Digital identities will facilitate frictionless payments and drive innovation, says David Birch, an internationally-recognised thought leader in digital identity and digital money.
In time, an increasing number of payments could become invisible to the consumer, says Birch
, a director of UK-based secure electronic transactions consultancy Consult Hyperion
Birch draws a distinction between a virtual identity and a real identity. As its name suggests, a virtual identity is something that exists only in the “virtual world” and is where credentials are held, such an identity with a bank. Likewise a real identity exists in the “real world”, such as an individual.
He defines a digital identity as the bridge between a virtual identity and the real identity.
“When you walk into a shop and buy something with your credit card, you put the card in the terminal and effectively a virtual identity of yours – for example my Commonwealth Bank identity – is interacting with a virtual identity of the store,” says Birch.
It’s possible to do things with virtual identities that aren’t possible with our physical identities
“I’m not really giving any money to the guy in the store. My virtual identity is dealing with the store’s virtual identity out there in cyberspace somewhere. The digital identity is in the chip on the card and I use the PIN to authenticate that something in the real world – me – is bound to that digital identity on the chip card.”
It’s possible to do things with virtual identities that aren’t possible with our physical identities, says Birch. For instance, if someone needs to prove they are 18 to get into a bar, they currently show their drivers’ licence. Not only does this reveal that they are over 18, it also reveals their date of birth, their name and address and their drivers licence number. A virtual identity can be used to reveal only the information that is required to complete the transaction, in this case, that the individual is old enough to drink.
“By having virtual identities which contain only the attributes that needed to allow specific transactions to take place, we not only make the whole thing more efficient but we also finally do something about privacy,” Birch says.
Birch expects that authentication – which is proving that the person has control of the private key that will allow the transaction to take place – will disappear into the background. In future, phones won’t require PINs or thumbprints for authentication, because they will be able to verify the user based on the unique way they hold and handle their phone.
In fact, digital identities will usher in more “invisible payments” where the payment is in background and happens automatically in a transaction, such as the way Uber bills.
In supermarkets, transactions could shift from a “payments-based view of the world” to being driven by identity. Birch says he has been in talks with retailers about “moving from check-out to check-in”.
Digital identities should be held by trusted regulated entities, such as banks or Australia Post
Rather than the shopper only identifying themselves when they have to pay at the checkout, they would be identified when they arrived, with their phone interacting with the shop. Shoppers would be told about specials and products of interest to them and scan their goods as they go, potentially obviating the need to check out at all.
“When I go into Woolies, they should be interacting with me through my Woolies virtual identity and not tracking my phone number or face recognition or whatever else,” he says.
Birch envisages that individuals would have a handful of digital identities, in the same way they have different email addresses now – one for home, one for work, one for shopping or hobbies and so on.
Each of these digital identities could be used to create large number of virtual identities, for instance with retailers, utilities, transport companies, entertainment providers and venues. He says that digital identities should be held by trusted regulated entities, such as banks or Australia Post.
The use of digital identities will also help to open up payments innovation, because payments will run on an app rather than being tied to hardware, such as a terminal.
“Right now, if I come up with an amazing new DavePay, going around to all the shops and trying to persuade them to install DavePay terminals is a bit of a tall order,” Birch says. “But if everything is being done inside the app that’s a different proposition. DavePay will be just another item on the menu. And so, I think what we’ll see is more imagination, more opportunities, and new kinds of payments coming in.”
This article represents the views and opinions of the author and do not necessarily reflect the opinions of BPAY.
Published by BPAY Pty Ltd. BPAY is offered by over 150 Financial Institutions. Contact your Financial Institution to see if it offers BPAY and to get the terms and conditions. This is general advice – before using BPAY please review the terms and conditions and consider whether BPAY is appropriate for your personal circumstances.