London proposes digital ID verification model to spur growth, efficiency

A secure digital verification system could unlock £1.8 billion (US$2.3 billion) in economic value by 2031, according to a new report published by the municipal authority of the City of London.

The report titled “Securing Growth: The Digital Verification Opportunity” argues that a widely accepted digital verification service (DVS) for consumers using financial products and services has become essential. Its introduction would not only streamline processes such as opening bank accounts and Know Your Customer (KYC) checks but also reduce fraud losses, which currently exceed £3 billion ($3.8 billion) in the UK, says the City of London Corporation.

The analysis also proposes a digital verification model that would be suitable for the UK environment – a hybrid model that combines federated and decentralized approaches.

The model consists of the “orchestrator,” an independent entity that helps users exchange secure information, Relying Parties (RPs) and Identity Data Providers (IDPs).

“Key aspects of the model include the ability for users to select from a variety of certified and trusted IDPs, enhancing flexibility in identity verification,” explains the report. Relying Parties, on the other hand, would gain access to high-quality datasets.

The analysis argues for a self-sustaining commercial structure: Fees collected from Relying Parties would fund the orchestrator and compensate Identity Data Providers. IDPs would be held to high standards according to the trust framework defined by the Office for Digital Identities and Attributes (OfDIA), which oversees the country’s digital ID market.

The report also provides a use case for customer onboarding and KYC in financial institutions which includes authenticating the user’s identity with biometrics or a PIN.

The adoption of digital verification will depend on identifying popular use cases and demonstrating benefits for users, similar to examples in Estonia and Finland. This also includes ensuring interoperability with international services and regulations such as the EU’s eIDAS, the authors of the report note.

Collaboration with initiatives such as the Centre for Finance, Innovation and Technology (CFIT)’s Digital Company ID is also on the cards. However, the government will first need to introduce a comprehensive legal and regulatory framework to ensure its way forward, the analysis concludes.

Tony Blair Institute shares views on digital ID misconceptions

One important part of introducing digital identity verification systems is ensuring that the public understands them. This includes tackling common misconceptions about digital IDs related to privacy and addressing concerns such as security, the Tony Blair Institute for Global Change notes in a new blog post on LinkedIn.

“The biggest myth is that digital ID is about mass surveillance,” says Yiannis Theodorou the organization’s senior advisor.

When designed with proper legal frameworks and technical standards, digital IDs give users much more control over their personal data even compared to physical IDs. By using encryption and privacy-preserving technologies, wallets linked to digital IDs allow users to share only what’s necessary, he argues.

“Digital ID wallets can actually help reduce the amount of personal data that companies need to store,” says Theodorou. “Instead of each company keeping a copy of your personal information, they can simply verify your identity through the secure, encrypted data in your digital wallet.”

When it comes to security, governments are attempting to address this with stricter regulation and cybersecurity standards. Some of these government standards are made to address AI threats such as deepfakes and circumventing identity verification measures.

“On the private-sector side, we are increasingly seeing new solutions emerging that leverage AI to enhance security by detecting and preventing fraud, and addressing new threats in real-time,” he says.

Article Topics

digital ID  |  digital identity  |  fraud prevention  |  identity verification  |  KYC  |  London  |  Tony Blair Institute