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Digital identity and financial services have always been deeply intertwined, with trust at the very heart of the relationship. How individuals and businesses manage money hinges on the confidence that their identities are secure and verified. 

As technology transforms finance, digital ID is no longer just a support tool, it is a critical enabler. From preventing fraud, streamlining compliance and supporting the next wave of Web3 technology- the opportunity for the UK is immense. 

 Realising this potential will require forward-looking strategies and pro-innovation regulation designed to foster confidence and unlock growth. Now is not the time to be complacent, both policymakers and industry must build upon current foundations to drive the UK forward as a leader in secure, digital ID-enabled finance. The potential is there, and techUK has a plan on how to seize it. 

Early foundations

Banks were among the first to adopt digital identity checks to onboard customers, comply with Know Your Customer (KYC) regulations, and prevent fraud. Estonia- a pioneer in digital identity – demonstrated how digital ID can build trust in banking. Digital banking logins were one of the country’s first eID’s in 1996, a public–private partnership with banks distributing ID card readers made financial services the gateway to nationwide adoption.

The financial services sector is an innovation powerhouse, often using innovative technologies before they proliferate into other areas of the economy. This culture of innovation adoption must always be pursued against a backdrop of safety and pragmatism. As technology and regulation continues to evolve at pace, the relationship between digital ID and financial services is moving from supportive to symbiotic - and the results to date are already striking.

How Digital ID in Finance is already making an impact 

Fraud is now one of the UK’s most pressing financial risks: in the first half of 2024 alone, almost £600 million was stolen, with identity-related fraud the leading category. UK Finance projects that in 2025, half of all bank fraud will be tied to identity. Against this backdrop, digital ID is no longer a convenience, it is an essential foundation. Strong, interoperable IDs can protect consumers and SMEs alike, while easing compliance costs for banks. 

Financial services are already deploying advanced tools- from biometrics to blockchain based verification- to secure identity. But looking ahead, Web3 opens an entirely new frontier. As crypto and digital assets move into the mainstream, identity will become the critical trust layer that enables adoption.  The U.S. sees this clearly: regulators stress digital ID as the backbone for KYC and anti-money laundering in crypto, while industry leaders frame it as the bridge between decentralised finance and traditional systems. 

Digital ID and financial services are deeply intertwined. The real question is not if this potential can be realised, but what’s holding it back. 

The current foundation must be built upon. 

Pro-innovation regulation is essential to keep financial services and digital identity close together, unlocking new use cases and accelerating adoption. 

In 2023, HM Treasury pledged to update the Money Laundering Regulations (MLRs) as part of its Economic Crime Plan 2023–26. Building on the Financial Services Growth & Competitiveness Strategy released in July, new proposals aim to plug loopholes, tighten customer checks, and give firms greater clarity on their obligations. Significantly, the Treasury also signaled it would work with DSIT to produce joint guidance on using digital ID within the MLRs- a timely and positive step. 

techUK’s June 2024 consultation response made the point clearly: digital identity is still the missing piece in the UK’s efforts to tackle financial crime. Although digital ID is already permitted for customer due diligence, uptake has remained patchy - held back by entrenched processes, legacy systems, and doubts over credibility. The direction of travel is right, but delivery will determine success. 

 Financial services are both a prominent testbed and one of the sectors that most relies on robust identity verification. At the same time, advances like Open Banking, instant payments, and crypto only increase the demand for trusted, interoperable IDs. The two domains are locked in a feedback loop -progress in one accelerates the other -and regulation must address them in parallel with a shared strategy and milestones. A long-term, cross-sector strategy for digital ID is sorely missing, a point we've emphasised in our latest Digital ID report.

The UK Treasury’s National Payments Vision or a Smart Data Strategy can provide a useful precedent: a roadmap combining short-term actions with a long-term vision. A national digital ID strategy could do the same, aligning government, regulators, and industry around sector-specific outcomes such as fraud reduction, productivity gains, and the safe adoption of digital assets. 

Seizing the moment: Digital ID as the Backbone of Future Finance 

The UK must not be complacent, but build on the success of digital ID within financial services. This interdependence will only continue to grow, and if the UK is to be ready for the future of finance, we must take steps today to drive greater adoption. 

 Clear rules can open up new use cases – from AML compliance, customer onboarding, or business verification -to private providers. Setting timelines for these use cases would build investor confidence and speed up adoption.  With rapid innovation and fast-moving policy in the digital ID sector, the UK government must move decisively – encouraging private-sector adoption, protecting competition, and positioning the country as a global leader in secure, citizen-centric financial services. 

• To read techUK’s full report on how to empower citizens and enable growth in the next wave of Digital ID, please click here. 
• You can also read here techUK's 3-phase, 2030 Vision: A Roadmap for Building a Digital Assets Economy