Why a national digital identity matters

UK Finance supports the Government’s ambition to create a national digital identity system that is useful, inclusive and trusted. If designed well, a national digital identity could reduce friction for both consumers and firms, make access to services easier, support stronger digital verification, and reduce the need for people to repeatedly provide the same information or paper documents across different services.

From a financial services perspective, there is clear potential value in a reusable, trusted and interoperable digital identity. It could help improve customer journeys, make some onboarding and re-verification processes more efficient, and support stronger protection against certain forms of identity fraud. It could also help people who currently struggle to prove their identity in the digital economy, particularly if the scheme is free to use and designed with inclusion in mind from the outset.

At the same time, the success of the programme will depend on the detail. Financial services firms already operate in a relatively mature identity and verification environment, and the national digital identity will need to work alongside that existing ecosystem. In practice, that means it should complement, rather than duplicate, existing trusted services, including private-sector digital verification services and current regulated-sector onboarding processes.

Interactions needed

A key point for UK Finance is that the national digital identity must be capable of being used through machine-readable, system-to-system verification, rather than through manual or portal-based checks. If the credential cannot be consumed in a seamless and automated way by regulated firms, many of the intended benefits in terms of customer experience, efficiency and security will not be realised in practice.

The proposed Government Checker service is therefore an important part of the consultation. A basic checker could help support adoption of the national digital identity in core public policy use cases and lower-volume scenarios. However, there is also a need to avoid distorting the emerging market for private digital verification services. Government should therefore be clear about what the checker will do, what it will not do, and how it will complement rather than crowd out private-sector services.

The consultation also raises important questions about reliance and liability. For regulated firms, a national digital identity should be treated as a trusted input into identity assurance, rather than as a substitute for firms’ own risk-based onboarding, customer due diligence and record-keeping obligations. Firms will still need to apply a risk-based approach in areas such as AML, KYC and fraud prevention, and they will need confidence about what they can safely rely on, what evidence is produced when checks are completed, and where responsibility sits if something goes wrong.

What’s missing for financial services

Address is another important issue for the sector. While the consultation proposes not to include address initially, this does limit the usefulness of the credential for many common financial services use cases. In regulated settings, name, date of birth and address are often used together to support verification, fraud controls and sanctions screening.

Overall, UK Finance supports the direction of travel, but believes there are still a number of important issues that need to be resolved. We look forward to continuing to discuss these issues with relevant stakeholders.

UK Finance has responded to the Government’s consultation on a national digital identity system.