TRUSTECH Asks: What Digital Identity Future Do We Want?
The forthcoming TRUSTECH conference at Paris Expo – Porte de Versailles (29 November - 1 December) will focus on two main themes – identification solutions and innovative payments, which together go a long way to address the question of what digital identity future do we want – and what will we actually get?
TRUSTECH is the international event dedicated to innovative payments and identification solutions. The event was first held over thirty years ago under the name ‘CARTES Secure Connexions’ to promote the new-born technology of smartcards. In 2016, it was re-named TRUSTECH to better reflect the way the industry was evolving towards trust-based technologies.
‘After being increasingly formatted around data, as a consequence of the Open Banking movement, and further digitisation through the revolution of mobile wallets, the prospect of future retail digital currencies from central banks leads us to consider the possible paths of an all-digital identity future’, it states.
According to TRUSTECH’s promotional literature, the size of the global digital payments market will likely exceed $8 trillion by the end of this year. Payments continue to transform from year to year, particularly retail payments, reflecting our changing consumption patterns. Card, mobile, data, crypto, digital currencies are just some of the elements of payment types that are spreading, supported by the ease of digitised identity.
But this version of the future of financial transactions is not without its sceptics, as a recent article in The Financial Brand 1 highlights. This digital approach, according to the article, is being touted as the future of identity — combining all an individual’s disparate identifying information into one account, or ‘digital wallet’ that the individual controls via a smartphone.
On the surface it seems logical for banks and credit unions to be involved in such digital identity programs because they are already required by law to collect enough information from their customers to verify who they are and clearly identify potential criminal activity, money laundering and tax evasion.
This know-your-customer (KYC) data is the most sensitive information that financial institutions possess. It must be secured and protected from malicious actors at all costs, and those costs can be significant. Just consider how much is spent to comply with banking regulations, let alone the rules around comprehensive digital personally identifiable information (PII), the article asks.
Taking on more PII is a costly responsibility for banks and fraught with risk.
The article argues that there is a better way forward for digital identity — and a less expensive, less risky role for banks and credit unions to play in this framework. In today’s highly regulated world, financial institutions should not be responsible for reporting on everything their customers do with their money and should not have to provide identity services that enable other parties to piggyback on their KYC processes, especially when those parties aim to link that identifying information to consumers’ behaviours and habits beyond what they do with their money.
Another voice that has recently spoken out about the growing dependence of banking and finance on digital identities came in the form of an article in The Sociable 2.
The article suggests that the introduction of Central Bank Digital Currencies (CBDCs) would be yet another opportunity to promote digital IDs.
The heads of both the American Federal Reserve and the European Central Bank recently confirmed that Central Bank Digital Currencies (CBDC), should they go forward, would not be anonymous, paving yet another path for all-encompassing digital identity schemes.
With respect to an American CBDC rollout, Federal Reserve Chairman Jerome Powell told an international banking panel in September 3 that it would have to be ‘identity verified’ and that ‘it would not be anonymous. It would not be an anonymous bearer instrument.’
In the same vein as her American counterpart, European Central Bank president Christine Lagarde also acknowledged that a digital euro would not be anonymous.
‘In terms of anonymity, there would not be complete anonymity as there is with banknotes, for instance, but there would be a limited level of disclosure and certainly not at the central bank level.’
In the absence of complete anonymity, a digital identity system would need to be in place.
According to the Bank for International Settlements (BIS) annual economic report for 2021 4, ‘the most promising way of providing central bank money in the digital age is an account-based CBDC built on digital ID with official sector involvement.’ This digital identity, according to the BIS, would draw on ‘information from national registries and from other public and private sources, such as education certificates, tax and benefits records, property registries, etc.’
In the extreme, a CBDC linked with digital ID could allow governments and corporations to put permissions on what you can buy with your own money, including expiration dates on when you can spend it.
Once digital ID and CBDC reach a certain level of acceptance and adoption by the general public, the article concludes, the option to go back to physical means can be quietly eliminated with little-to- no pushback.
These two articles converge to a growing sentiment, amongst some, that gathering the digital identities of citizens and consumers is part of an authoritarian agenda of unelected global operators to control and manipulate. Which makes the discussions at the TRUSTECH event even more timely and important.
For more information about TRUSTECH, visit www.trustech-event.com.
3 - https://sociable.co/government-and-policy/us-eu-digital-id-central-bankers-cbdc-anonymous/
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