Digital identity is coming of age, but what does it mean for regulated sectors?

The UK Government’s upcoming GOV.UK Wallet marks a turning point in the country’s journey towards fully digital public services. With the first credentials set to go live in the coming months, including the digital veterans card and, later, the digital driving licence, this development could reshape how identity is verified and trusted across sectors.

For customers, this means a simpler and more secure experience. For regulated industries, however, it raises timely questions, particularly around acceptance by authorities such as the Solicitors Regulation Authority (SRA) and HMRC and how digital ID will fit into existing standards such as HMLR’s ‘Safe Harbour’.

As the industry awaits clarity on how the wallet will be recognised across regulatory frameworks, one thing is certain: the digital identity landscape is evolving fast.

How did we get here?

There has been discussion around digital identity cards for a long time, with former prime minister Tony Blair being a big advocate. Past governments – and this current one – have taken a different stance, however, firmly disqualifying any notion of a national ID card. Rather, they have been allowing the private sector to create a solution that meets consumer needs.

As of recently, this strategy looked to change with the introduction of the GOV.UK Wallet. It was previously anticipated that the GOV.UK Wallet would be accessible to all users and reusable across both public and private sector digital identity needs. However, recent statements have clarified that the government’s current approach is to restrict the wallet’s reusability exclusively to government services. For all other identity verification purposes, individuals and organisations will still need to work with authorised third-party providers, such as independent service providers (IDSPs) in order to access these new digital credentials.

Now, digital IDs are finally becoming a reality thanks to the introduction of the digital identity and attributes trust framework as part of the Data (Use and Access) Bill, which sets out the legislative requirements to allow for the reuse of verified digital identity information.

What it means for compliance

In theory, the Gov.UK Wallet will make it much easier for companies which are required to conduct identity and verification (IDV) checks, including estate agents, to be compliant – regulated firms can fall short in their compliance due to failing to adequately and efficiently collect this information. What’s more, as only users can access and use the documents in their wallet, it significantly reduces the chances of fraud. Where the issues arise, however, is with acceptability.

Currently, for example, the HMLR digital identity standard for conveyancers requires them to use NFC technology to verify the cryptographic chip within ePassports in order to reach the ‘Safe Harbour’ standard. So, will digital passports and shareable digital wallets change this? Or will this process still need to be carried out with digital IDs?

The SRA and HMRC also have their own guidance for what forms of identification are deemed acceptable. Their protocols revolve around verifying physical documents in a robust manner, with some guidance relying upon independently verified information. So, it remains to be seen how these will adapt to the introduction of digital wallets. We could end up with cases where firms are processing digital and physical IDs simultaneously.

…and customer trust

If you’re questioning whether or not people will want to part ways with physical ID documents, there are two things to consider.

One, as the government website explains: “Importantly, this is not about replacing paper documents – it’s about allowing people the choice to use digitised credentials where it works better for them.” There will still be a need to verify physical documents but customer expectations will quickly evolve to expect sharing their digital ID as an option. What businesses must be able to do is provide the means to accept both forms of identification.

Two, the vast uptake of digital wallets by customers on their phones to house payment cards – and now everything from train tickets to customer loyalty cards – shows how popular the convenience and security provided by the technology is. You can’t lose them. They’re far harder to steal. And all you need to carry is your phone.

So, while the wallet is in its very early stages, organisations should be prepared for a potential surge in its uptake after it has launched.

How to assess whether your IDV strategy is ready?

To be ready for digital IDs and digital wallets, you need to have the technology in place to handle them. There is already a demand for IDV solutions, provided by IDSPs, to help firms perform KYC checks and adhere to anti-money laundering (AML) regulations. If firms are still reliant on manual processes for collecting and verifying physical documentation, then they need to reassess their IDV strategy. This approach is time consuming and error prone, heightening the chances of non-compliance, and will put them on the backfoot for managing digital IDs.

As their name suggests, IDV solutions digitise the KYC and AML process – they enable firms to quickly and remotely verify identities by scanning government-issued documents and using facial recognition technology. Crucially, by having this foundation, organisations will be able to integrate new capabilities to facilitate the introduction of digital IDs.

While the digital wallet is intended to make the sharing and verification of documents easier and more secure, there will still be an imperative to robustly cross-check evidence and screen individuals against databases like sanctions lists, for example, something IDV solutions are designed for. And as IDSPs are the only companies permitted to integrate with the GOV.UK Wallet, looking for providers with this accreditation is paramount.

Digital IDs are coming

The GOV.UK Wallet is another key step in the government’s mission to turn services fully digital. Yet the question over digital ID acceptability in regulated sectors highlights the need for these firms to manage many eventualities. Change will come regardless, so it’s about future proofing IDV systems and processes so organisations can manage this change when it comes.