The Age of Consent – The Case for Federated Bank ID
Treasury and Trade Solutions 10 In the digital world, we need ways to give consents and authenticate transactions. We need credentials to establish our entitlements as we transact across an increasingly interconnected digital and physical world. The need for digital ID and the benefits are clear. A 2019 Report from McKinsey concludes: 15 • Digital ID is a foundational set of enabling technologies that can be pivotal in a wide range of digital interactions between individuals and institutions. • Digital ID enables individuals to unlock value and benefit as they interact with firms, governments, and other individuals. • In our seven focus countries, extending full digital ID coverage could unlock economic value equivalent to three to 13 per cent of GDP in 2030 — if the digital ID programme enables multiple high-value use cases and attains high levels of usage. • For mature economies, many processes are already digital, so the potential for improvement is more limited and largely requires digital ID programmes that enable additional data-sharing features. An average per- country benefit of three per cent could be possible, assuming high usage rates. The question is who will provide the digital ID layer — governments, banks, fintech or bigtech firms, or a combination of players? Banks have a natural advantage in providing digital ID (based on underlying government ID) because of the position of trust that they still enjoy and the extra levels of due diligence that they are required to perform by regulators. Conclusion Open banking and PSD2 has provided an object lesson in the dangers of building digital pyramids from the middle. SCA has been shown to be a major pain point with a potentially significant impact on European online businesses. If the EU wants to complete the “Single Market for Money”, then it might consider catalysing a Pan-European federated Bank ID scheme modelled on the Swedish example. Regulators and the banking industry should take this opportunity to consider the fiat currency stack in a holistic manner and realise that digital identity is the base layer. After all, the puzzle of payments is solved through a combination of digital ID, accounting entries and rulebooks for the participants. 16 Federated Bank ID has great potential as an enabler of the global digital economy, and it would be a wise investment for banks seeking continued relevance in the digital realm. But even as Denmark displays a synthesis of digital advancement and interpersonal hygge, we cannot forget the human element: financial and digital literacy are the best investments that will enable us to reap the benefits of digital commerce without the downsides. The human factor also raises its head on the question of whether the banking industry can coalesce around Bank ID — there is no technical impediment, only the need to prioritise and execute. All that we need is common consent.