In recent years, digital ID has paved the way for more secure, convenient, and inclusive payments. Now, biometric-based digital ID is the path forward for transactions of the future.
Digital identification, or digital ID, represents information that is stored in a digital format to prove the identity of a person or an organization. In the age of digital transformation and increasing demand for data privacy, the need for robust consumer identification has never been more pressing. Meanwhile, the same consumer base is also becoming more experience-centric. As a result, 80% of consumers prefer to transact with brands that enable digital identity (digital ID) verification as they seek both security and convenience.
In recent years, digital ID has evolved from a security-focused concept into an essential tool for customer engagement. To contextualize its role in business preservation and financial planning, just a single authentication failure can cost a financial firm up to $42 million. This is before you consider the cost of reputational damage, and the loss of customers due to frustrating and time-consuming processes. After all, the post-pandemic, mobile-first customer craves fast, intuitive, personalized digital experiences above all else.
Transactions must be seamless, secure, and trustworthy to meet this demand. And while digital ID is a critical way for businesses to ensure such robust access control, it is not fully optimized.
The digital experience and death of the PIN
Users have long been accustomed to PINs – personal identifying numbers assigned to an individual by a bank or an organization to authorize transactions. A more complex and seemingly secure PIN is often difficult to remember, especially as users set up more accounts. Digital ID’s added layer of both convenience and cybersecurity initiated a shift away from PINs.
Despite digital ID being deployed to aid data privacy concerns, it isn’t entirely protected from hacking and fraudulent misuse. Today, 84% of consumers care about the privacy of their data and want more control over how their data is being used. This privacy concern calls into question digital ID’s trustworthiness in its current state.
When data is stored on servers or in the cloud, hacking risks increase as well as the potential for identity theft and harassment. When customers are exposed to fraud, organizations run the risk of losing consumer trust and damaging their reputations.
If digital ID holds the key to more convenient and secure transactions but has inherent security risks through current deployment methods, is there a suitable alternative?
Enter, biometric smart cards.
As an industry, biometrics has evolved with the direct purpose of allaying data privacy concerns around tracking, monitoring, or owning data. And, as such, a host of key players are realizing its benefits and subsequently developing biometric cards that integrate fingerprint sensors into smart cards.
Once a user places their fingerprint onto the sensor, the image is captured, encrypted and stored only on the card. Security is also built into the sensor, meaning the fingerprint image is encrypted and cannot be hacked or manipulated. This offline solution means data is not transferred onto bank servers or the cloud.
Ultimately, biometric smart cards represent a shift in data ownership – one that empowers users to store their private information with total agency and control, and in a way that minimizes risk of data being retrieved illegally, thanks to its encryption.
In essence, it represents digital ID 2.0… and, more broadly, the death of the PIN.
Vince Graziani is CEO at IDEX Biometrics.
Closing the digital inclusion gap
The need for an upgrade to digital ID’s current role in the global digital economy is made even clearer when looking at the situation through an inclusivity lens.
Despite efforts to improve levels of financial inclusion, barriers that prevent access to financial services for communities across the globe remain unsettlingly common. Marginalized segments of society continue to be impacted, including low-income minorities, refugees, and those suffering from dementia, literacy challenges, or impaired vision.
While the PIN has been at the heart of best-practice data security for decades, it is no longer the most secure and seamless solution. The multitude of login details, passwords, and PIN numbers required for financial service platforms can represent a significant barrier to engagement for many of these marginalized groups. Also, a lack of familiarity with mobile banking applications means that older people may need greater reassurance of their security in an online environment.
Digital ID has the potential to reverse many of these systemic challenges, removing barriers faced by those with limited access to the digital economy. Examples already being seen around the world include the Nigeria Digital Identification for Development project, which has recently pledged to bolster Nigeria’s digital economy by enabling people living with disabilities in the country to have their biometrics captured. As a result, the inclusion gap is closing, and access to identification is becoming democratized.
Similarly, in Europe, a consortium of six countries - Denmark, Germany, Iceland, Italy, Latvia and Norway - led by the Nordic-Baltic eID Project (NOBID), is set to embark on a new pan-European digital wallet pilot. The digital wallet will allow citizens across the continent to easily verify their ID, access public and private services. and store sensitive digital documents in one secure location.
The next phase of digital ID
Digital ID is already a step forward for consumers around the globe who require universal access to secure transactions. It, therefore, comes as no surprise that global digital ID revenue is forecasted to exceed $53 billion by 2026.
Biometrics represents one step further in this evolution. The global biometrics market is expected to grow at a Compound Annual Growth Rate (CAGR) of 15% between 2021 and 2028. The convenience, security, and inclusivity of this mode of digital ID are more than just a final nail in PIN’s coffin. Its broad set of use cases spans access control, payments, crypto, and digital wallets. All with the knowledge that a person’s entry to these domains is dictated by their own identity, and nothing else. No remembering, no passcodes, no leeway for that person’s credentials to fall into the wrong hands.
Private players in these financial spaces are already aware of the potential that biometrics offers. The responsibility now lies with this market to continue engaging with biometric solutions, and for governance policies to provide a more suitable framework for this next phase of digital ID, a phase that promises to meet consumer needs, protect businesses, and foster inclusive growth of the global digital economy.
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Vince Graziani, CEO, IDEX Biometrics. He is an experienced executive with proven ability to set strategic direction and achieve operational results. More than 30 years of high-tech leadership experience including 15 years as a startup CEO.