The first internet protocol, invented back in the 1960s, only allowed machines to talk to each other and could not enable the secure identification of the person using them. This was not a problem for the first generation of internet users, who trusted the
website they were on. But as the number of organisations offering services online increased, users were required to provide proof of identification. Due to the absence of a ubiquitous identification framework, the identification processes used for services
such as eGovernment, banking or telecoms have evolved independently, leading to fragmented and inconsistent solutions with variable levels of security and visibility.
This inconsistency in online ID verification has become a target of new regulations. For example, PSD2 and the arrival of Open Banking is forcing banks to radically revisit their approach to online payment authentication and the identification technologies
that sit behind it. According to
Statista, in 2017 84 percent of British consumers indicated that they believed online banks authentication methods are secure. Therefore, regulations and consumer trust mean that banks have a real opportunity to provide the digital identity system the internet
Digital identity offers the opportunity to remove inefficient and time-consuming manual processes and achieve reduction in fraud. Banks can take advantage of the opportunities digital ID schemes bring by following this three-stage process:
- First, prove they can solve a compelling problem with their digital ID scheme.
To be able to deliver a digital ID infrastructure for everyone, banks need to identify an area within its own business which digital ID would be able to address and deliver positive ROI. Pain points that could be addressed by digital identity in the first
instance include anti-money laundering (AML) and Know Your Customer (KYC) procedures, account enrolment, payment authorisations, online shopping and banking, account logon and others.
- Get customers to use the new digital ID tech. Once a bank has taken its identity vision and applied it to solve a compelling problem, it now needs to look at what is required to increase customer usage. The solution needs to be easy to use, so that
customers will embrace the experience more quickly and confidently transfer that user behaviour to other services. When more and more customers embrace a digital identity scheme, this should build transaction volumes within the market, which in turn will make
identity frameworks more attractive to third party service providers.
- Realise the value in offering cost effective ID solutions to third parties through collaboration. Banks can offer cost-effective identity solutions to organisations with similar needs by re-using the infrastructure which already supports their own
services. But going beyond traditional banking services requires identity frameworks to be able to address a third-party’s entire customer base, so close collaboration is essential to maximise the value digital identity can bring.
Successful European digital identity schemes driven by the banking sector
There are already some good examples of digital identity schemes driving adoption in third party services such as government and healthcare. In the Nordics for example, bank operated solutions are dominating the region, providing access to millions of users.
A number of schemes have introduced mobile offerings to further increase the ease of use, which in turn has helped to build scale further. For example, consumers use the mobile application from
BankID Norway an average of 3.5 times a week. This is a significant increase on the twice a week average when it wasn’t available on mobile platforms. This shows
that having the right mobile solution can make a real difference to consumer adoption.
itsme® scheme in Belgium has been one of the most successful Federated ID initiatives. Being backed up by four leading Belgium banks and three of the country’s biggest telecoms operators, has helped itsme®
become immediately available to the majority of the Belgium population. Due to the ease of use of the application,
itsme® has attracted more than 350,000 users in its first year of operation.
Both BankID and itsme® have already expanded from usage across banking and government services to be used more widely. Through the support of third-party providers, itsme® is now being used for authentication in the healthcare
and insurance domains and it’s been endorsed by Belgium’s government for tax return services.
BankID, on the other hand, has been successfully implemented in vehicle rental, property leasing and postal deliveries.
The wider adoption of digital identity schemes could present a drastic, positive change in the way consumers interact with online services. It also provides banks and financial institutions with the opportunity to be a driving force for this change. Fundamentally,
the core business of financial institutions has been focused on enabling secure transactions with users who can verify their identity, which makes them the perfect providers of multi-purpose digital identity frameworks. And with several banks around the world
already showing what’s possible, it’s time for the rest to catch up.