Banks want the government to work more closely with them on the national framework for establishing digital identity, and say it must include changes to "know your customer" (KYC) rules to allow them to rely on identity information provided by other organisations.
A new digital identity regime promises to reduce costs for banks by making it easier for customers to prove who they are. It will also make it easier to switch accounts.
The Reserve Bank of Australia says a framework for trusted digital identity "has the potential to make online interactions more convenient and secure" and "could help mitigate the scope for identity fraud". The central bank has suggested the regime could be incorporated into the government's plans for "open banking".
Research by Forrester and analytics firm GBG, to be released on Monday, finds 95 per cent of Australian financial firms are concerned with their ability to identify customers, while 92 per cent place a "high to critical" priority on conducting identity checks properly. "The current system relies on multiple sources of physical documents but we need a digital form that can be reused multiple times," said Mathew Demetriou, the country manager at GBG.
Through the Digital Transformation Agency, the federal government is seeking to establish a "trusted digital identity framework" as part of its Govpass program. The banks support the proposed federated design, whereby multiple entities operate the regime. Banking industry sources say consultation has improved since responsibility for the program was shifted from Angus Taylor, the former minister assisting the Prime Minister on digital transformation, to his replacement Michael Keenan after the ministerial shuffle late last year.
"There is a strong desire for collaboration, and for the banks and government to work more closely on this area," one banker said.
A bill currently before Parliament will allow biometric information, including faces, to be used to establish identity. The Forrester GBG survey said 77 per cent of finance firms say they have plans to implement facial recognition technology to authenticate identity within the next 12 months.
The banks and FinTech Australia are pushing for a framework that would allow identity to be established by drawing on information held in various government and private sector databases. For example, a party could tap a state government's traffic authority, the federal government's Medicare records, and a bank, and then software could be used to combine the data and verify the identity. This would avoid the need for every service provider or government department to hold full identity records for every customer.
But the industry will need new protections in the anti-money laundering and counter-terrorism financing laws to allow them to rely on the information from the external bodies. Banks are highly sensitive about complying with this act following the AUSTRAC lawsuit against Commonwealth Bank of Australia for alleged breaches.
In his recent report on open banking, King & Wood Mallesons partner Scott Farrell recommended that "the outcome of an identity verification assessment should be able to be relied upon by another entity".
"This should remove the need for the customer's new provider to undertake its own identity verification check of the customer, saving time and effort for the customer and removing a significant disincentive to access new banking services," he said.
"It would also make the assessment process easier for the new provider. This could be seen as an indicator of the potential benefits of the development of a customer-driven, reusable digital identity in Australia."
Banks are hoping being a trusted source of customer identity could become a new revenue source as they could be paid for providing ID checks into the framework.
The development of a digital identity strategy was a recommendation of the 2014 financial system inquiry, which found a "fragmented, unco-ordinated ecosystem of digital credentials creates high costs to government and taxpayers".