A new report published by Mobey Forum’s Digital Identity Expert Group has identified unique opportunities for banks to leverage their position as custodians of personal data to offer value-added digital identity services and become brokers of trust in the digital economy. The report suggests that for digital identity systems to succeed, banks must bridge the divide between private and public sector and drive adoption of so-called digital identity wallets.
The report, entitled “The Rise of Digital Identity Wallets: Will Banks Be Left Behind?”, contends that growing consumer demand, regulatory mandates such as eIDAS in Europe, and the trend toward digital identity wallet issuance by global governments are requiring financial institutions to consider now the role they wish to stake out in the emerging digital identity ecosystem.
Already, banks in the Nordics and Canada have embraced strong Know Your Customer (KYC) procedures defined by strict regulatory compliance, and harnessed best in class security and authentication technology to achieve high levels of customer engagement in their respective BankID and Verified.Me systems.
The Expert Group’s research indicates, however, that banks don’t need to fully provision a wallet for meaningful participation. Rather, financial institutions can start by creating the infrastructure that enables issuance and acceptance of Verifiable Credentials. In addition to issuing wallets and credentials, banks also have opportunities to act as credential consumers, relying parties, authentication providers, and to combine these services in accordance with their own strategic approach.
“The growing need for trusted online identity is giving banks a chance to embed themselves more meaningfully in their customers’ lives by providing related services,” comments Elina Mattila, Executive Director, Mobey Forum. “Building on their strong positions of trust, banks should act now to establish prominent roles in this space. This will mitigate their risk of disintermediation in a world where their core businesses are being perpetually challenged by market disruptors.”
Banks’ participation in the digital identity space should not only be viewed as defensive, however. The Expert Group also contends that banks can move beyond traditional trust services and develop new identity-based use cases that address customer’s broader needs, creating value streams in the process.
Kevin Faragher, Interac, and Co-Chair of the Expert Group, adds: “Our research really underscores the important role that financial institutions can play. With people relying on digital identification and verification on an almost daily basis, issuing digital identity wallets will enable banks to better meet customers’ needs, stay relevant in their lives, and remove identity related pain points – providing issuing banks an opportunity to create competitive advantage and improve brand loyalty.”
Jukka Yliuntinen, Gieseke+Devrient, and Co-Chair of the Expert Group, adds: “Banks are uniquely positioned in this space. They have a clear opportunity to bridge governmental digital identity services with private sector use-cases to create exceptional value for all stakeholders. Their close relationships to business clients also positions them favourably to address the many identity related challenges found in the B2B environment.”
The report combines the results of a survey of prominent global financial institutions, conducted in 2022, with the Expert Group’s analysis of the current landscape, trends, regulation, opportunities, and risks.
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