By Bryn Robinson-Morgan
The financial service sector is currently undergoing a dramatic transformation as it embraces the digital revolution. Technological, regulatory and customer behaviour driven change deliver threats to existing business models and create opportunities for the development of innovative products and services within the sector. Initiatives underpinning these changes have a common theme of strong customer identification and authentication. An assured, trusted, digital identity could be an enabler for financial service providers to meet a number of their obligations under the key regulations that the sector faces:
Payment Account Directive (PAD)
EU Fourth Money Laundering Directive (4MLD)
Open Banking (Competition and Markets Authority)
Second Payment Services Directive (PSD2)
General Data Protection Regulation (GDPR)
In June 2016, Innovate Identity published a report with the Open Identity Exchange (OIX) that stated the UK private sector needs for identity assurance. The report was based on survey responses from 80 different organisations across multiple sectors. The report concluded that there was a significant appetite to collaborate to move forward with a cross industry approach to digital identity. The report recommended, based on participating industry feedback, that the financial sector should be the starting point for this collaboration.
As the next step of this collaborative approach, Barclays commissioned a white paper through OIX to explore the reuse of a GOV.UK Verify digital identity in a financial service application process. With Innovate Identity as project co-ordinators, Barclays were joined by Aviva, Experian, HiFX, Meeco, Post Office and Verizon to participate in a discovery project that would seek to understand the value of digital identity to the financial service sector by testing two hypotheses:
- Customers are more inclined to complete the application process for a financial service product that enables them to reuse an existing assured digital identity
- Financial service institutions would accept an assured digital identity from a third party provider as part of their product application process if an established trust framework met their regulatory and service requirements
The resultant white paper focuses on the challenges faced in enabling trusted online transactions within the financial service sector, and explores whether digital identity reuse offers a solution. Specifically, looking at three areas:
- User testing of customer inclination to reuse a government endorsed digital identity to open a bank current account
2. The views of four leading financial service providers around identity reuse, and the strengths, weaknesses, opportunities and threats of such a proposal
3. Assessment of target model for implementation to make identity reuse across multiple sectors a reality
The project concludes that a widely-adopted, fit-for-purpose, trusted, standards-based digital identity scheme could have significant value for the financial services industry.
Senior leaders responsible for customer due diligence will find key insights, recommendations and actionable next steps to meet the challenges of regulatory change currently affecting the financial service sector.