Driving digital transformation with identity management
Money is no longer the ‘crucial’ resource in a transaction says Dave Birch, so what is? Identity. As customers gain greater control of their data and identity, how can financial institutions embrace technology to drive a digital transformation and create a seamless, integrated and simplified digital payment ecosystem?
FaceApp, the viral sensation that turns your innocent selfie into a terrifyingly believable image of you in 30 years’ time, recently hit the headlines for its terms of service. Eager to find out how hot or not we will be when we’re drawing our pensions, millions of us downloaded the app without noticing that we had just signed over perpetual and irrevocable rights to the app‐generated photos of our own face.
But it’s just a bit of fun, right? Well, maybe not; as financial services companies increasingly turn to biometric data for security, you may want to guard your image as closely as your great‐grandparents guarded the key to their safe.
According to David Birch, commentator on digital financial services, speaking at the Money 20/20 conference: “Most of my wealth is not money in the bank. What’s in the bank [is] identity. The crucial resource that I want the bank to look after and care for is identity.”
Most of my wealth is not money in the bank. What’s in the bank is identity
-David Birch, commentator on digital financial services
The digital era is making our relationship with money both more complicated and easier. “Money” is fast moving beyond the physical to a string of code in cyber‐space. But, financial services companies are struggling to keep up. Many are still wedded to paper‐based forms of authentication, demanding that we supply hard copies of utility bills or driving licences – while simultaneously encouraging us all to go paper free when it comes to our bank statements.
Such outdated processes are hampering the development of today’s digital ecosystem. It is bad enough if customers are in the same geographical location and time zone but increasingly difficult given today’s global reach. “The identity systems we have today are slowing innovation in FinTech,” according to a report on digital identity from consultants Deloitte. “They’re also getting in the way of delivering financial services online. Digital global transactions, so close at hand, will come about only when digital identity does.”
Time‐consuming, manual applications are being rejected by time‐poor, digital natives. Around a quarter (24 per cent) of young adults say that they spend more time managing their finances than they want to, according to a research study Futureproof from Bud — an Open Banking platform. “New products and financial tools need to promise simplicity, low stress and time‐saving,” the study says.
Regulatory initiatives are the heralds of much needed change. Examples include Open Banking which requires the biggest UK banks to provide data access to other licensed companies and PSD2 which enhances security through two‐factor identity authentication. The rules of digital business are changing, with regulators putting the individual in charge of their own data. Companies that satisfy today’s digital expectations will be able to make the most of tomorrow’s opportunities. The financial world is not only digital, but mobile, cross‐border and omnichannel.
But trust and therefore security are critical elements of the digital transformation. Privacy/identity management and information security are one of the top ten risks for 2019, according to a study from consultancy Protiviti and NC State University. The report added that “cybersecurity is a moving target as digital transformation initiatives, such as cloud computing adoption, mobile device usage, continue to outpace the security protections companies have in place.”
The risks of a security failure are high – not only from potential fines and penalties imposed by the authorities, but also from the potentially greater reputational loss that could follow a breach. Yet Protiviti’s benchmarking data suggests that less than one in five organisations are optimised to deliver identity and access management services. Services that both reduce risk appropriately and consistently meet emerging regulatory requirements. “If organisations cannot adjust their operations and legacy IT infrastructures, they may not meet the expectations of their core customers in a manner sufficient to retain their loyalty,” the report concludes.
Trust and therefore security are critical elements of the digital transformation
Today’s payment providers need to be able to provide systems that work anywhere, on anything. Mobile commerce is the dominant factor driving strong digital commerce growth, according the Juniper Research report on Digital Commerce. The report forecasts that mobile commerce will account for 77 per cent of global digital commerce sales by 2023, from 70 per cent today.
That figure however, hides many variations. The global contactless transaction volume via smartphones is significantly higher than previously estimated by Juniper Research. It is predicted to reach 52 billion by 2023. As of today, more than half of these contactless mobile retail transactions occur in Asia Pacific region.
And looking at the highly convenient use of digital wallets for in‐person spending, already 40 per cent are carried out via mobile digital wallets in China, with strong adoption showing in the U.S., according to the consultant McKinsey’s report, Global Payments 2018.
The sheer variety of alternative payment methods is astonishing (McKinsey identifies 140) – and is damaging to security. With numerous individual identity solutions, most of us end up frustrated and confused. We reuse passwords, write down PIN numbers and list our security credentials on online documents – so it’s no wonder cyberbreaches are commonplace.
Biometric security, such as the contactless cards with integrated fingerprint readers currently being piloted by French banking group Crédit Agricole in partnership with G+D Mobile Security, is a safer bet. “The biometric card aims to perfectly meet the needs of our customers by combining perfectly ease of use and security,” says Bertrand Chevallier, chief executive officer of Crédit Agricole Payment Services.
The biometric card aims to perfectly meet the needs of our customers by combining perfectly ease of use and security
Bertrand Chevallier, chief executive officer Crédit Agricole Payment Services
Such a solution is a key example of how technological innovation can be used to enhance both consumer experience and security. Another is the digital wallet, such as the Convego hub, which integrates online transactions with a mobile payment process, Each purchase generates a secure, single use code via a mobile phone message which provides the consumer with a high degree of confidence in the security of the payment.
Gabrielle Bugat, Head of Division for Financial Solutions at G+D Mobile Security, says: “The transaction is done is a very secure and very safe way.”
Digital payments need to move to the next level in order to meet the demands and transformational potential of today’s omni‐channel ecosystem. When it comes to our financial future, we all need to be sure that our face is only our fortune, and not access to our fortune.
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