Why everyone’s talking about Digital IDs

It’s no secret that customers are demanding instant, digital and connected services across the board, so there’s no surprise that industry leaders are turning their attention to digital IDs in order to take advancements to new heights… though this is easier said than done. The challenge not only lies in launching well-functioning digital IDs but also in the acceptance of digital IDs by the public.

The question is, what role should banking and payments leaders play in this fast-moving digital ID environment? What are the tangible benefits digital IDs will bring to the Financial Services industry? And how can banking and payment leaders ensure that customers benefit from these ground-breaking advancements? We asked Katinka Jussie Lønning Brurberg, Business Development Manager, BankID and BankAxept to get her thoughts ahead of MoneyLIVE Nordic Banking this October.

Why are Digital IDs such a major focus right now for the industry? What are the tangible benefits they’ll bring?

Well-functioning digital identities are the foundation for a digital society, as they are the core of all digital services. Which is why it is so essential to have a well-functioning digital ID that is widely accepted and used universally. What I mean by well-functioning is that they have a high adoption and usage. For example, BankID in Norway has a 98% adoption within the adult population, and an average usage of 220 times per year, per user.

Once a digital ID becomes a part of the user’s everyday life, it is possible to move almost all services over to digital channels, bringing enormous benefits to society. Many European countries have come far in this digital shift, but there is still a long way to go. Considering it requires investment in infrastructure and collaborations between industries and services to gain the full potential, it is a slow-moving mass.

At the same time, COVID-19 has accelerated this shift immensely, moving the shift from a want to a need has been great from a digital perspective. We also see that the digital maturity of all verticals has increased in the past decade and the increased proficiency amongst the citizens in the digital space facilitates this digital shift. At the heart of this change is also the digital identity, it’s hard to do anything digitally, if you are not able to prove who you are. Some of the key benefits we have seen in Norway is that it saves time for all parties involved. One example is in real estate in Norway. The sale and purchase of a property can be completed digitally within a matter of days. The loan application can be done through the banks, by digitally filling out a form, authenticating with BankID which then gives an immediate response. All documentation from the realtors can be signed using BankID and with authorisation from the users, the realtor can check that everything is in order with the loan. Every step is digital and requires less time and effort for all parties involved.

As society becomes more efficient, there are great benefits to be extracted. McKinsey has estimated 3-13% of GDP in economic value, depending on how digital the country is already [1]. Globally, there are not just examples of gains in efficiency, but also greater inclusion and equality. For 1 billion people globally one of the greater challenges is that they have no proof of identity [2]. This keeps them on the side of society and makes it impossible to gain financial independence, women are overrepresented in this group. Therefore, by making a digital ID a possibility, more people can access financial and other services, giving them greater freedom and control of their lives so that they have the same opportunities.

“For 1 billion people globally one of the greater challenges is that they have no proof of identity. This keeps them on the side of society and makes it impossible to gain financial independence, women are overrepresented in this group.”

What is needed for customers to accept a digital ID and how do we make sure we are delivering on digital IDs to make the benefits a reality for the customer?

I believe that customers will adopt digital ID if it solves enough pain points for them. In other words, if it makes life sufficiently easier for them, they will use it. This means that there needs to be enough use cases, where the user can use the digital identity and the user journey needs to be seamless. The users also need to trust the service and feel like they are in control of their own ID and data, this goes hand in hand with adoption of use cases and users.

If the user needs a different ID for every digital service they use, they will try to avoid the service, or they will try to make it easier for themselves (such as having the same password for several services). Whilst using an integrated ID with homogeneous experience everywhere from logging into their kid’s school portal to signing their mortgage or logging into their banking services. Then that digital ID will make life easier for the user.

We see this with BankID, even today when we admittedly do not have the best user experience – we are battling 18 years of legacy – the Norwegian population love the service because it can be used everywhere, at any time. I’m not saying that a good user experience isn’t key, the experience needs to be seamless for the users, and we are working full force to ensure we get there.

I believe that now with more countries having a well-functioning digital ID we will see that, soon it’s not enough to be available, but we will see a shift towards the need for more use cases as well. The new eIDAS regulation is firmly pushing towards this, and the pandemic only highlighted the need further. Soon there will be a need to share credentials securely in different settings, have a place to store documents, be able to distribute power of attorney in a safe and secure way, to have qualified signature, all levels of assurance and access all of it through an app.

To sum up a long answer; the key part of ensuring a digital ID will be adopted and give benefits to the user is adoption. Merchant adoption, adoption of use cases and adoption of different industries.

“To sum up a long answer; the key part of ensuring a digital ID will be adopted and give benefits to the user is adoption. Merchant adoption, adoption of use cases and adoption of different industries.”

There’s talk of having a pan-European digital ID wallet – what are your thoughts on this concept? What would it take for this to become a reality?

The EU has taken on a huge mission trying to create one consolidated approach to an eID wallet Europe wide. There are many unanswered questions so far, about the scope and how the wallet should be set up. What we do know is that eIDAS 2.0 is looking to add more use cases to the identity wallet to ensure adoption, which I believe is a very good approach. As described in the previous question, this will make digital IDs even more relevant for all users and further the digital services that are available. It’s great that the EU wants to be a part of driving this change and ensuring that the EU is at the forefront of digital innovation. They are also now taking a step further towards cross-border solutions. The current eIDAS regulations also had hope in bringing out cross-border initiatives and solutions, but there is still only 14% of key public services across all EU states that allow for this at present [3]. Therefore, the EU is going all out on the cross-border set-up in the new version of the regulation.

“The current eIDAS regulations also had hope in bringing out cross-border initiatives and solutions, but there is still only 14% of key public services across all EU states that allow for this at present.”

It will be difficult to consolidate such an initiative with many different use cases and cross borders, but if anyone is going to do it, it’s the EU. The task is both complex and ambitious, and implementing the regulations in each country’s legislation will take time. At the same time, I believe they will do it and that it will be implemented in some years’ time. One of the reasons I believe this, is the collaboration between the private and public entities, this has been one of the key reasons BankID has been such a success. That collaboration means it is possible to reach adoption faster by removing pain points for user in many different use cases at the same time.

What I hope is that we see further development of all digital IDs within then, where digital ID wallets are readily available for the users so they can gain all the benefits that will come with such a service. The EUDI wallet lies under the assumption that eID success requires ubiquitous use across public and private environments, something that we have found to be true in Norway.

[1] McKinsey Global Institute, 2019

[2] McKinsey Global Institute, 2019

[3] Thales; eIDAS 2 – realising the vision of a single Digital ID Wallet for Europe