The Age of Consent – The Case for Federated Bank ID

The Age of Consent | The Case for Federated Bank ID 3 Banks are compelled by regulation to perform strong know-your-customer (KYC), anti-money-laundering (AML), sanctions and other checks on individuals and legal entities, based on government IDs and other sources. The need to perform these checks imposes extra costs on banks, but they can also be the basis of secure digital credentials. As we enter a world of digital platforms, banks need to think about what role they will play and where to set up shop. A bank’s presence on the high street is tangible and obvious, but its presence and relevance on the information superhighway cannot be taken for granted. Digital analogues of physical constructs may not work. We can see from the example of Ant Financial and Alibaba in China how financial services can be embedded into digital platforms, and those financial services do not have to be provided by a bank. The Bank of International Settlements (BIS) released a working paper that demonstrated how bigtech’s informational and network scale advantages enable bigtech firms to successfully address core banking activities like lending. 5 Bigtech firms are also targeting bank revenues in payments and seeking to cement their position as providers of digital identity: The Case for Federated Bank ID An additional goal of the (Libra) association is to develop and promote an open identity standard. We believe that decentralised and portable digital identity is a prerequisite to financial inclusion and competition. 6 There is a race between banks and fintech and bigtech firms to provide the financial layer of the digital economy. If banks are to remain relevant, they will need to cultivate a world in which: • The primary store of value remains the bank account . • The primary source of lending remains the bank balance sheet . • The bank becomes the primary provider of digital ID . Different models are emerging around the world. In India, the national ID scheme called Aadhaar (“foundation” in Hindi) has been transformative as the base layer of the India Stack but its future usage in the banking space and interaction with privacy regulations are under discussion. 7 Banks around the world may consider the lessons from BankID in Sweden, where financial institutions have worked together to build the base layer of an almost cashless society and unlocked a wide range of opportunities for a thriving digital ecosystem to develop.