Use mDLs for trust and accountability in financial transactions: report

A new white paper from the Secure Technology Alliance’s Identity and Access Forum (IAF) says mobile driver’s licenses (mDLs) can reduce fraud in financial transactions, reduce identity verification costs and provide better customer experiences.

The paper, “Building Trust and Accountability in Digital Financial Transactions with the Mobile Driver’s License,” explores exactly what its title promises. The set-up: “Identity fraud, through schemes such as account takeovers, fraudulent loans and credit, and synthetic identities” has resulted in “billions of dollars in losses impacting financial institutions.”

“Identity risks are currently everywhere and significant. When there are failures in an identity verification mechanism, financial institutions face financial losses and reputational damage.”

Passwords no longer work, but as biometric data and other digital ID models become more widely used, customers come to better understand their data’s vulnerability to misuse, leading to a “decline in confidence and engagement with digital financial services.”

Enter mobile driver’s licenses. Since these digital credentials are issued by government authorities, they come with a high level of trust in the initial identity verification process. Secure encryption can reduce impersonation and synthetic identity fraud, preventing losses.

Furthermore, they streamline ID verification and can eliminate third-party costs. And perhaps most importantly, “mDLs offer a seamless and user-friendly way for customers to verify their identities. Instead of remembering multiple passwords, answering knowledge-based security questions, or scanning documents, customers can use their mDL to quickly and securely present authentic identity data.”

Besides which, they are catching on. Per IAF, as of July 2024, ISO-certified digital mDLs are available to about 40 percent of the U.S. population, with additional states in exploratory stages.

Chain of trust makes mDLs strong foundation for overall digital trust

The IAF argues that, since “there are transparent, secure processes at each step in the identity process to ensure that the personal data presented in an mDL is authentic and issued from an authoritative government source,” they are a keystone for authentic identity in digital transactions: “the benefits of accepting mDLs extend beyond fraud prevention to enhancing overall customer trust and engagement.”

There are, as always, security considerations. Digital driver’s licenses should always be verified with a verifier application or equivalent process certified to the the ISO/IEC 18013-* standard. “Cryptographic verification of the document is key to ensuring the integrity of a presented mDL,” the paper says. Verification Certificates should come from authorized issuers.

The benefits, however, are not simply high: they are of existential consequence. The adoption of mDLs, argues IAF, is more than a technological upgrade: “Accepting mDLs is crucial to creating a viable digital identity ecosystem” – “a strategic imperative for the future of financial services” in which accuracy, data integrity, and privacy are cornerstones.

Furthermore, there is urgency in the IAF’s call to action, or, at least, incentive. “Financial institutions that act swiftly to support the integration of mDLs into their systems will realize the greatest benefit and enhancement of their reputation as leaders. The time to act is now.”

Article Topics

digital ID  |  digital trust  |  fraud prevention  |  identity verification  |  mDL (mobile driver's license)  |  Secure Technology Alliance  |  synthetic identity fraud