As we start to recover from COVID-19, can banks drive the innovation in digital identity that we so desperately need?

NB Team

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The COVID-19 pandemic has dramatically accelerated the adoption of digital financial services. The use of banking apps has rocketed as consumers ditch the traditional bank branch. Consumers have also embraced contactless payments, as COVID-19 throws cash its biggest challenge yet. And, more generally, our changing environment has resulted in more openness to digital services (as outlined in our recent Fintech PR Playbook).

But digital identity is still waiting to take off in the UK. As we increasingly rely on digital services during the pandemic, our banks, retailers, and other critical service providers urgently need a way to digitally establish we are who we say we are. This is a massive opportunity for fintech. So if COVID-19 provides the ‘need’ for greater digital identity services, who will drive innovation?

The UK’s digital identity crisis

Recent research from Nomidio, a biometric identity service provider, found that of the one in seven UK adults who have had to confirm their identity digitally during lockdown, 49% were asked to email sensitive documents such as passports. Our reliance on presenting paper-based documents such as a passport or driver’s license is inconsistent with our new digital expectations. Not to mention how practices like this only add to the growing threat of identity fraud that already exist in the UK.  A digital identity solution is long overdue.

But the UK hasn’t had much luck so far. Plans for national ID cards were scrapped in 2010 after concerns of how the data would be used. And the Gov.UK Verify programme has faced years of scrutiny after failing users and a lack of uptick.

In other parts of Europe, such as Norway and Sweden, nationwide electronic ID (eID) schemes exist and are used by large swathes of the population. Citizens use them every day for all manner of tasks – from logging on to their bank, to purchasing age-restricted products. Last month, it seemed like the Government might be finally making progress towards a new digital ID scheme. However, the UK Government’s plans have already come under fire for lacking actionable outcomes.

The opportunity for banks and fintechs

While a nationwide scheme must be the long-term aim, the Government’s plans are still a long way off. There is an urgent demand for a solution now, but this responsibility doesn’t need to fall to the Government. Banks are well-placed to take the lead on digital identity, as it is intrinsically linked to their services – whether you are opening a bank account, applying for a mortgage, or paying your bills. There are also countless studies that show when asked who they trust with their identity credentials, consumers always rate banks top; and above governments.

Banks have an opportunity to become custodians of identity. But they likely are going to need support from the number of identity verification providers working in the financial services space. Some are even creating their own solutions. Earlier this year, Onfido successfully tested a portable digital ID, which lets consumers securely re-use their verified digital identity to access a range of service providers, all controlled from their smartphone.

UK banks might have the scale, consumer trust and the brand, but they can lack flexibility, speed and innovation – something fintechs have in absolute abundance. Joining forces is not just a smart play; it could give digital identity its rocket launch moment.

Nicole Louis, Account Manager, Nelson Bostock – an UNLIMITED agency