On the Trail of Digital ID: Vast Potential and Open Questions

KYC – Know Your Customer – is fundamental both to the provision of financial services and to the industry’s regulatory compliance. Still unresolved, even after decades of technological advances that have streamlined so many of those processes and produced increasingly fast and frictionless payment systems, is how best to verify individual identities.

It is one thing to carry out background due-diligence before onboarding a customer, or to authorize a bespoke, high-value wire transfer in a controlled corporate setting. It is quite another to reliably authenticate parties to retail electronic transactions in real time.

Biometric methods – from fingerprints to facial recognition to iris scans – are considered a significant step up from passwords, even when the latter are reinforced with additional multifactor authentication (MFA) layers. Yet there are continuing debates among technologists, and questions about public acceptance of potentially intrusive biometrics, while AI agents, deepfakes and decentralized finance raise new risk concerns.

Surveys by client lifecycle management company Fenergo have shown financial firms to be...