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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 needs.
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:
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.
Meanwhile, the 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.
This content is provided by an external author without editing by Finextra. It expresses the views and opinions of the author.
Arthur Azizov CEO at B2BINPAY
20 December
Sonali Patil Cloud Solution Architect at TCS
Retired Member
Andrew Ducker Payments Consulting at Icon Solutions
19 December
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