Digital driver’s licenses (DDLs) are ushering in a new era of digital identity, thanks to a recently launched pilot study in the U.S. that tested mobile driver’s licenses for the first time. With digital wallets, self-driving cars and mobile payments, it’s no surprise that traditional identification cards might be on their way out as technology and the digital identity ecosystem grows.
Within a few years, our driver’s licenses could become another app on our phones or another card to add to our digital wallets. States across the U.S. are beginning to line up to be next in line to launch additional pilot programs for a new, futuristic system of identification.
Digital identity has become an increasingly important topic, and leaders in the FinTech industry would be wise to take a leading role in growing the technology to power it. If you want to know what makes DDLs and digital identity ripe for the taking in the FinTech industry, then keep on reading.
FinTech’s Role in Digital Identity
“Identity” in a digital system essentially represents a user through a set of digital records. These records help to create a deeper dive or of the user, which provides the information or “assurance needed to complete transactions”.
As digital driver’s licenses and identifications are tested, tech companies, governments, and organizations are all vying for territory in the digital ecosystem. FinTech organizations should take the lead in this space, as they are the most well positioned to close gaps in digital identity.
“The identity systems we have today are slowing innovation in FinTech. They’re also getting in the way of delivering financial services online. Digital global transactions, so close at hand, will come about only when digital identity does.“
Why? Financial institutions already do a lot of digital identity functions as part of their normal routines. Information storage and verification, and processes for storing and using this data are done regularly in their business. These processes are also highly regulated. Because of this, financial organizations already have a level of trust built with consumers, as they are trusted with their information and assets.
Why the Shift to Digital Driver’s Licenses?
In the U.S., approximately 86% of 18 to 29-year-olds are smartphone owners. Because of this, digital driver’s licenses very likely might be the next natural step or evolution of digital identity.
According to a Deloitte report, digital identification in the form of mobile driver’s licenses is a solution that would benefit everyone, “making it easier for all individuals to securely buy a house, cash a check, or purchase alcohol; or a company to securely trade financial assets”.
Their ease of use and convenience could arrive in many potential forms. Information can always be easily accessible and updated with the touch of your mobile phone. Which means no more in-person visits to wait in line at the DMV. And it can make it simpler for law enforcement or other authoritative bodies to view it in order to verify identity.
Digital driver’s licenses are just one more technological advancement that is showing how many traditional, everyday concepts are changing as the digital world evolves. And it isn’t going to slow down any time soon. In fact, seven states in the U.S. are either developing, testing or considering implementing DDLs.
In addition, government officials are hoping that encrypted DDLs will further enhance safety for the public and law enforcement. But the benefits can also be seen in the FinTech industry. Currently, consumer identification is a daily issue for FinTech. Any transaction that requires identification requires either physical or digital proof.
With it, DDLs could bring the potential for more affordable operational costs, efficient business systems and additional revenue for the industry. All this should make app-based driver’s licenses even more appealing to FinTech businesses.
Security Risk of Digital Driver’s Licenses
Digital driver’s licenses could bring many new layers of security that you cannot get on an ID card, with verification methods such as PIN, facial recognition, or fingerprint scanning. But are those methods enough to keep consumer information safe? One hesitation of DDLs is the potential for new security risks.
Because digital driver’s licenses might have the capability of being updated in real time, it could thwart the potential for fraud. Users could remotely deactivate or wipe their mobile driver’s license if they lose their phone. And just the same, DMV’s could remotely revoke state DDLs.
With the potential for IDs to go mobile, many worry about the information being collected, in addition to being tracked via geolocation tagging. With any digital technology, information can be susceptible to hackers, or curious authoritative personnel looking to abuse the system.
But with any digital information, there is always a potential for identity theft, fraud or breaches of data. The evolution to mobile driver’s licenses might not be far behind regardless of consumer fears, because with verifiable digital biometrics in the form of a DDL, it makes it an efficient and accurate way to establish identity. Especially for law enforcement.
When it comes to digital driver’s licenses, it might not be a question of if it will happen, but when it will happen. FinTech should be a clear leader and problem solver in this space, given the immense opportunities for the industry above all others. Identity verification is at the center of many of the financial institution’s processes, and in the daily lives of consumers. With the rise of digital identity, business leaders will need to either get ahead of the technology, create it or step aside as digital solutions are sought.
How can you stay on top of emerging technologies? Attend this year’s Mobile Payments Conference to learn more about how the world of digital identity is evolving. Get your Mobile Payments Conference 2018 tickets today.