Are digital identities the new golden bars for banks?
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By Inge de Ruijter, Innovation Manager at equensWorldline
The concept of a digital identity is fairly simple, but until now we have not yet seen a digital identity with sufficient trust, reach and convenience. That is unfortunate, because a solution based on trust will bring the digitalization of doing business online to a next level. The big question is: who is able to offer the trustworthy digital identity with enough reach and convenience?
For various reasons, it seems a logical step for banks to take on that role. The first reason is that the electronic payment infrastructure is comparable to the infrastructure of providing an online identity. The two major steps in a payment process are authentication and authorization, which means electronic payments rely heavily on a strong Know Your Customer (KYC) process provided via the onboarding process of the bank. This is similar for the process of providing digital identities, which means that the landscape is similar for suppliers and acceptants of payments and identities. Managing identities is the DNA
More important, however, is that managing identification processes is in the DNA of banks. Banks are professionals in risk management, and managing the identification processes is an element that is in their DNA. In this perspective, banks are well placed to offer those types of identity services, beyond what the bank is in today's world, in the relationship between the bank and the customer.
This new role of an identity provider offers banks multiple advantages. The first advantage is that banks can strengthen the relationship with the customer, because their credentials and brand are being used for third parties. It’s a new business model to attract new business and income. The timing is ideal, because they must take the step anyway to embrace new possibilities in a post PSD2 and AML5 environment.The bank as data guardian angel
A third advantage is that banks can provide new services like a data guardian angel. For example, they could conduct risk profiling, which could be useful for e-commerce. Here is a chance to step up and take an active role in the path of a seamless shopping experience. This means that banks can provide a login and several payment methods, together with other services such as e-signing, e-invoice and e-mandate. But in the long term, a bank could give a customer the full control over his data in a secure environment provided by a bank. For example, to gain access to other third-party providers with budget planning tools, which are also services a bank could provide. In the longer term, we expect that a bank could act as a banking platform for several services. For example, for account insights or even social sharing and purpose offering (as can be seen in the image below).
Some banks already recognize these advantages and have transformed themselves to be compatible with this new future. In Belgium, multiple banks and telcos joined forces to introduce online IDs, and in Germany, the Deutsche Bank and some partners jointly introduced an online identity platform. It is a platform for online registration, e-identity and data services and, in the future, it could be used for digital payment and financial services, too.
To take that step into the future, it is important that customers are able to use the digital identity that is provided by the bank. It is therefore advizable for banks to concentrate on providing and managing the digital identity in order to remain relevant in the future. The roadmap to the future with this new role contains a lot of specific areas or solutions to remain valuable in the chain and to eventually transform into a bank platform. equensWorldline is ready to support banks on their path to that future.