Tuesday, January 22, 2008

If you really want to save tax payers' money...

My column in financial i

Headline: E-identification you can bank on

Fast progress in the digitalisation of public and private sector services is desperately needed in light of a dwindling workforce in the EU, slow improvements in productivity, globalisation introducing low-cost competition into new areas and environmental pressures forcing enterprises to cut use of material and transport and people to reassess travelling to banks, post offices and shops.

But how can progress be speeded up? Naturally by informing the public about the benefits of digitalisation and the hundreds of billions it can save them. We should not make it easy for them to resist the inevitable. The media is not always helpful as it tends to exaggerate the risks. The best way forward is to use the tools consumers already know and trust. Significant progress is being made by transmitting invoices to both businesses and consumers like payments. Now it is time to do the same with e-identification (e-id) and e-signatures also outside the Nordic and Baltic countries.

The reasons why individuals, enterprises and the public sector are turning to banks for strong e-identification and e-signature services are self-evident:

Ÿ User habit and trust – logging on to e-banking applications is a trusted tool that facilitates faster adoption. Faster uptake is improving the business case, but costs are also saved as much less marketing and customer support is needed.

Ÿ High security levels – bank log-in security is strong and supervised as banks are an integral part of the defence against money-laundering. What is good enough for banks is good enough for others – including public health services – as no details of the transaction need to be shown to the e-id provider. Since their inception, banks have been involved in confirming the identity of trading partners to one another.

Ÿ Cost-efficient – essentially it is a question of reusing existing investments in high-volume solutions for new purposes. When these need to be upgraded, such investments also benefit third party users.

Ÿ Banks have unparalleled selling power, creating the highest level of scope. Banks also have the track record. Launches in Estonia, Finland and Sweden have been very successful and are now the de-facto e-id standard for the public sector. Parallel tools like state-issued smart cards are too cumbersome and seldom lead to any noticeable usage volumes.

It is now clear that only a user-centric focus, not technology, drives real progress. This was borne out by the lack of focus on the user’s experience in the mass market digitalisation of e-banking. PKI technology is an alternative and is being offered by many banks, but it does not have any important security advantages over, for example, one-time passwords – especially when considered in relation to cost and convenience. But when banking and payments for remote and proximity shopping are integrated in mobile phones, PKI-based digital certificates can be useful as was demonstrated in the dual-chip phone pilot run by Nokia, Nordea and Visa in 2001.

To ensure a technology-neutral implementation of the EU Services Directive, which aims to reduce the barriers to cross-border trade in services between EU member states, it is important to take the same approach as in e-invoicing. Even if a common rulebook for all service providers (not only banks) is needed and the fastest possible standardisation is good for competition, there has to be by necessity a federal phase.

National practices should be made robust enough, especially in the physical inspection of passports and identity cards at account opening and when e-id tools are issued. Supervision of e-id service providers is a necessity to avoid the weakest link syndrome. When e-id transactions are sent cross-border they should also be standardised – just as payments and e-invoicing will be.

Bo Harald is Head of Executive Advisors, TietoEnator, Helsinki

1 comment:

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