As technology reshapes the financial services landscape, digital identity is emerging as a foundational pillar — not just for security, but as a new form of currency.
Digital identity: The next global currency?
Far beyond passwords and PINs, today’s identity systems leverage biometric, behavioural, and decentralised tools to authenticate individuals and protect institutions from an escalating tide of fraud.
Digital Identity?
The scope of what constitutes a “digital identity” is broadening.
It includes everything from facial recognition and voiceprints to behavioural traits such as keystroke dynamics and touchscreen interaction patterns.
As Tom Moore, head of financial services at Moore Kingston Smith, observes, these methods are “more sophisticated, integrated, and user-centric than ever before,” offering financial institutions powerful new defences against deception while streamlining user experience.
Financial institutions, particularly those serving a digital-native customer base, are now embedding advanced identity verification tools into core user journeys — from account opening to fraud detection.
At Magnetiq Bank, head of marketing Julija Fescenko notes that biometrics are fast becoming “essential for future financial access,” helping institutions strike the delicate balance between seamless service and rigorous compliance.
The Rise of Biometrics
Yet the rise of biometric and behavioural verification methods introduces a parallel rise in regulatory complexity.
Biometric data is classified as “special category” information under GDPR, demanding explicit consent and strong safeguards.
Institutions must tread carefully.
As Ahmed Badr, COO at GoCardless, warns, “Biometrics can simplify compliance if done right, but they also raise concerns around misuse and data breaches.”
Digital Identity Across Borders
One of the most pressing challenges now is how to harmonise digital identity standards across borders.
With payments and financial services increasingly global, the patchwork of national rules creates friction.
A unified system, say many in the industry, could reduce inefficiencies, accelerate onboarding, and bolster international anti-money laundering (AML) efforts.
“There is enormous potential in cross-border digital identity,” said Wendy Redshaw, chief digital information officer at NatWest Group.
“But implementation depends on aligning divergent regulations, privacy laws, and ethical standards.”
She stresses that trust and transparency must underpin any unified model — with governance frameworks that safeguard individual rights while enabling interoperability.
Fescenko supports a federated model, pointing to the EU’s eIDAS 2.0 initiative as a potential blueprint.
This would allow public-private collaboration while retaining individual control.
Still, the technological and political hurdles are considerable — from data sovereignty to the spectre of surveillance.
Fight Against Fraud
Crucially, the fight against fraud is evolving just as fast.
Moore warns of the threats posed by deepfakes and synthetic identities, arguing that “continuous identity verification and liveness detection must become standard.”
Without these layers, no unified system can withstand today’s criminal ingenuity.
Ultimately, identity must become both a personal asset and a protected commodity.
If digital identity is to serve as the financial sector’s next “currency of trust,” it must offer security without sacrificing privacy, convenience without compromising compliance, and flexibility without increasing risk.
The opportunity is profound — but only if the industry can build frameworks as resilient and adaptive as the technologies they seek to govern.
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