Financial services are moving towards 100% digital. But a fully digital financial services ecosystem is impossible unless it is underpinned by digital identity. How can we do digital business if we don’t know the identity of the person on-line, and how can we be digital if we still print lots of paper and send it out by post for signing?
But digital identity need to be widely deployed to be effective. It also needs to be interoperable. Having separate digital identities for different services becomes too cumbersome and will not encourage digitization.
In some markets, infrastructure that enables sharing of digital identity across multiple services are being built. This type of infrastructure is called a digital identity scheme. A digital identity scheme enables individuals to have a single digitial identity that can be used whenever a service needs to know a verified fact about the user.
Some countries, notably the Nordics, had an early start with digital identity as a common infrastructure since the beginning of the 2000s. Others are catching up, with digital identity schemes initiatives announced in the Netherlands and Germany recently. Still others are in the risk of being left behind without the digital identity infrastructure that is necessary for rapid digitization.
Take for instance the UK.
The UK has a dominant position in the financial services market and the fintech industry, and ties with Singapore in the top spot of Deloitte’s list of best fintech cities. This position could be endangered by the lack of a widely used, interoperable digital identity.
The UK does have a digital identity scheme, GOV.UK Verify, but it is under-used and has failed to meet key targets. Unlike other digital ID schemes such as those in Norway, Sweden, and the Netherlands, it is limited to the public sector, does not support financial services and is not interoperable with its European counterparties. Plans to remedy its shortcomings are vague.
This lack of digital identity is already having an effect: A recent study confirms that the UK’s digital infrastructure has fallen behind countries such as Germany and Spain
Slipping behind in digital identity carries real risks for the UK’s digital economy. Without the right digital identity system it will be tricky, if not impossible, for UK-based companies to operate in the EU, and vice versa. This will relegate the UK’s digital economy to a ‘second tier’, incompatible with one of its biggest partners.
If the UK wants to correct this course, it needs to rethink its approach to identity for the digital age. One of the experiences from the early adopters of digital identity schemes is that they stand little chance of success if they are limited to the public sector. The high volume use cases such as payment need to be included to drive adoption rate. The approach of a bank-led public-private partnership should be explored, and GOV.UK Verify needs to start to align with the commercial needs of the UK banks if it is to take off.
Norway-headquartered Signicat has unique experience of digital identity, supporting public identity schemes across Europe including Norway’s Bank ID, and is a world leader with 150 Million uses by the public of their digital identity platform. The company has been tasked by the EU’s Horizon 2020 innovation project to help deliver the EU’s vision of a digital economy underpinned by a single digital ID market.
CEO at Signicat
January 22 2018