Amid declining revenue Australia Post considers using a blockchain for identity management

At the recent Australian Financial Review Business Summit in Melbourne, Australia Post Managing Director and Group CEO, Ahmed Fahour, revealed that his company is exploring using a blockchain to store identities for personal services. Citing that Australia Post already handles 90 percent of all Australian passports, he stated that identity services was one of the largest opportunities in e-commerce for the company.

"The future is going to be a digital identity, so that when you say who you are, I can tell who you are. […] A lot of people are thinking about blockchain from a financial services point of view but the reality is it has much wider applications."
— – Ahmed Fahour, Australia Post Managing Director & CEO

Australia Post is a government business enterprise, with 4,417 Post Offices, including 2,560 in rural and remote areas, delivering more than 60 million items every week.

While the Commonwealth Government of Australia is its sole shareholder, the Post is self funded, receiving no taxpayer funding, and has paid more than AUD$2.5 billion in dividends to the Australian government over the past ten years.

In addition to traditional postal services, Australia Post offers a broad range of financial products on behalf of businesses and government, collectively referred to as Agency Services, which includes bill payment, banking, money transfer and identity services.

“As Australia’s oldest, continually operating organisation, Australia Post is a national icon that has been providing a core essential service for over 200 years. However, Australia Post is entering difficult times.[…] The forecast is that things are likely to get worse before they get better.”
— – McKell Institute

The decline in traditional postal revenue is by no means confined to Australia. The U.S. Postal Service reported full year revenue of US$68.9 billion for 2015, but a net loss of US$5.06 billion.

In the 2014 financial year, Australia Post made a six-month loss for the first time since corporatization, in 1989, but ended the year in positive territory with after-tax profits of AUD$116.2 million, down 34.5 percent from the previous year. Annual revenue last year was AUD$6.4 billion, driving the first full year loss of AUD$221.7 million.

“This year, our posties delivered 1.2 billion fewer letters than they did in 2007–08,” stated Post’s Chairman, John Stanhope, in the company’s 2014 annual report. The Group’s Managing Director & CEO, Ahmed Fahour, urgently called for regulatory reform at the time, stating that “Australia Post will incur $12.1 billion cumulative losses in letters, and $6.6 billion for the enterprise over the next 10 years.”

“The immediate challenge for our business is clear. We have been carefully managing the real decline in our letter volumes for the past seven years. But we have now reached a tipping point where we can no longer manage that decline, while also maintaining our nationwide networks, service reliability and profitability.”
— – Fahour

Not all of Australia Post’s businesses are suffering. While revenue from traditional products decline, products such as financial and identity services have collectively grown 17.7 percent year-on-year, according to the company’s 2015 annual report.

In an effort to boost identity services, Australia Post is actively developing digital identity solutions. "We do most of the physical IDs, so it’s logical that a trusted organisation like Australia Post be able to not only handle the physical ID but digital ID," states Fahour.

The Australian government has also been trying to develop a trusted digital identity framework for individuals and businesses. According to the Digital Transformation Office (DTO), Australians aged 14 and over will look up government information and services online approximately 324 million times each year. “Of these people, more than half will experience a problem,” the DTO states.

The DTO was established in July 2015 as an executive agency and part of the Prime Minister’s portfolio. The Office is currently investigating different ways to manage online digital identity, according to the DTO Head of Identity, Rachel Dixon. “Currently users have to identify themselves again and again when they interact with different government departments,” she wrote in a post on the DTO site. The DTO wants to find a solution to fix this problem, she added.

"Identity is better thought of as the ability to have trust online. It’s having the ability for the government to trust that you are who you say you are. And for you to trust that the government will deal with you in a fair and protective way."
— – Rachel Dixon, DTO Head of Identity

In an independent report by Deloitte, Demystifying Bitcoin, the authors assert that blockchains could transform identity management. Blockchain solutions could be applied to many different identity management situations, including passports, social security numbers, tax identification numbers, or driver’s licenses, the report reads.

“Much of identity management, including passports, still operates on a paper-based system. These documents are frequently forged and stolen. […] A cryptographic network based on blockchain could be used to verify individuals’ identities and monitor movement across borders.”

• Deloitte

Deloitte painted a picture where someone travels through a checkpoint, but instead of presenting a paper passport a bitcoin key could be used. "A government entity could verify the key and register the entry into the blockchain," explained Deloitte’s report.

In the U.K. Government Office for Science report, Distributed Ledger Technology: beyond block chain, the UK Government Chief Scientific Adviser, Sir Mark Walport, described how distributed ledgers can be radically disruptive.

Due to their real-time processing capability, near tamper-proof security and increasingly low-cost, a wide range of industries could benefit from the technology, including financial services, real estate, healthcare and identity management, Sir Walport explained. He also urged the U.K. Government to start using blockchain technology immediately.

“Distributed ledger technologies have the potential to help governments to collect taxes, deliver benefits, issue passports, record land registries, assure the supply chain of goods and generally ensure the integrity of government records and services.”
— – Sir Mark Walport, UK Government Chief Scientific Adviser

A similar use for blockchain technology in identity management has been considered in the U.S. The U.S. Department of Homeland Security, through the Small Business Innovation Research (SBIR) program administered by the U.S. Small Business Administration (SBA), has recently been exploring potential applications in identity management too.

The agency says that it is seeking to “Design information security and privacy concepts on the blockchain to support identity management capabilities that increase security and productivity while decreasing costs and security risks for the Homeland Security Enterprise (HSE).”

Australia Post already offers a robust suite of identity services through a  “multi-channel, end-to-end solution that fully integrates online, in-person and phone channels for identity management” including passports and tax file numbers. New technologies such as blockchains could enable the Group to boost an already growing business, and help through the downturn in traditional postal services.

“Australia Post will need to adapt to the changing needs of consumers, businesses and government as we embrace the evolution of the digital economy.”
— – Australia Post