The benefits of cutting-edge digital identity verification solutions have become clear as more and more organisations continue to adopt these platforms. In the financial services sector, in particular, the implementation of digital ID products has supported innovation in both start-ups and well-established high street banks.
A number of digital identity trends are expected to develop over 2023 as financial firms across the globe work hard to overcome often complex challenges to better meet the constantly changing needs of their customers.
New fraud threats
From rampant inflation to a major cost of living crisis, disruption has become the norm in the financial services system. One of the challenges that will be felt across virtually all banks is the expected rise in fraud. For example, a smartphone user may receive an phishing email from a criminal, that appears to come from their bank, and due to desperation the victim could be more easily tricked into accidentally giving away sensitive details to a scammer.
Emergent threats to the security of financial services, such as the rapid development of advanced deep fakes, are a clear cause for concern. In just a few years, this form of technology has improved to become virtually indistinguishable from a real human face.
Crypto frauds, too, are a rising threat. The relatively unregulated nature of the crypto space has resulted in the widespread usage of scams including impersonation scams, Ponzi, scams, and so-called man in the middle attacks, where scammers access sensitive information when the victim sends these details over an unsecured secure connection.
Firms in the financial services sector would benefit from reassessing their identity verification and anti-fraud defences, to ensure these solutions are well-equipped to protect against nascent threats.
Government digital identity schemes
Several national and multi-national digital identity frameworks are currently under development that are set to impact the financial sector. On the European level, the eIDAS 2.0 regulation has been established to support the creation of a genuine cross-border digital ID, with the EU Digital Identity Wallet framework being agreed by the EU Commission in 2021.
The rapid growth of remote biometric ID systems and the evolution of portable wallets is leading governments around the world to create new frameworks. In the UK, the DIATF (Digital identity attributes trust framework) was first published in 2021, with an updated released in mid-2022, and has introduced new IDSPs and ASPs certification guidelines to ensure the framework requirements are fully met.
In the U.S. committees in both the House of Representatives and Senate have voted to advance the Improving Digital Identity Act, moving close to legislation that lays the foundation for a national Digital ID system for American citizens. The bill is expected to be brought to a vote in 2023 and if passed will establish a task force to coordinate federal, state, and private-sector efforts to develop digital identity and publish guidelines on best practice.
Customer experience is key
While achieving high levels of customer experience is already vitally important for companies in the financial sector, an increasingly competitive ecosystem will only make this objective more essential. There’s no question that outdated and cumbersome identification solutions can seriously damage the experience the customer has and their overall satisfaction.
With research from Zendesk finding that 70% of customers report to making buying decisions based on the level of customer service they receive, an unintuitive account opening process can push potential customers away. If digital identification doesn’t work as intended or takes too long, it won’t be long before users consider switching to a more user-friendly competitor.
A seamless digital onboarding and authentication journey is now expected by the vast majority of customers and innovative digital identity platforms will help financial services businesses to provide this quickly and cost-effectively.
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Future Identity Finance, taking place on the 19th March 2025 in London, will explore how innovation, regulation and customer expectations are changing how we identify ourselves to access financial services.
Join 500+ attendees, representing the retail and corporate banks, insurers, lenders, regulators and tech enablers building an identity ecosystem for the future digital economy.