German Angst and Lessons from the Nordics in Electronic Identification

“Angst” is one of the few German words which many English-speakers know (the word angst and perhaps the words autobahn and kindergarden). German angst-or fear- is this year’s theme of FinForward, a full-day conference part of Germany’s largest fintech event Fintech Week in Hamburg. Some of the topics discussed look at how digitalization in Germany can be “schneller” in the autobahn of Europe’s digital transformation. When it comes to digital identification and implementation of electronic identification (eID), Germans are often looking to the Nordics’ success.

German angst can be measured in decreasing trust

Trust is a fundamental element of social capital, contributing not only to sustainable well-being but also economic development. The emergence of societal trust can be attributed to many socio-economic factors including a country’s history, diversity, political stability, economy and more. Nordic countries are observed with the highest social trust according to the World Values Survey- a standard measuring social trust across countries. For instance, Norway and the Netherlands have some of the highest interpersonal trust scores with 73% and 66% of surveyed participants agreeing with the statement “most people can be trusted” (2009 and 2014 figures respectively) whereas in Germany 42% agreed with the statement, closely followed by 38% in war-stricken Yemen. With over almost three decades of peaceful reunification since 1990, what is the root of German angst in the 21st century?

Beyond interpersonal angst in Germany are the attitudes towards a country’s institutions. The Financial Times recently reported that Germans are broadly losing trust in their social institutions (such as the church, to trade unions and to the police) according to a survey where 26 institutions were featured. The police were the most trusted institution in the country and banks and managers were at the lowest level of the trust spectrum with attitudes decreasing from 2018-2019. The trust in the press was the only area in which confidence had grown from 2018 to 2019 compared to trust in schools, police, unions, armed forces, catholic church where the figures were decreasing.

Angst in a digital world

Angst and concerns with digitalization are growing as digital ecosystems expand, particularly in the realm of a person’s identity. Figures in the report “Digital Identification: a key to inclusive growth” published by McKinsey Global Institute (April, 2019) highlighted that USD 16.8 billion was lost in the United States in 2017 due to identity fraud, an increase of 8 percent from 2016. Similarly, a study conducted by the American IT security company Norton by Symantec in 2017 confirms that German Internet users are highly affected by cybercrime (38%). In Germany, this caused a loss of 2.2 billion euros (Norton by Symantic, 2017). The growth of identity fraud is noted across borders and consumers’ concerns about fraud is rising with 51 percent in 2016 to 69 percent in 2017.

With more and more of our lives taking place online, electronic identification (eID) is only going to become more prevalent in the years to come. eID has the power to be a more convenient and secure form of identification compared to traditional alternatives such as passports, driver’s license, and documentation used as proof of address and although almost every German citizen has a “Personalausweis mit Online-Ausweisfunktion (nPA)", the general population in Germany has very little knowledge of digital identity with some claiming that 5% of the population know the digital usage. In Norway, the utilization of eID is 80% and when you take away the citizens not eligible for an eID (e.g., children), then the figure is closer to 93%.

A Nordic model that beats digital angst

So how did Norway succeed in implementing a digital identification scheme? In the early 2000s, the associated Nordic banks concluded that a collaborative solution would give them the chance to improve existing business, develop a platform to launch efficient and more enhanced services to their customers, and a whole new business model which could be used beyond the financial sector. They did not want to compete on identity but on financial services so it was the banks that drove the digital maturity agenda. It was social institutions such as Norway’s Education sector, that supported the institutionalization of eID to which now Norwegians use BankID (similar in how the nPA can be used) 5-10 times per week on average.

Despite initial hesitance and doubts around bringing such an all-encompassing solution to the market, banks in the Nordics now see their eID schemes as an enabler for their businesses, and also as a product from which many other services can profit.

In our “Federated eIDs” report we take a detailed look at how the Nordic countries of Sweden, Norway, Finland and Denmark have developed successful eID solutions. The Nordics are leading the way when it comes to embracing the benefits of eID, and it is essential for the rest of the world to take note.

Click below to download the report.

Arkwright Federated eIDs Report | Download

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