Despite slow policy developments in the U.K., the future of digital identity is bright. Will it transform payments for good? 

Is digital Identity on its way to the U.K.?

The prospect of a digital identity framework being implemented in the U.K. is not a recent phenomenon. In fact, the U.K. government launched its ‘ Verify’ digital identity system back in 2013. Yet it has been largely cast aside due to its rather burdening cost of £175 million, as well as the fact that a key government department, HMRC, opted out to focus on their existing ‘Government Gateway’ system in 2017.* 

Yet, a national digital identity project never completely left the government’s agenda. And fast-forward to April 2020, the U.K. commenced the first of several Covid-19 lockdown programes and the nation makes the switch to working from home. Suddenly, a catalyst for greater adoption of electronic ID services is born. 

Fast-forward again a year later to February 2021 and the UK Government published its policy paper for a UK digital identity and attributes trust framework, proposing the introduction of a trusted digital identity system.

And most recently, an amended financial services bill now calls for HM Treasury to publish the Government’s plans for the deployment of a Digital ID for individuals and corporate entities in the financial services sector by the end of the year. 

“Matt Warman MP, Minister for Digital Infrastructure commented:

Having a digital identity that can be used easily and universally will become a cornerstone of future economies.

What is digital identity?

So, digital identity is on the horizon but what is it? 

Proving your identity face-to-face is typically done with a physical document, for example a passport or driving licence. Online it’s by providing personal identity details that are verified against data sources and sometimes uploading an image of an identity document and taking a ‘selfie’. A digital identity, once created, allows an individual to reuse that identity to prove who they are on subsequent occasions. This digital identity which contains similar proof of identity to a physical form of ID would be managed via an app on a device such as a mobile phone and used in person. In this context, users will have a secure ‘digital wallet’ on their mobile devices, in which will be stored a range of trusted pieces of personal information such as one’s name, address, date of birth, citizenship and so on.

Why is it important? 

The lack of a national identification document often excludes many from accessing basic financial services. For example, opening a bank account or taking out a loan often requires a physical proof of address as well as a valid photo ID. This can often be tricky if you’ve just moved or you don’t have a place of residence. 

Whereas, a Digital ID can provide all this verification from a mobile phone, therefore offering tremendous opportunities for individuals to engage with financial services. It could also unlock access to government benefits or even online medical portals. 

As well as having the potential to create a more financially inclusive society, Digital ID can provide trust through the value chain at a time when traditional forms of identity can longer support online security. The use of passwords to protect our personal and financial data is a weak form of authentication. Cyber-criminals have exploited our reliance on passwords for years, with identity theft and data breach attacks becoming regular occurrences. 

Digital identity is a key tool in preventing FinCrime as it makes life tougher for the fraudster. It will be a crucial method for customers to use to prove who they are .


If there is one obstacle to the implementation of Digital ID in the U.K. it would be that there are general concerns over centralised state registries. It doesn’t take much digging through history to prove that central data stores are high-value hacking targets and data leaks can threaten millions of users.*** It also demands a level of trust in national governments not to misuse such mass data. However, if a digital identity framework can improve financial inclusion, make customer experiences more seamless and prevent fraud, then one would hope public trust in the U.K. would overcome these concerns.

What will it all mean for consumers and retailers in the U.K.?

  • More efficient online shopping experiences
  • Better data privacy
  • Reduction in cart abandonment rates
  • Seamless collection of customer information
  • Quicker age-verification

The introduction of this technology offers several advantages for consumers when making in-store and e-commerce purchases. A huge benefit, in our digitised society, will be that it offers better data privacy. Unlike traditional IDs, a digital ID will only share the information necessary to make a purchase, a process called data minimisation. 

It also offers huge practical benefits. By using a digital ID stored in a mobile wallet, customers can buy and prove their identity with a single device. How many times have you forgotten your identification documents when you’re in a shop buying age-restricted goods? With a digital ID on your mobile phone, you can leave your wallet or purse at home. 

For retailers, the rise in fake IDs plus fraudulent accounts online, makes it increasingly challenging for them to check the age of their customer. Digital identity in retail would be great for proving a customer is over 18. This could be achieved by sharing a photo of the individual together with an ‘over 18’ indicator whilst not sharing any other personal data including date of birth. Also, at the point of sale and with the consent of the customer, it would allow retailers to easily capture other personal info for warranties, receipts, or for marketing purposes. 

As well as providing a more efficient and safer in-store customer interaction, digital ID would drastically improve online retail experience for the retailer. A digital ID could help solve the high rates of cart abandonment with online purchasing as customers won’t need to repeat entering separate information such as name, mobile number, address and so on. In fact, British shoppers abandon online baskets worth almost £30 a month, potentially resulting in more than £18bn in lost sales every year**** 

To find out more about Digital IDs and managing Financial Crime in general, join us at Financial Crime 360, taking place on the 9th November at the Royal Lancaster Hotel, London.  There will be a whole session dedicated to: “Digital ID Q&A session: Ditching the paper trail – Is digital ID the solution to security vs frictionless?” Visit the website to find out more.



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This article was also published in The Retailer, our quarterly online magazine providing thought-leading insights from BRC experts and Associate Members.