Everything is going digital, and has been for some time. Ever since the UK switched over from analogue television, consumers are living in a constantly evolving digital world through innovative means. 

This process has of course extended to payments, banking and finance, sectors which have been at the forefront of digitalisation, as seen by the huge surge in digital assets and cryptocurrencies, digital payments methods like Apple and Google wallets – and now, digital identity.

As with other examples, a digital ID has great potential for consumers in areas such as security, as well as for simple convenience. For a panel of finance experts at Pay360, however, there was one overarching factor. Trust.

“Trust is hard earned and quickly lost,” said Phillip Mind, Director of Digital Technology and Innovation at British finance trade body UK Finance. Digital ID poses a ‘great opportunity’, he said, but this opportunity comes with risks.

“The great opportunity is using data to create a digital ID, but with that opportunity comes great risk. Banks will be tentative and cautious about putting at risk that customer trust without a great deal of reassurance about the way the framework is going to play out.”

For banks, payments providers and other financial institutions, trust is an essential part of the relationship. If anything, it is the most important part of their relationship – why would a customer bank with a company if they are not 100% sure they can trust it with their identity documents and financial information?

The same can be said in other industries. When setting up an account with an online bookmaker, for example, customers want to be confident that the aforementioned information will be secured and not visible to third parties.

Stacy Wilkinson, API Growth Manager with NatWest Group’s Bank of APIs, noted that a key challenge financial institutions will have to overcome is ensuring that customers understand digital ID, as understanding is always paramount to trust.

“If we can’t define its meaning, regardless of where it comes from a trusted institute you have lost the customer’s trust,” Wikinson commented. .

Changes are afoot it seems, both from a legislative and a developmental perspective, as both policymakers and private corporate actors are becoming increasingly aware of the benefits digital ID poses.

Dac Nguyen, Corporate Commercialisation Payments Product at Lloyds Banking Group, provided further perspective from the banking sector, reiterating that banks cannot operate with trust.

“It is incumbent upon us to ensure we deliver on that and focus on that, and that internally. We’re a regulated entity and body and we do a lot to abide by that,” he said. “But we need to make sure we are at the forefront of conversations to shape regulations, to benefit the customer and UK plc.”

Differences in consumer demographics are arguably as broad as they ever have been, with Gen Y, and especially Gen Z, having come of age in a far more digitally influenced era than than Gen X and other predecessors.

“There is a growing disparity between those who are highly proficient and digitally active and those who aren’t,” Nguyen continued.

“Digital ID can open up a broad range of use cases from the less complex to the people who are very used to using digital wallets and payments, who jump from TikTok to gaming platforms.”

Against these discussions about what digital ID can do is the overarching key word of trust. This is the case not just for the consumers too, but for the businesses using digital IDs.

For example, banks need to know that a digital ID can be trusted so that an account is not being set up for nefarious purposes, like money laundering. 

Payments providers need to know an ID is legit so that a transaction is not fraudulent. Betting operators also need to trust that the ID in front of them is not being used to defraud their business or also to move criminal proceeds.

“Banks themselves when presented with a reusable digital identity, they have to trust it,” UK Finance’s Mind remarked. “They are institutions that have to trust the reusable token.”

Sharing the stage of Pay360, located at the ExCel London this year, was Rob Kotlarz, Co-Founder & President of OneID, a company active in digital identity solution development.

Fraud prevention is a particular area in which digital ID can play a significant role, in Kotlarz’s view, with fraud becoming ‘a national risk’, enhanced by the emergence of AI-based deep fakes and synthesised voice technology.

“This is about restoring trust, because we’ve lost it,” he remarked. “Too many actors online aren’t who they say they are, and that’s causing a lot of issues for our society.”

So where are we heading with digital ID? As noted above, legislative developments are ongoing, but the EU and UK seem to be taking two different approaches, with the former adopting a framework in February.

Based on the viewpoints expressed by the panellists, the EU is taking the path which other jurisdictions should learn from, although Kotlarz noted that inroads have been made particularly in the Nordic countries.

In Europe, a ‘unified, single public/private approach’ is being pushed forward, as UK Finance’s Mind put it. Whilst in the UK, debates in Parliament this week signalled progress, although there are ‘still pieces of the jigsaw missing’, the UK Finance representative added.

As Mind put it, there is ‘a lot of work to be done’ if digital ID is to be done right, with Lloyds’ Nguyen adding that a strong data culture and foundation, coupled with good governance are needed – but perhaps most significant is a need for industry collaboration.