Digital identity the next frontier for FinTech innovation
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Special Report: The growing prevalence of digital identities will have far-reaching consequences for the way we interact with our traditional banking and financial services institutions in shaping the contours of customer engagement.
The renewed investment by the federal government in digital identification presents a telling blueprint for the future of public-facing interactions – one which could completely transform legacy systems and infrastructure, particularly when applied to Australia’s financial services sector.
That is the view of Seed Space Venture Capital founder and managing partner Dirk Steller.
Steller said the federal government’s move to expand its Digital Identity Program in this year’s Federal Budget with a $257 million cash injection was consistent with the government’s series of “digital-first” measures that included continuing the rollout of open banking and a $19.2 million expansion of an advisory program that helped small businesses make the transition to digital.
“A holistic vision for data interoperability has been the defining feature of the federal government’s plans to completely reshape it’s suite of public sector services and this is creating opportunities for emerging companies like never before, particularly in a COVID-19 led environment where the shift towards digital has accelerated,” Steller said.
“The sheer promise of a national digital ID framework can also be realised when it is applied to many of Australia’s incumbent wealth and banking institutions. Add in the ability to uniquely identify that individual, through a biometric physical trace or audio footprint, we can now begin to envisage a world where a bank’s plethora of products and transactional services are no longer a ‘one-size-fits-all’ for all customers.”
“Instead, these services are tailored and personalised to the individual, drawing on much deeper data sets that can acutely inform how that bank seeks to target the next generation of customers.”
Over the past six years, the Australian federal government’s Digital Transformation Agency (DTA) has spent more than A$210 million developing a National Digital ID platform. From the outset, its aim was to help address a series of challenges the government has faced in streamlining commerce, cutting through bureaucratic red tape, and improving national security.
According to Steller, Australia could take a leaf out of the implementation of digital identities in overseas jurisdictions such as France and India.
He said La Poste’s L’Identité Numérique presented an excellent example of how this could apply on a national scale and is successfully being rolled out across France and it’s overseas territories.
“National identification systems are emerging rapidly, and the next logical frontier for this is around digital identity systems. La Poste’s L’Identité Numérique is an initiative that allows French citizens to access everything from their social security payments and retirement documentation, with future enhancements allowing you to open a bank account or sign up for private or mutual insurance on the go,” Steller said. And with the EU’s interoperability regulations in place, French citizens can use their digital identity anywhere within the EU.
“In India, we see another example where cutting edge biometric technology has been used to form a compelling digital ID solution, known as Aadhaar, to reform service and program delivery. With 1.2 billion unique numbers, Aadhaar now covers about 95 per cent of India’s population, providing instant financial access and mobile communications through its platform.”
“At the same time, Aadhaar has been an excellent case study in delivering frictionless experiences and costs have been further reduced by allowing the possibility of digital or e-KYC for customers to do banking and mobile services all with one tap.”
Steller said the application of digital identities to financial services presents a compelling articulation of a future where customers can have a virtual unique identifier that is triggered across multiple touchpoints each and every time they interact with their bank.
This is where we are able to have a situation where a bank’s entire historical interactions with that customer can be informed by a history of recent and past interactions, as well as their spending or financial behaviours, he noted.
“Questions over what data banks could potentially access as well as what data an individual can or would like to share under such a National ID framework in banking remain,” Steller said.
“However, as we’ve seen with the phased implementation of an Open Banking regime in Australia, the right mix of bipartisan encouragement, regulatory support and policy controls can help provide us with a favourable environment for making sure we get this initiative absolutely right for end consumers.”
Dirk Steller is the founder and Managing Partner of Seed Space Venture Capital
This article was developed in collaboration with Aegros, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.