity costs are incurred at considerable expense for commercial and compliance based reasons. Vertical integration can be seen through the lens of identity cost economizing, including in the financial sector, due to high costs of complying with KYC regulations as well as commercial risk management. Such organisational structure is also contingent on available identity technologies. The introduction of blockchain and distributed ledger technologies in identity applications may see new models of institutional structures develop