Even before the pandemic, digital identity—various forms of authentication and identification such as passwords, pins, facial recognition, etc.—had become an integral part of our everyday life. COVID-19 has accelerated the need for businesses and governments worldwide to rethink their approach to enabling remote-identity verification over digital channels to facilitate day-to-day interactions.

Across the world, governments and businesses are already looking to roll out nationwide digital identity systems to cater for a new range of use cases such as disbursing financial aid, secure document signing and others.

Creating a robust digital identity that can cater to cross-sector and cross-border requirements, while also offering customers the flexibility to create and share their identity attributes, can be a complex exercise. Such initiatives will need wider collaboration between governments and businesses across a well-governed digital-identity ecosystem.

Financial services (FS) providers have long established their trusted position in the realm of identity protection and confirmation. There are successful examples where banks and governments have come together to drive adoption of digital identity. For example, BankID in Sweden and NemID in Denmark offer common digital authentication for accessing banking and public services.

With the current Open Banking infrastructure, FS firms are in a unique position to drive this trend forward and serve the rising demand for digital identity. Open Banking enables a secure framework, based on application programming interfaces (APIs), that allows customers to digitally authenticate themselves to third-party providers to share data or to make a payment.

FS firms can easily extend the principles of Open Banking to create monetisable APIs that can allow customers to share their identity attributes with other organisations or third parties within similar trust and security frameworks with the customer’s consent. Customers can authenticate themselves digitally with other organisations to access products or services, following strong privacy rules.

In today’s world, FS firms perform a series of complex checks to validate a customer’s identity to deliver any financial service or product. These checks are repetitive and not necessarily streamlined to be reused across multiple business areas within the same organisation. As a result, the customer’s identity attributes are created repeatedly but remain largely unexploited. Exposing these attributes over secure open APIs with the consent of the customer will not only facilitate data sharing within the organisation, but also enable cross-industry use cases such as age verification from which other businesses can benefit.

As the Open Banking digital-identity capabilities mature over time, they can unlock multiple benefits for all parties.

Benefits for customers include:

• Seamlessly prove identity to access any financial or non-financial products and services without needing to go through yet another onboarding process or to present a physical identity document.
• Be in control of which identity information to share with whom, sharing only the personal-identity data they choose based on their comfort levels around security and privacy.

Benefits for FS firms:

• Offer digital identity to help monetise investments in Open Banking technology, infrastructure and related capabilities and recover some of the cost of implementation.
• Create an ecosystem of partners and unlock new revenue opportunities by enabling digital-identity use cases that can serve all participants.
• Improve internal efficiency, as digital identity via APIs can be reused across various products within the bank without repeating the onboarding journey.

Benefits for the ecosystem partners:

• Use digital identities, enabled by Open Banking, to simplify onboarding and reduce the cost of manual identity verification.
• Combine digital identities with Open Banking payments to offer a seamless e-commerce / online experience, e.g. when customers can validate their address or age and make payment in one go to complete a transaction.

In the post-COVID era, the demand for digital identity will only gain momentum. The time is right for FS firms to play a leading role in seizing the opportunities that Open Banking presents.