Even in tech-savvy Canada, digital ID must overcome outdated ideas
Canada is often at the forefront of payments innovation, with active fintech hubs and a national initiative to restructure the country’s transaction system for e-commerce. Yet outdated attitudes about identity risk linger, showing how hard it will be to achieve global digital ID at scale.
“More than three-quarters of Canadians really don’t know enough about how to protect their ID online. And the same number of people feel they don’t have enough control over their personal information when online,” said Neil Butters, director of products and platforms for Interac, Canada’s national debit network.
Interac just finished research that shows Canadians are clamoring for better authentication, and are subject to risk because of a knowledge gap and other behavior.
For example, 65% of Canadians fear a digital ID is at greater risk than a physical ID, even though digital IDs have safeguards against counterfeiting and theft that physical IDs lack. Forty-five percent of Canadians say they take photos of their physical IDs, which is a risky practice that creates opportunity for ID theft and fraud, since it places an image in proximity to personal data. And as Butters mentioned, 77% of Canadians say they don't know enough about online ID protection.
The numbers are daunting when considering an international perspective, because Canada is very advanced technologically. Toronto ranks ninth among global fintech hubs, according to Toronto Financial International. Payments is the largest category of fintech investment in Toronto, accounting for half of all local fintech investment. Canada led the U.S. in EMV migration, and McDonald's adopted mobile payments in Canada as early as 2013.
Montreal has used digital payments and transaction analytics to manage transit usage spikes through incentive marketing for at least seven years, and the rest of the country has aggressively added open-loop contactless transit payments. And Interac has offered its mobile payment technology internationally for the past three years.
“Canadians are not the only ones getting increasingly frustrated with passwords and physical identity documents and concerned about fraud and identity theft,” said Zil Bareisis, a senior analyst at Celent. “The good news is that Canada already has a strong vision for digital identities … banks also recognize the opportunity and are keen to play a leading role in developing digital identity infrastructure.”
To continue this momentum, Canada will have to embrace new forms of authentication, Butters said, adding that means increasing awareness and use of digital ID. “It allows Canadians to do more transactions online and in a safer environment. The opportunity is there to make Canadians realize they are more safe and secure when more is put online.”
Digital ID refers to a federated form of ID that’s flexible and reusable, and is better suited for international payments and e-commerce than static forms of authentication such as usernames and passwords.
There are hundreds of digital ID projects underway globally, which are taking place at the same time open banking is expanding, providing improvements in data sharing among institutions. These efforts give consumers more control over their data and how it’s used.
Digital ID is necessary for open banking to be successful, according to Butters, adding many of the building blocks are in place, such as passports and driver’s licenses, which can be digitized as a base for shared identity.
“Payments is one of the tailor-made use cases for digital ID,” Butters said. “You can marry strong authentication with money movements, and there are so many use cases that can come out of the payment.”
One of the challenges in building digital ID is cooperation, as parties have to cede or share control of some proprietary systems to work together to standardize authentication methods. And there is some disconnect in Canada.
There is digital ID initiative in Canada called Verified.Me, which uses SecureKey’s technology to support a blockchain-based interoperable ID system.
Interac is not a part of that project, though Butters said there are “many opportunities” for digital ID.
“We see if from a holistic perspective; there’s opportunity with the banks and with the public and private sectors,” Butters said.
Verified.me has the support of most of the country's largest banks, and is picking up more partners and consumers. SecureKey echoed Butters on the future interoperability with Interac.
“At some point these things will align,” said Greg Wolfond, SecureKey's CEO. “Generally you have to prove the digital ID to authorize the payment. In the other countries we’re working in, there’s a push to do data sharing in conjunction with payment sharing.”