The synergy between banks and digital ID has long been discussed, and that trend is growing. Financial institutions, companies, and organizations that hope to influence the development of national digital ID efforts are striving to win larger roles as program operators and guardians of all that data.
According to a recent report from the Mobey Forum, a potential leader in such efforts could be the banking industry. That can only happen, however, if banks keep hold of their inherent advantages and craft the needed collaborations with other participants in the growing digital ID ecosystem.
Unlike other stakeholder groups that are challenged to reach critical mass, banks already have both a ready-made userbase and an ID service (e-banking access) that is in popular demand
Banks and digital ID dividends
That analysis comes from a report from the Mobey Forum’s Digital ID Expert Group entitled “How to Make Digital Identity a Success: Insights and Learnings from Seven Digital ID Schemes.” The basic idea about banks and digital ID goes like this: Financial institutions still enjoy relatively high levels of trust and confidence among consumers, levels that, depending on region and context, are often much higher than the case with governments and corporations. That trust, in turn, can provide digital ID dividends.
“The confidence established in bank credentials also plays well to banks’ potential future role as guardians of their customers’ digital identities beyond financial services,” according to the report. Indeed, mobile banking and other digital services have won over many consumers in a short period of time, especially younger ones still in the first chapters of their professional and adult lives.
Banks and digital ID also have the advantage of a head start of sorts.
“Unlike other stakeholder groups that are challenged either to develop ID services that will attract users, or to recruit sufficient users to their scheme in order to reach critical mass, banks already have both a ready-made userbase and an ID service (e-banking access) that is in popular demand,” the digital ID report from Mobey continues. “This puts the banks in a uniquely strong position to facilitate the launch of national ID schemes together with supporting their wider development over time.”
That said, the trust and edge that banks might have now doesn’t guarantee they will have top roles in national digital ID programs going forward. If banks fail to collaborate with other corporate and technology players active in the digital ID space, or don’t figure out ways to deal with specific data privacy laws enacted by some countries, those financial institutions could find themselves left out of the main action.
Indeed, the Mobey report found that “a combination of government, banking and telco organizations” formed the foundation of six of the seven digital ID programs in North America and Europe that were covered in the analysis. Those programs are Alastria, e-Estonia, Itsme, NemID, BankID, Verimi and Verified.Me. The outlier here is the e-Estonia program, well respected around the world and which is largely led by the country’s government. But even in Estonia, the digital ID effort, the report noted, is “strongly supported” by the financial sector.
The reluctance of banks to collaborate on larger projects has certainly eased over the past few years thanks to regulatory changes and other shifts. Still, the problem remains.
Calling the shots on digital ID
Even so, in this age of mobile commerce and quickly emerging financial technology, banks are not always known for taking on partners for high-level or core projects — a challenge that is part stems from the inertia of some corporate cultures within financial institutions. The reluctance of banks to collaborate on larger projects has certainly eased over the past few years thanks to regulatory changes and other shifts. Still, the problem remains.
The need for collaboration will only increase as digital ID programs gain more popularity and as the desire for interoperability grows.
“This is already evident in the Nordic and Belgian markets,” the report noted, “where the ITSME, NemID and BankID schemes are well established, the domestic populations enjoy a high level of digital literacy and the major stakeholder groups such as government, transport and healthcare are equally advanced.”
Collaboration can lead to other challenges as well, at least in the initial stages of a digital ID program. Partners must decide issues related to branding, costs and revenue streams. Data privacy laws, and rules against the commercialization of consumer data, also serve as hurdles. Processes for electronic signatures and associated tasks must be negotiated and crafted.
But if banks find ways to deal with those potential problems, and work with partners on national digital ID efforts, financial institutions could find themselves calling a good deal of the shots in coming years.
Banks, after all, “have mastered the ability to operate at scale in highly regulated environments, under conditions that require rigorous and stringent security and identity verification procedures,” the report concluded. “This makes the banks prime candidates to be future guardians of their customers’ digital identities, potentially supporting services that stretch beyond their traditional banking and finance territory, generating new revenues as a result.”