Digital Identity Solutions – Building Trust in the Banking Sector

By Justin Walker, VP Digital Transformation at Thales in the UK

There are many instances where we have to prove who we are. Whether it’s showing our passport when travelling abroad, proving our age at a bar, or enrolling at a higher education facility – there’s no shortage of touchpoints when it comes to proving one’s identity.

This is particularly true when it comes to matters of finance and banking. Whether it’s applying for a mortgage, taking out a new mobile contract, or signing a new rental agreement – in these instances the customer needs to be able to prove they are who they say they are, and that they have the requisite funds and credit history for the ask in question.

Banking is one of those sectors that has undergone large swathes of digital transformation in recent years – and is quickly moving away from analogue ways of doing things. There’s no longer a need to visit a bank branch in person for many activities – in fact a survey from KMPG found that one in five UK consumers haven’t visited a bank branch since before the Covid-19 pandemic – a trend we will likely see continue.

With many consumers increasingly applying for mortgages, opening up accounts, and managing their finances purely through digital means, it makes an increasing case for digital identity.

What is digital identity?

Digital identity works just the same as the physical examples above, just in a digital setting.

Broadly speaking, digital identity takes two main forms. The first is the digital version of an official physical identity document – such as a digital driving license that lives in a mobile wallet on your smartphone.

The second is a credential for accessing online services. These are typically created through an initial identity verification process, usually involving a check against an official ID document and – increasingly – some form of biometrics. For a consumer, this might be the details they use to log onto their mobile banking app on their phone.

These two areas cover a huge number of interactions – including both day-to-day moments and life milestones. Setting up a new SIM-contract with a mobile provider, connecting a smart speaker to a home smart hub and taking out a loan to start your own business sit at different ends of the spectrum, in terms of significance, but all are enabled by digital identity.

Digital means of proving identity provides a number of benefits – customer convenience and ease being one of them. However, if not done in a secure way – it could put the end-user’s data at risk.

In the absence of in-person verification, how can the person and the business on both sides of that interaction know that who they are dealing with is a genuine and trusted party? This is especially pertinent in the banking sector in order to protect customer’s money and mitigate fraud.

Trusted digital identities are needed to bridge that gap and ensure people and machines can trust other organisations, businesses, and devices, and vice-versa.

Why is trust in Digital Identity so important?

Without trust in their customers, banks and other finance institutions won’t be able to pursue the digital transformations that they need to level up the services they provide. Similarly, in the absence of trust, consumers won’t feel comfortable using online tools, which may mean they miss out on access to essential services – a major barrier to inclusion.

More of us than ever before are reliant on online banking services; mass closure of bank branches mean that for many it’s the only way they can access financial services – therefore establishing trust is vital.

What’s more, ‘traditional’ forms of identity are no longer enough to ensure adequate online security. The use of passwords, for example, in isolation, no longer meets the needs of a society that relies so heavily on being online – given they are a relatively weak form of authentication. With criminals constantly looking for chinks in the armour of consumers and businesses, more must be done to protect these parties.

Digital identities are designed to solve all of these challenges. Not only do they enable 100% trust in all parts of the value chain, but they are also key for driving inclusivity to all parts of society, providing security through unique biometric identifiers – like fingerprints and facial recognition – and creating a frictionless experience for consumers as well as ensuring compliance for businesses. They should also be created along privacy by design principles. The identity credentials should be stored on the device in secure chips or hardened applications, biometric verification happens locally when possible and users should stay in control of the data they choose to share.

When designed properly, one of the benefits of digital identity solutions is the ability to only share data that is necessary – only sharing it as a transaction or certificate. To put this into context, when you’re liaising with an estate agent to rent a property, you’re usually asked to provide 6 months’ worth of bank statements to prove you’re financially viable – or failing that, the details of a guarantor that can vouch for you. In reality, all you should have to prove is the financial viability – why should you need to hand over itemised bank statements to do so? In practice, digital IDs in this context would be enough to show the estate agent that you’re financially viable without handing over hordes of your personal finance data.

Trust is the most important currency in the digital world, and indeed in the banking sector. Digital identities are how this trust is conveyed and embedded, and therefore their importance to our online society cannot be overstated.