Why I tabled an amendment to the Financial Services and Markets Bill on Digital ID
This month we learned that Lloyds Banking Group has invested £10 million in digital identity company Yoti and NatWest is making its new Customer Attribute Sharing service available to businesses as an embedded digital ID after signing a deal with identity service provider OneID.
These important developments bring me to my penultimate piece on Committee stage of the Financial Services and Markets Bill, now completed in the Lords, in which I want to consider perhaps one of the most significant changes we could make across financial services. That is, the pressing need for an effective means of digital I.D.
To this end, I put down an amendment as follows:
Digital identification
(1) Within six months of the passing of this Act, the Secretary of State must publish the Government’s plans for the development and deployment of a distributed digital identification (“Digital ID”) for individuals and corporate entities in the financial sector.
(2) The digital IDs should be—(a) scalable, (b) flexible, and(c) inclusive.
(3) The Secretary of State must also undertake a public engagement campaign around Digital IDs to raise awareness and participation in the process with regard to the financial sector.
(4) In this section—“digital ID” means a set of attributes related to an entity, as according to the International Organization for Standardization and International Electrotechnical Commission framework 24760-1;“flexible” means capable of resilience and workable as technologies develop and evolve; “inclusive” means capable of including all entities and individuals, not least, in respect of their protected characteristics as set out in the Equality Act 2010;“scalable” means capable of national deployment.
This amendment is about one of the most significant steps we could take to transform financial services in the UK. Fraud out, inclusive fintech in, friction out, security and privacy in. Operational efficiency for financial services providers in, user experience up for all of us.
As I put it in the debate: “It is vital that the Government strongly consider and move forward with such a system of ID.”
This is significant stuff, though. Obviously, if you talk ID cards, carrying your ID and so on, more than hairs on the back of all our necks stand up. It is vital that not only any digital ID is safe, secure, and effective, it is even more important that the public are engaged throughout any development and roll out.
As I said: “Understandably, if the public one day wake up and find that they need a digital ID to access their banking services, why would they think that is a good thing if they had not been involved at any stage in the creation and the deployment of such an ID?”
If we are to achieve rapid take up, the Government must fully engage the public on this. In conclusion, I asked Minister Penn to “…comment on the need for the Government urgently to engage and to increase the work that is happening in other departments on a general digital ID to be particularly applicable to the financial services sector.”
From the Labour benches I received thorough support for the proposition. Lord Eatwell summed it up well in relating his own professional experience:
“When I was chairman of the Jersey Financial Services Commission and therefore the regulator in Jersey, I was continually lobbied about the issue of digital identification simply because of the high cost of repetitive KYC investigations that institutions had to go through.
“It seems that the possibility of having a system of digital identification which would be generally acceptable and generally accepted within financial services would significantly reduce the costs of KYC and would provide a much sounder foundation for the credibility and respectability of the individuals attempting to transact within financial services. So, this is broadly a good idea.
“It is very complicated, as I discovered when I tried to introduce it in Jersey, and it raises very important privacy issues, but none the less, this is the way that the world is going, and we need to think this through extremely carefully. It could be of great benefit to the whole KYC problem.”
Responding for the Government, Minister Penn was positive on digital ID, deploying many of the precise terms set out in my amendment:
“The Government have been transparent about their plans to enable the use of digital identities in the private sector, including in financial services, and we are committed to ensuring the scalability, flexibility and inclusivity of secure digital identities.
“The Government initiated their digital identity programme following industry calls for the Government to take the lead in developing common standards for digital identity across the whole economy.
“We continue to believe that a whole-economy approach is the right way forward, and we are working with stakeholders to deliver this at pace.
“For example, the UK digital identity and attributes trust framework has already enabled right to work and right to rent checking processes to be digitised, making these checks quicker and more secure.
“In addition, measures in the Government’s Data Protection and Digital Information (No. 2) Bill, which was introduced to Parliament on 8 March, go further by securing the reliability of digital identity services across the economy for those businesses and consumers who wish to use them.
“The Government also recognise that greater clarity with respect to how digital identity services certified against the digital identity and attributes trust framework support requirements under the Money Laundering Regulations will be key for market uptake. As set out in the Government’s 2022 Money Laundering Regulations review response, we have committed to considering this too.
“I hope that I have reassured my noble friend Lord Holmes that the Government remain committed to enabling the use of secure, reusable digital identity products across the UK economy.”
We have a problem when it comes to KYC and AML. Such an important aspect of financial services, so disappointingly papery. Why are we still blithering about with gas bills? What strong authentication do we gain from all that pointless paper?
The positivity of Minister Penn must translate into increased pace and take up of safe, secure digital ID if we are to enable all citizens to benefit, not just in financial services but across society and the entire economy.