Run from the Department for Work and Pensions, the Identity Assurance Programme will authenticate people through their credentials with one of a group of approved private sector providers.

Having picked seven providers - The Post Office, Cassidian, Digidentity, Experian, Ingeus, Mydex, and Verizo - in November, the DWP has now confirmed PayPal as the eighth and last.

Initially, the registration service will be targeted at benefits claimants as part of the governments overhaul of the system and introduction of a 'universal credit' later this year.

Claimants visiting the benefits site will choose which of the eight providers will validate their identity and the system will automatically check their authenticity with the provider - through, for example, their PayPal login details - before processing online claims.

The government says the system is safe and secure, will minimise the number of usernames and passwords people need to remember and reduce costs.

Once up and running for benefits, the programme will be extended to other public services that can be accessed online and it could eventually move into the private sector, forming the basis of a universal authentication system.