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How banks Can Promote Digital Identity Schemes
The first generation of internet users did not need secure identification for the website they were visiting. However, as the companies offering online services increased the need for proof of identification also surfaced. The absence of the ubiquitous identification framework helped evolve the eGovernment, banking, and telecom services. This evolution led to fragmented and inconsistent solutions with variable levels of security and visibility.
The lack of online ID verification has become the focus of new regulations. Open banking and PSD2 are prompting banks to rework on their online payment authentication and identification technologies. In the past, consumers believed that online banks authentication methods are secure. Therefore, banks have a real opportunity to provide the digital identity system the internet needs. Digital identity eliminates inefficient manual processes and reduces frauds.
To take complete advantage of digital identity, banks need to identify an area in their business which digital ID would be able to address and deliver positive ROI. Anti-money laundering (AML), Know Your Customer (KYC) payment authorizations, account enrolment, account login, and online shopping and banking are the pain points that could be addressed by digital identity. After a bank has taken its identity vision and applied it to solving critical problems, the next challenge is to increase customer usage. The solution has to be easy so that the customers adopt it quickly and adopt other services confidently.
When a lot of customers use digital identity scheme, it builds a huge transaction volume in the market. This will make identity frameworks more attractive to third-party service providers. Banks can re-use the infrastructure supporting their services and offer them to organizations with similar needs. Modern banking services require identity frameworks to comprehend a third-party’s entire customer base. Therefore, close collaboration is essential to maximize value.
Digital identity scheme can transform the way consumers interact with online services. Banks can use the changing force for change. Financial institutions’ essential function is to enable secure transactions for users who can verify their identity. Several banks are using modern methods for banking, and it is going to transform the entire banking landscape.