Customers Wary of Digital Identity
Proponents of a standardized digital identify–an electronically verified set of attributes that uniquely describe a person–say it can improve, simplify and accelerate identity-dependent transactions, including buying or renting a home. But, according to Fannie Mae in a new study, given the growing number and severity of personal data breaches, many Americans say the risks of having a digital identity outweigh the benefits.
The Fannie Mae study (http://www.fanniemae.com/resources/file/research/housingsurvey/pdf/feb2018-topic-analysis-presentation-digital-financial-identity.pdf) surveyed consumers to understand their perceptions of and comfort levels with digital financial identity and how those views might affect U.S. financial activities.
Key findings:
–Just 13% of respondents said they are interested in having a digital financial identity.
–Those who are more highly educated, have higher incomes, or are ages 18-34 (Millennials) are only slightly more interested in having a digital financial identity.
–Many consumers said they wouldn’t be more interested in having a digital financial identity even if it meant a quicker, easier and less costly mortgage application process.
–Half (50%) of respondents said security and safety of personal information was the biggest concern regarding digital financial identity. The second biggest concern was the use of information for purposes other than what the individual chooses.
–Half of respondents said large financial institutions or the U.S. government should manage digital financial identities. Those entities are seen as being able to better safeguard information than other organizations can.
“Meaningful benefits resulting from a digital identity when applying for a mortgage–such as reduced costs, a simplified process, and instant approval–did not inspire the majority of respondents to be more interested in having a digital financial identity,” said study authors Daphna Meroz and Steve Deggendorf of Fannie Mae’s Economic and Strategic Research Group.
The authors said these concerns persist despite the fact that most consumers currently have many digital identities, maybe even unknowingly.
“These identities were formed through various online activities designed for a single purpose or transaction, such as logging into their bank or social media accounts,” the authors said. “Nevertheless, consumers have told us they are reluctant to adopt a digital financial identity. This is not surprising. Identity theft is a costly and widely experienced problem, with more people affected every year. At the same time, we might infer many consumers do not know or believe in the potential benefits of a robust digital identity system–one that is used across multiple activities and controlled by the consumer–particularly compared to the current system.”
The study said consumer concerns need to be thoroughly and thoughtfully addressed to win the trust necessary to encourage the adoption of a standardized and widely usable digital identity that applies to financial, medical, governments and other activities. “In the United States, both financial services companies and consumers soon will likely confront the issue of having a better digital identity system,” the authors said. “Creation of one, if done well, has the potential to reduce cyber-related risks and empower the consumer by making buying and renting a home safer and more efficient.”
