When will the world be ready to embrace digital identity?
The Fintech Forecast is a series of guest articles published each month from thought leaders at ACI Worldwide.
Author: Elise Thrale
In the era of open banking, a functioning digital identity scheme has plenty of benefits to both the consumer and the wider economy. It would help improve interoperability for national and cross-border payments, ensuring financial inclusion, ease when accessing financial services and protection from fraud. Unlike traditional forms of identity such as PINs, passports, keys and licences, digital identity can be authenticated digitally or remotely. The technology for digital identity schemes exists, but when it comes to taking the dive into the world of digital identity, the world is hesitant.
Debunking the myths around digital identity
Digital identity is about making sure that you can prove who you are, whenever and wherever. It does not endanger or track us, but keeps us safer. Privacy will be gained by means of digital identity, not blocked by it. McKinsey have predicted that by extending a full digital identity scheme throughout the UK, it could unlock economic value equivalent to 3 to 13 percent of GDP in 2030. Of course, achieving this growth this would require high usage levels among the population, but with a well-planned system mitigating risk, it has the power to drive economies. The right system needs to be thoughtfully planned out with the right governance, under the rule of law and with privacy top of mind. We can look to India for this, who is not only world leader in real-time payments, but roughly 1.2 billion people in India are registered to the universally trusted Aadhaar digital identity scheme.
How a digital identity scheme protects yours
We are giving away a lot more personal information on a daily basis than we think, or than is necessary. Every time we make an online order, we must share our personal details, including name, address, email, phone number and sometimes even our date of birth. We are effectively sharing our identity with hundreds of businesses in exchange for a few items. In 2020, 75% of large companies saw a large data breach in the UK, putting into question why many consumers would rather hand over their identity to several companies over one central secure scheme.
As we recover from the pandemic, identity fraud is rising. Cifas warned early last year that identity fraud increased by 11% in the first six months of 2021. This is not surprising with the seismic shift to digital channels during the pandemic. Digital identity does not only protect our privacy, it makes regulatory and technology developments like PSD2, 3DS, open finance and sharing data less problematic for banks, as digital identity schemes provide seamless customer experiences in the face of change. Authenticating a transaction becomes as simple as using your digital identity, to which your bank details are connected. Opening a bank account will no longer require presenting a passport and proof of address, all you will need to provide is your digital identity. If you change address, you will only need to change it on your digital identity, and it will be updated securely everywhere you need, from your workplace to your bank, and your energy providers, with just one click of a button.
Laying the foundations of trust
There is an opportunity for banks and financial institutions to pave the way in digital identity schemes. At the heart of consumers’ relationships with banks is trust. According to Edelman’s Trust Barometer 2022, trust has declined for government and media, while business is the only trusted institution. While government is seen as divisive, business is seen as a unifying force. For digital identity to work, it has to be trusted by all parts of society, including those that accept digital identity. Not only do consumers trust banks, but they also have trust in existing technology that will help the growth of digital identity. We already have the essential building blocks of trust, so the time is now for banks to act and pave the way for wide adoption of a digital identity scheme.
People In This Post
Companies In This Post
- Western Union Expands its Service Offering Across Peru Read more
- Builders & Tradesmen’s Insurance Services (BTIS) Announces California Launch of VETA – an Exclusive Contractor Insurance Product Read more
- Mambu’s Kunal Galav Highlights What Fintechs Can Do To Enter The SME Market Read more
- Nick Telford-Reed – Endava – MoneyLIVE Summit 2023 Read more
- BZR on Coinstore – a Significant Milestone for Bazaars Read more