14 June 2017
Are digital identities the new golden bars for banks?
A digital identity demonstrates that you really exist to prove that it is okay to do business in the digital world. The concept of this digital identity is fairly simple, but until now we have not yet seen a digital identity with sufficient trust, reach and convenience. That is unfortunately, 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?
It seems a logical step for banks to take that role for multiple reasons. 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 todays world, in the relationship between the bank and the customer.
This new role of an identity provider beholds multiple advantages for the banks. 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 with, for example, risk profiling, which could be useful for e-commerce. There is a chance to step up and take an active role in the path of a seamless shopping experience. This means 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 fully control on his data in a secured environment provided by a bank. For example to gain access to other third parties providers with budget planning tools which are also services a bank could provide. 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 this new future. In Belgium, multiple banks and telco’s joined forces to introduce online ID’s and in Germany the Deutsche Bank introduced an online identity platform together with some partners. 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 advisable for banks to concentrate on providing and managing the digital identity 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 in the path to that future.