23/06/2024 9:54 PM


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Digital ID infrastructure is key as payments become transparent

Remote and contactless payments popularity with consumers grew during the pandemic, which is prompting the need for a robust digital identity infrastructure in the Payments 4.X era.1

In the connected world of 2022, digital ID is a prominent tool for remote identification and authentication. Consumers and businesses demand safeguards from payment fraud and identity theft. Yet, the authentication process is fragmented and unwieldy, needing an overhaul to ensure a frictionless experience for customers in the Payments 4.X era.


Banks, retailers/e-tailers, and other FIs count on digital identity verification to onboard customers. Global retail trends such as buy now, pay later (BNPL) also fuel needs for shopper identity verification.

Digital ID solutions protect users against the abuse of personal data while shielding the payments system against money laundering and financial crime. Digital ID solutions can also help control the spike in online fraud − which is currently estimated to cost global businesses 1.8% of revenue every year.2

digital ID

ID Initiatives

Across the world, governments are launching national identity initiatives. The European Commission, as an example, hopes to launch an identity verification toolbox by September 2022, as part of its greater mission to achieve an Open Finance/Open Data economy.3

Several other countries, including Australia, New Zealand, and Canada, have either implemented or are in the process of putting digital identity initiatives into effect.4

A shared digital ID infrastructure would certainly help unify access and democratise usage as well as pave the way for an Open Finance future.

As argued by PCM in numerous texts including our ground breaking Open Banking Readiness Index, regulations such as PSD2 and Open Banking will thrive on a shared and integrated digital ID scheme that facilitates a payment authentication system that customers can access anytime, anywhere, and on any device.

With mobile payments expected to increase quickly, as many as 5 billion people may use digital ID platforms for authentication by 2024.5

Digital identity verification is a crucial to ensure customer experience (CX) in the Payments 4.X era.

Nearly 30% of customers experience check-out process friction during online and in-store transactions,6 while Strong Customer Authentication (SCA) under PSD2, which was scheduled to be implemented from October 2021, is reliant upon digital identity as the second level of authentication.7

Global Vision

Globally, various industry associations and industry stakeholders are formulating uniform standards to build digital identity ecosystems.

The World Economic Forum launched a shared Platform for Good Digital Identity to bring together existing and new digital identity solutions that are inclusive, trustworthy, safe, and sustainable.8 Similarly, the World Bank’s Identity for Development (ID4D) initiative is aimed at financial inclusion.9

In the United States, the National Institute of Standards and Technology (NIST) published new guidelines to incorporate biometrics for password-less authentication and remote identity proofing, as well as industry stakeholders demanding standards as market players collaborate to create ID solutions.

For example, ID2020 is a blockchain digital identity alliance founded by private sector firms, United Nations agencies, and non-government organizations.10

In Australia, Eftpos became the first private digital identity exchange. The firm launched ConnectID in June 2021 to allow users to authenticate their identity with merchants, hotels, hospitals, insurers, and government agencies by linking to a verified digital ID.

Back in Europe, 10 Spanish banks, including Santander, Caixa, and Generali, are working together to develop Dalion − a blockchain-based self-managed digital identity solution expected to launch in 2021.11

Impact of interoperable ID

It is our view you can expect to see more integrated and shared digital ID schemes that enable the payments industry to fight fraud on a global scale. Access to a single, unified digital ID will streamline the identity process and unlock new and enhanced consumer experiences.

The digital identity market is growing, allowing banks to regulate data use, establish KYC functions, and boost consumer trust. Further, digital identity is important in the wake of growing adoption of digital currencies and consumer expectation on how services should work.


  1. Payments 4.X, is a concept introduced in World Payments Report 2021 where Experience is the defining feature. Payments are embedded, invisible, and an enabling function in a collaborative environment to boost customer experience.
  2. Ravelin, “Online payment fraud,” accessed October 1, 2021.
  3. The Paypers, “The growing importance of digital identity verification, interview with Mark Heymann,” July 1, 2021.
  4. Biometric update, “Governments in Australia and Canada investing in digital ID,” February 3, 2021.
  5. Juniper Research, “Digital ID platforms to be used by 5bn people in 2024, as emerging economies go mobile-first,” July 2019.
  6. Capgemini, “World Payments Report 2021,” October 7, 2021, Voice of Customer survey, N=6,300.
  7. European Banking Authority, “Regulatory Technical Standards on strong customer authentication and secure communication under PSD2,” accessed October 8, 2021.
  8. World Economic Forum, accessed October 1, 2021.
  9. World Bank, accessed October 1, 2021.
  10. ID2020 website, accessed October 1, 2021.
  11. Santander, “Ten Spanish companies join forces to promote digital identity using blockchain technology,” November 5, 2020.


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