Following Open Banking Expo UK and Europe, on 18 and 19 October 2023, where digital identity was a lead theme and discussion point throughout the event, this article sets out the vision of a UK, bank-based digital identity system – drawing on all the benefits many other nations already enjoy.
The scene is now set for the UK to adopt this as a digital identity scheme, underpinned by the government-backed Digital Identity and Attributes Trust Framework (DIATF) and Open Banking’s real-time technology infrastructure for exchanging personal data with customer consent.
This bank-centric form of digital identity already exists in the UK. It has the potential to quickly gain ubiquity at low cost, as it is based on the comprehensive customer due diligence checks already applied by banks to their 50 million customers.
Sweden’s BankID – a precedent to follow?
BankID is used, on average, twice daily by each Swedish citizen to identify themselves; out of 10.4 million Swedes, 8.4 million use BankID and, in 2022, it was used 6.7 billion times, according to data from BankID. It’s used for a wide variety of private and public products and services – tax, health, postal services, ecommerce and online payments.
BankID in Sweden has played a leading role in building the foundations of a digital society and has unlocked a wide range of opportunities for a thriving digital ecosystem to develop, enabling major cost savings and innovations in products and services. It has also proved that banks are ideally positioned as the base for a digital identity scheme – as they are highly regulated to check identities and invest heavily in IT security to protect data.
For Swedish banks, BankID means an extra revenue stream, while for the government, it represents a shortcut to delivering e-services without building and maintaining its costly infrastructure. Meanwhile, businesses can rapidly develop and launch new digital products and services by leveraging trusted technologies, reducing costs and accelerating innovation.
Sweden is reaping the economic and social benefits of a ubiquitous digital identity scheme, which is both secure and user-friendly, providing the UK with an exciting example of what could be achieved by leveraging digital identity.
The UK’s circumstances are not identical to Sweden’s, but critically, we already have the key foundations for bank-verified ID. The UK Government’s Department for Science, Innovation and Technology (DSIT) has developed DIATF to make it easier for organisations to establish trust in digital identity products in the UK.
We also have Open Banking, a real-time technology infrastructure to exchange personal data with customer consent.
Benefits of a digital identity system – for consumers, businesses, banks and the UK
For consumers and businesses
A bank-based digital identity solution allows any business to immediately verify the identity of anyone with an online bank account in the UK, which equates to nearly 50 million individuals – 88% of the 56 million adults with bank accounts – which far exceeds the number of adults who own a passport or driving licence.
Customers need only to provide consent to their bank to verify their identity, with just a few clicks and in real-time. They do not need to download an app, nor upload documents or photos to use the service. Instead, they simply use their banking app to consent to their bank sharing their identity data with any specified organisation which has activated this service. Their data is transferred securely and in real-time to the relying party’s platform to provide authentication of the individual’s identity.
This slick process removes the need for manually keying all one’s personal data time after time when using different services. The same technique can be used when regularly logging into a website, avoiding the need for additional log-ins and passwords. This convenience enhances user experience and boosts customer satisfaction and loyalty, improving overall customer retention rates.
And bank-verified identity is faster and more secure than existing identity checks. This attribute becomes all the more important with the proliferation of AI-created fake documents and photos, making it increasingly challenging to filter out synthetic identities.
A UK bank-verified digital identity scheme could be transformational for banks. Banks spend around 5% of their revenue on AML compliance and customer due diligence (CDD). A bank-verified digital identity scheme creates a new revenue stream to help them recover some of those CDD costs.
With customers increasingly looking for financial services at the moment of need, in embedded digital journeys, a bank ID enables bank brands and products to be present when customers make their buying decisions. This prevents banks from losing the digital identity market to Big Tech and the subsequent loss of their core business of savings and lending. All banks should be looking across the Atlantic, where Apple in the US has attracted $10 billion of deposits into its savings product in just four months.
For the UK
There is now a broad consensus that a ubiquitous digital identity scheme is the core foundation of the full development of a digital economy. For example, McKinsey’s authoritative report on digital identity  concluded that:
- Digital ID enables individuals to unlock value and benefit as they interact with firms, governments, and other individuals.
- Productivity gains equivalent to 3% of GDP could be realised (circa £60 billion for the UK)
The G20 has issued policy recommendations for advancing financial inclusion and productivity gains, highlighting the role of using technology systems at scale, known as Digital Public Infrastructure (DPI), to realise the benefits. Public or private organisations can provide DPI. The UK must address its productivity gap, and DPI provides an enabler.
The OECD has also published a paper on digital identity governance, recommending a coherent digital ID strategy and cross-border interoperability.
In a post-Brexit and post-pandemic economy and in the midst of a ‘cost-of-living’ crisis, this is precisely the fillip which the UK’s economy needs.
Several countries, such as China, India, Indonesia, Brazil, Nigeria and Estonia, are ahead of the UK in introducing digital identity. In Sweden, BankID has become part of everyday life. However, in the UK, the perfect enablers have been put in place to support digital identity, thanks to the government’s DIATF and the banking system’s Open Banking infrastructure supporting the real-time exchange of personal data, with the customer’s consent.
Not everyone in the UK wants a government-issued ID; in some parts of society, there is an innate aversion to the government having deeper sight of citizen transactions. Banks are, therefore, in a good position to play the role of the trusted party in an identity scheme.
Bank-based ID is very much a reality and is alive today. With bank support, we can capture the benefits of a modern, digital society.
Paula Sussex is chief executive officer of OneID