In the online age, establishing reliable, secure and portable systems of digital ID could unlock significant gains for both consumers and firms. It has huge potential for improving choice and competition and streamlining processes. But the growth of digital ID is not without risks and challenges. To unlock that potential, industry, regulators and government need to work together to get it right.
The use of digital transactions has been growing rapidly for several years, but the advent of Covid-19 has given this trend a fresh impetus in both the public and private sector. In this age of digital interaction, the ability to prove identity digitally has also become more urgent and more valuable.
The potential economic value is significant. A 2019 study by the McKinsey Global Institute calculated that by increasing access to services and easing transactions, digital IDs could unlock economic value equivalent to 3- 13% of GDP.
In the field of financial services and markets, secure and reliable digital ID will be a key part of the infrastructure that allows truly Open Finance, with consumers able to share their data with third party providers smoothly and securely, fuelling choice and competition in the market. It could help enable more efficient SME lending and even play a role in the use of digital currency by central banks.
It’s little wonder that solutions to digital ID are one of the growth areas in innovation.
Author: Joyce Zeng. Source: Financial Conduct Authority (FCA) Insight
About the author:
Joyce is a team leader of the Regulatory Sandbox at the FCA’s Innovation Division. She leads a team that supports innovative businesses in testing new products and services with real customers in the UK financial services market.
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