The just-released Financial System Inquiry report, led by former CBA boss David Murray, has called for improvements to digital identity management systems, warning that gaps are costing governments, the industry and tax-payers money to fix.
Among the findings, this report flags digital identity management as being a concern across the banking and financial transactions sectors. Without an integrated approach to managing digital identities, there are implications for private or public sector stakeholders.
This government-endorsed report calls for a nationally-coordinated approach to managing digital identities. A fully-integrated model improves the way transactions or consumer services are managed in an online or mobile environment.
The current system, especially for financial services or the broader transactions, is fragmented and may lack focus. In this uncharted terrain, there is potential for continued online fraud affecting online or mobile consumers.
Referencing findings by the Australian Institute of Criminology, the report says that fraud concerns continue to rise. The criminal misuse of identity affects consumer activity and also compromises confidence in the financial or banking system. This kind of misuse is costing business and government substantial sums to respond to or prevent crimes.
In 2011 alone, Australians lost an estimated $1.4 billion through personal fraud incidents. “Each year, an estimated 4 to 5 per cent of Australians experience identity crime resulting in financial loss.”
The report adds that identity theft or false identities are key enablers of superannuation fraud or the more serious organised crime. “An enhanced digital identity infrastructure can help to reduce this risk.”
Government streamlines identity management
More recently, the federal government has streamlined its digital identity management programs including the myGov web site. This online channel offers access to multiple government services using a single set of digital credentials.
Almost one in three adult Australians are now registered to access government services using the myGov web site.
The federal Department of Human Services conservatively estimates that myGov will generate around $547 million in efficiency savings and reduced red tape burden over 10 years.
Considerable work is underway to simplify digital identity processes and expand the use of myGov to other government agencies at the commonwealth, state and territory levels.
“myGov’s efficiency benefits indicate it has the potential to play an ongoing and significant role in Australia’s future identity model,” the report says. For example, this site has delivered efficiency savings ranging from $1.7 million to $28 million.
These savings stem from reducing duplication around identity management, offering single account access and credentials and authenticating linked services. This is reinforced by access to a secure digital mailbox for individual subscribers.
“Enhanced digital identity processes improve efficiency and security across the digital economy,” adds the report. “Even in the current fragmented identity environment, one firm’s shift to electronic methods for identity verification has reduced costs by more than 30 per cent,”
Plugging gaps for financial transactions
Under existing private sector financial access or transactional arrangements, an identity must be verified and authenticated across multiple points or dispersed online or mobile channels. This occurs when financial services are provided or consumed.
A more streamlined regime helps defray the cost of compliance, for example, those associated with the more stringent anti-money laundering requirements.
“The efficiency benefits of implementing coordinated digital identity management across the entire financial system are likely to be many,” the report says.
Among the reforms, the report canvasses that government, in consultation with the private sector, develop a national identity strategy that leverages a “federated-style model.” This model operates in a contestable market and offers a wide range of identity management services.
The report also proposes creating a public-private sector task-force to develop an integrated and secure digital identity management framework.
This task-force, proposed in the New Year, can streamline standards around identity-proofing, authentication or a broader sharing of legal liability.
Parameters can be refined further around managing fraud or the accreditation of identity providers or trusted brokers.
Australia’s last Financial System Inquiry is the most comprehensive this decade. It was led by David Murray AO (chair), Professor Kevin Davis, Craig Dunn, Carolyn Hewson AO, and Dr Brian McNamee AO.
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