Who Should Manage your Digital ID?
Digital ID has the potential to deliver huge convenience benefits for both individuals and banks across the world.
And it’s already here – and growing.
A single interoperable digital identity is likely to become a dominant technology trend over the next decade. Via a fingerprint or a password, consumers are already relying on online and mobile banking applications to manage their banking accounts, get approved for loans or a new account, share funds and pay bills.
We’re already in an era where mobile connectivity is part and parcel of our lives. It’s a trend that the pandemic has fuelled and it’s here to stay. The fact is that digital identity is fast becoming an accepted part of the banking industry as we all migrate to digital channels rather than in-branch or ATM transactions. Accessing government services is likely to be digital ID-driven too.Australia has placed digital identity at the heart its AUS$800-million technology budget package. It wants to simplify and reduce the cost of interacting with public services. The UK government’s Digital Identity Consultation has also stated its commitment to further the use of digital identities. It is aware that Digital ID there is fractured. Most people in the UK have one Digital ID via their social media accounts present, another via their bank accounts to access finances, and a NI number for payment and tax purposes.
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All these identities remain separate from each other and are not interchangeable. But other countries are further forward in consolidating Digital IDs. There are Digital ID schemes at varying levels of maturity worldwide and one to highlight is the small country of Estonia. It now provides its citizens with a physical ID card, a SIM card and an app, all tied to a singular digital identity that is powered by blockchain. So what does your Digital ID reveal? It uniquely identifies and authenticates you online or offline. It can include details such as a unique identity number, social security number, name, place, and date of birth, citizenship, biometrics, and more, as defined by national law.
But who should lead the Digital ID framework? The need to prove who you are online in a trustworthy way will only increase ahead. In December 2020, the European Commission put forward a legislative proposal for an EU ‘digital identity wallet’ that will permit a range of services, from opening a bank account or filing tax returns, to be done purely digitally. To ensure maximum privacy, this new e-wallet would be based on blockchain technology. Many people think banks – which already have a high trust factor – have a role to play too.
There is now a big opportunity for banks and financial institutions to fight back against FinTech encroachment. By taking a lead on Digital ID, they can bridge the physical and digital world to improve the customer experience while also implementing advanced identity proofing processes to prevent account takeover fraud and theft. Banks could be foundational in the inevitable transition to Digital IDs by laying the groundwork for other industries. What is sure is that however Digital ID is rolled out (and it will be different in each country), strong regulation and well-considered government policies will be needed to encourage adoption and manage associated risks. But once it is up and running, banks, together with individuals and society at large, have a great deal to gain.