Financial services companies should start planning for a new global market, and here’s how it can unfold.
It all starts with Identity
Governments have often played a central in verifying the identity of an individual. For instance, governments issue passports, driving licences and authenticate commercial organisations, mainly for tax and legal reasons. Governments are considered trusted sources of verifying identities – banks trust government documentation such as a passport or driving licence) to prove a person or company says they are who they say they are.
The Internet has missed a trust authenticator though. SSL certificates go some way to prove a company is who they claim to be, but it’s much harder to prove an individual is who they claim to be.
For instance, almost anyone can open a PayPal account in any name. They can then create an eBay account and an AirBnB account, build up and then lose the ratings on those accounts, and simply open a new account. It’s not good enough for commerce in 2014.
Governments are quickly playing catch up, especially in the UK. The UK government is working on an Identity Assurance service which does what it says on the tin… it will provide a single account that has the governmental stamp of approval that a person is who they say they are.
The Identity Assurance service (https://gds.blog.gov.uk/2014/01/23/what-is-identity-assurance/) sounds aspirational – partly devised by Martha Lane-Fox, it’s trying to keep an open standard for connecting and using the system, which means any third-party website will be able to connect to the service and instead of asking a user to create a new account each time, they can ask the user to login via the Government service, and then keep additional data about the user themselves. It’s very similar to Facebook connect, but secure enough to log into HMRC (tax system) and a bank account.
The beta service will go live in March 2014 with around 2,000 users and ‘serious’ systems such as the DVLA (driving licence) and HMRC systems.
International authentication
This all sounds great, but it only brings Internet users in line with paper documents of today.
Ensuring the system will work with future business models, the UK Government is working with other governments to make the system international. In October last year, the GDS Identity Assurance Programme met with six other governments to discuss how the trust could be shared across borders.
This would enable the new digital authentication service to provide users and companies faster, unparalleled trust. Without the inter-governmental support, consumers will either need a website to either offer different sign up mechanisms for different nationalities, or people will need to apply for online identities from foreign governments.
For instance, if eBay, a US company, asks me to sign in, I’ll either need a US government issued identity, or eBay will need to offer login options for all international government IDs. Neither solution is useful to consumers.
However, with an inter-government organised system, a user can register on a site, seek authentication from their own government, and the consumer can be logged in within microseconds.
Future opportunities
Assuming international authentication does go ahead, consumers and companies may have access to new markets without precedent.
In the financial services world, UK current accounts rarely charge for services. The new World could provide US citizens access to free, UK personal banking. If a Danish bank offers a savings account better than UK banks, a UK citizen could quickly (within seconds) open a Danish bank account. And insurance products could work in the same way too.
We’re starting to see the tip of the iceberg – websites such as Kickstarter, as noble and creative as they may first appear, enable new businesses to get a loan cheaper than a local bank, with far less documentation, and with money coming from foreign investors.
Readers who work in the banking industry will be shaking their head at the thought of a new, consumer-friendly international financial services system and asking “What about the regulators?” That’s a fair question, and the answer is that regulators are set up for two reasons:
- Making sure consumer get a fair deal
- Making markets work well.
Both of these roles would be fulfilled by a secure, trusted, international authentication system.
Great Article. There does seem to be a huge gap regarding identity that needs to be solved. We want security, speed and ease.
Thanks John. I agree with your three requirements – security is probably the most complex, and incorporates identity of both parties.
Speed combines both the electronic experience (browsing and buying from the website), as well as the sales experience, up to and after receiving the goods or service.
Ease of use is also vitally important, and often underestimated. One of my favourite stories is how a user experience agency was called in after an expensive speed optimisation exercise managed to shave some milliseconds off a trading platform. The usability agency redesigned some screens and the workflow and reduced the process by a further several seconds!