Banks have an “unfair advantage” in Identity. Will they use it?

Summary: Banks have a window of opportunity to use their superpowers in the identity space to become indispensable for their customers above and beyond their financial lives. A window that may well only stay open for a bit longer, but enough to allow them to make significant strides in the right direction if they take swift action.

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There are two areas where banks have an “unfair advantage”: Identity and Financial Health. Given how the identity space is heating up, I want to dedicate this post to the former. There will be time to discuss the latter in the future.

Where does this superpower come from??

Here are a few facts that we should take into account:

• Every bank customer goes through an extensive KYC (Know-Your-Customer) process during onboarding. The bank knows who their customers are, and it verifies them digitally every time they access the mobile app, and physically every time they go to a branch (for those banks that have branches).?
• Banks have years (in some cases, over a century) of experience protecting customers’ assets, with regulation that clearly delineates what they can and cannot do with your data.?
• They already act as reliable sources of identity at scale in countries such as Norway and Sweden with BankID. For example, in Sweden BankId was used 6.7 billion times last year for identifications as well as digital signing, and it is now launching a new digital ID.?

In fact, banks could easily become the trusted protectors of identity as a new asset class. They already help you protect, manage and access your financial assets. Doing this for your identity assets (not only the information they already have about you, but also other verifiable credentials coming from reputable institutions, such as universities or government agencies) should come as second nature. Banks are in an enviable position to provide these services in a secure and privacy-enhancing way, to become indispensable for their customers. Forget about winning the battle at checkout, win it at sign-up/sign-in.?

What are other key industry players doing?

Other industry players keep moving, and announcements keep coming out that should make the banks realize that their window of opportunity to become the trusted protectors of this new asset class is finite and may be closing soon. Two very recent announcements seem particularly relevant.

Apple Wallet

Apple is building on their steady rollout of IDs in Apple Wallet across the U.S. At the moment, a number of states support the ability to load a digital version of users’ government ID to their iPhones, but these IDs can only be used at select TSA checkpoints and certain lanes in participating airports. Both cases require special hardware to communicate with the person’s iPhone and exchange the information. In the next iOS release, businesses will be able to accept these IDs with no additional hardware required. This can streamline things such as age verification for alcohol purchases or ID verification for car rentals.?

Apple has always made it clear that Apple Wallet was created to completely replace the physical wallet. Credentials, including government IDs, are of course one of the elements currently in everyone’s physical wallet that will be replaced. There is still a long way to go to achieve this goal, but Apple is certainly taking all the right steps in this direction. Yes, it may only work within the Apple ecosystem (although I believe this is “just” a commercial choice, as it seems to me that everything is based on standards), but it is a large ecosystem across many parts of the world.??

Note: Google, with Google Wallet, is moving in this same direction. It is a few steps behind, and possibly not as focused, so it is only supporting one state (Maryland) at select TSA checkpoints.?

Plaid “Remember Me”

In the words of Alain Meier, Head of Identity at Plaid, “Just as commerce providers have delivered on the promise of “one-click” checkout, Plaid is creating the standard for a ‘verify once, verify everywhere’ experience that allows for faster verification while remaining KYC compliant for digital finance.”

Just like Apple, Plaid is building on a product that they announced last year: Plaid Identity Verification and Monitor. This product focused on helping businesses with their KYC and AML processes to reduce friction, but it still involved the user entering her information and uploading documents every time for every business. Plaid did not remember the user, so they had to start from scratch every time.

With “Remember Me” Plaid does exactly what the name says. It stores your information and your documents, and just confirms (and if necessary, reverifies) with you what you want to share with each specific business. Just as in the case of Apple, yes, there is a long way to go to achieve success, particularly around consumer adoption (users need to opt-in to “Remember Me”), but it is a big step in the right direction. To me it is particularly telling that this Plaid has chosen “Remember Me” as their first B2C product. Yes, it will certainly help businesses, but it is also a great first step for Plaid to become a household name.?

What does this all mean?

With both Apple and Plaid’s identity solutions we can see:

• Technology companies developing the capabilities.
• Creating additional repositories of user’ information and credentials, although one is device-based and another, I assume, cloud-based - quite a different approach.
• Creating and defining very clear “rituals” for consumers to get used to and adopt.
• A possible (likely) future link between identity and payments / finance products.

Hopefully banks will use these developments to focus even more clearly on what next steps they need to take in order to create their own solutions. It will benefit them, and more importantly, their customers and the entire ecosystem.?

Link to article in personal page: https://trishburgess.com/f/banks-have-an-%E2%80%9Cunfair-advantage%E2%80%9D-in-identity-will-they-use-it