In recognition of the realities of our increasingly digital world, the Aspen Institute Financial Security Program convened diverse, cross-sector, expert-led conversations in July 2024 to explore the evolving landscape of digital identity and its implications for financial services, particularly the potential to build a more inclusive financial system.
The public event on July 9 highlighted how secure and verifiable digital identity credentials could foster financial inclusion and build greater trust in our system. Panelists also shared how digital identity solutions can streamline access to financial services (such as through more seamless government payments), reduce fraud, and empower individuals, particularly those in underserved communities, by providing them with a reliable means to prove their identity online.
The discussion delved into the challenges and risks associated with digital identity systems as well, citing concerns around data privacy, security, and the potential for further excluding already marginalized groups. Participants emphasized the need for robust regulatory frameworks and collaborative efforts between the public and private sectors not only to mitigate these risks, but to strike the delicate balance between enabling seamless digital interactions and protecting individuals’ sensitive information.
Looking ahead, speakers expressed optimism about the future of digital identity in financial services. One inspiring example: the current pilots underway with the National Institute for Standards and Technology (NIST) around the use of mobile driver’s licenses for both financial services and public benefits. These pilots will provide critical testing experience to better shape an environment where digital identities are universally accepted and trusted.
To build on this optimism, recognize risks, and outline a path forward, a smaller group of leaders met on July 10 to articulate a comprehensive action and learning agenda to enable digital identity in financial services. At the heart of this agenda was a clear goal: create a digital identity system that is secure, accessible, and inclusive for all individuals and that unlocks benefits for household financial security.
To best serve this goal, the cross-sector group named the following priorities:
Bring More Leaders Into the Work Ahead
Aspen FSP has been inspired by the leaders committed to work on digital identity, and recognizes that more leaders across sectors need to be included, especially those with lived experience of financial insecurity, government leaders working in different aspects of our financial system, and community groups. As such, our action agenda begins with ongoing dialogue with an expanded group of leaders to demonstrate how digital identity could drive financial inclusion and highlight what risks or concerns must be addressed. Bringing digital identity into practice in financial services will require buy-in from leaders across federal and state agencies, financial institutions, and community leaders. By fostering a sense of urgency and possibility, we can expand the coalition of stakeholders committed to this cause and accelerate progress towards our shared goal.
Communicate Digital Identity’s Shared Definitions and Common Terms
A key component of this agenda is communicating the precise definition of and common terminology in digital identity. By aligning with established standards, such as those from the National Institute of Standards and Technology (NIST), we can ensure clarity and consistency in approaches within financial services. Defining digital identity will help to standardize requirements across multiple jurisdictions issuing identity; in turn, such standardization will help financial institutions and regulators make progress in being able to accept and ingest digital identity credentials.
Build Foundational Trust Frameworks and Principles for Data Sharing and Privacy
A trust framework is a set of common requirements that providers must follow for the purpose of facilitating trust and assurance within an ecosystem. Establishing robust trust frameworks will enable secure and efficient data sharing between entities, ensuring that individuals’ information is protected and that identity verification processes are reliable. This fosters confidence among users and service providers alike, and promotes widespread adoption of digital identity solutions. Trust frameworks are also critical for regulators to be able to issue guidance and provide regulatory clarity for financial institutions to be able to work with digital identity credentials. Collaborative efforts to develop and implement these frameworks are essential to building a trustworthy and resilient digital identity ecosystem.
Increase Access to Validated Data for Identity Verification
Increasing the availability and access to validated data for identity verification is another critical aspect of the agenda, particularly for the many people in the U.S. who experience identity exclusion. Examples of excluded groups can include: people experiencing homelessness, refugees, LGBTQIA+ individuals whose identity doesn’t align with previously issued identity credentials, and those who have experienced a climate event (such as a fire or flood) and no longer have access to foundational paper identity credentials.
What’s more, the process to establish or reestablish your identity can be confusing, frustrating, and time consuming. By improving data sources and ensuring they are easily accessible for identity verification purposes, we can streamline the onboarding process for financial services and reduce barriers for individuals. This requires investment in data infrastructure and collaboration between public and private sectors to make accurate and reliable data available for identity verification, ultimately enhancing the inclusivity of the financial system.
Invest in Pilots and Outreach Within Underserved Communities
To ensure the effectiveness of digital identity solutions, it is imperative to conduct pilots that test both operational functionality and user experience. The NIST pilots are an excellent example of how such initiatives can provide valuable insights and drive improvements. Expanding these pilots to include government payment systems, such as EBT cards, can further demonstrate the potential of digital identity in various contexts. We also hope for a future where, at any point an identity credential is issued (such as when obtaining or renewing a driver’s license), both a physical and digital credential can be issued simultaneously.
Additionally, targeted outreach to specific populations, with a focus on building trust and inclusive design, is essential. By addressing the unique needs and concerns of different groups, we can create a more inclusive and effective digital identity system that truly serves everyone. Such outreach will yield useful insights for all parts of the digital identity ecosystem to understand what will drive consumer demand for these new solutions.
Enacting this action and learning agenda will require collaboration across technology providers, financial institutions, regulators, and consumer advocates, to name a few. As Aspen FSP continues its own learning journey, we are hopeful that this agenda offers a common purpose around which stakeholders from various sectors can rally, driving a collective effort towards leadership and action.
For this event, we thank the Visa Foundation for their support of Aspen FSP’s efforts to advance digital equity as a key facilitator of inclusive financial systems.
