Martin Sladecek, Director of Digital Strategic Studies at Société Générale, explores the key role banks have to play in the emerging digital identity ecosystem, and why the time to act, is now.
Digital identity is one of the hot topics of the moment. In this area, things are changing rapidly. Yesterday’s competitors are not tomorrow’s competitors. In this context, banks must act quickly, and together.
Let’s take a very recent example that gives a good idea of the challenges of digital identity: in the United States, in several pioneering states, Apple users can now add their driver’s license or national identity card to Apple Wallet on their iPhone and Apple Watch. In some airports, queues are now reserved for Apple customers, to allow them to pass through security checks in a few moments, thanks to their digitized identity.
As this example suggests, digital identity enables the creation of secure and frictionless experiences for customers, citizens or users, both online and in the physical world. In this emerging open banking ecosystem, financial institutions have a key role to play.
But they must act quickly and wisely, preferably in a coordinated manner.
BankID, the first example of a bank-driven digital identity
This is already the case in the Czech Republic, where a consortium of banking institutions, including Komerční banka, a subsidiary of Société Générale, illustrates the possibilities opened by a digital identity driven by banks.
Launched in early 2021, this Czech BankID offers consumers a secure and seamless way to connect to a wide range of digital services, following a familiar path: the one they use almost daily to log into their bank accounts or make their wire transfers.
With BankID, users no longer have to remember all their passwords. They retain full control over how their data is shared, in compliance with the regulatory framework and with a high level of security. For example, BankID can be used to create fully digital onboarding journeys, meeting all KYC (Know Your Customer) needs.
Less than a year after its launch, BankID is already available to the majority of the Czech adult population and positively recognized by more than two-thirds of them. UX (User Experience) has been the key to this success. Indeed, to be widely adopted, the solutions proposed by banking institutions must be as simple to use as those of BigTech, or even simpler. Smooth, frictionless experiences are a must.
Such an initiative can easily be replicated in other markets. In France, for example, the movement towards a digital identity is essentially led by the government. FranceConnect is already used by nearly 34 million citizens, but is still used mainly for administrative tasks with public institutions. In 2021, a more secure version was presented (FranceConnect+) and in 2022, a new government digital identity application will be launched, in connection with the new identity card equipped with a chip.
Together, banks could play a complementary role to FranceConnect, for example by becoming identity providers for FranceConnect and/or by providing additional identification services, through their own tools and data.
What are the opportunities for retail banking?
Now imagine the opportunities this opens for Société Générale’s new French retail bank… Let’s start by imagining an instant, fully digitized onboarding process where the customer could complete each of the steps without having to provide documents, photos, or selfies. This process would of course be completely secure and would comply with all legal and regulatory standards. This would be an experience comparable – and even better – to that offered by neobanks or Big Techs.
Later, the customer could connect to their digital space, to authorize transfers, or sign contractual documents with the bank, using one of the digital identity tools on the market, (not just that of the bank).
If a Société Générale’s customer wishes to change telephone operator or energy supplier, they would not need to travel, send physical documents, or provide documents or certificates. They would only need to authenticate digitally via the new French digital identity, the application of commercial identity providers or with a banking authentication tool (for example, the Société Générale’s Security Pass).
These digital ideas may seem like science fiction, but some of them are already becoming our client’s reality.
Four use cases – already deployed by banks for direct interactions with their customers – can be offered to third parties quickly by a bank (or better, by a mutual banking identity platform of financial institutions):
- Connection – the bank allows a secure connection of the customer to a third-party digital environment, an online store, a customer account, or a digital kiosk – this is the first use case of BankID, the simplest, which greatly simplifies the daily life of each customer.
- Identification – the bank confirms and shares the identity of the customer with the third-party partner, based on an immediate and direct request and consent of the customer.
- Signature – the bank allows customers to digitally sign the partner’s documents or contracts, as simply as when the customer usually authorizes transfers or payments by credit card online.
- Validation – the bank provides simple Yes/No answers to the partner requesting the personal data or the status of the customer, for example to confirm that he/she is over 18 years old.
For banks, it is desirable to act now, as the potential of digital identity is considerable. (Very) soon, digital identity will be a key part of our daily lives, whether to facilitate access to healthcare, financial services, e-government, e-commerce, telecommunications, utilities, or travel.
This vision is gaining visibility. Recently, we shared our beliefs and understanding of digital identity at various conferences on FinTech and banking innovations, such as the FinTech Talents and Future Identity Festival in London.
In the Czech Republic, chief economists of the country’s three largest banks have predicted a 7-9% increase in GDP by 2030 thanks to digital identity, while McKinsey’s Digital Identity Report predicts GDP growth of +3-13% by 2030 in the various countries around the world implementing a digital identity.