University of Exeter’s Professor of Digital Economy, Alan Brown FBCS, explores the intersection between AI, trust, identity and the world of banking.

Digital transformation is creating opportunities for many and changing our view of the world - yet we are all struggling with a fundamental challenge which only seems to be getting harder: how do we tell fact from fiction online?

Unfortunately, new generative AI tools may well be making this even more difficult. As a result, advancing the role of digital identity as a crucial factor in establishing trust may be one of the most important steps we can take today.

For all forms of online interaction, one of the most significant issues facing digital transformation is the fundamental need to be able to verify the truth, accuracy and provenance of what is shared digitally. Misinformation online, whether intentional or not, is a cause for significant concern. Rapidly circulating false information on social media channels may range from satire and parody, to dangerous conspiracy theories.

Much of it is benign and easily dismissed. However, many forms of complex falsification schemes and deep fakes using advanced AI to generate realistic images, documents, and sounds create misinformation which is much more harmful and much harder to detect.

Artificial intelligence

Recent advances such as ChatGPT can generate large amounts of text quickly by synthesising huge libraries of existing data. Unfortunately, much of what is created can be manipulated into, or biased towards, answers that are plausible but wrong. Now that everyone has access to powerful tools creating endless streams of truths, half-truths, and lies, vast amounts of AI-generated answers may be about to swamp online channels and exacerbate problems already in danger of overwhelming us.

This is a complex, multi-layered issue for organisations to grapple with, and something which has been agonised over for some time. It is perhaps best understood in the context of banks and other financial institutions where the introduction of online banking systems and Know Your Customer (KYC) regulations have been important in enabling more personalised service and reducing fraud and money laundering.

Digital identity

Much of the focus has been on mechanisms to secure passwords and other information from a customer so that the bank knows it is dealing with that customer and no-one else. Meanwhile, by using techniques such as multi-factor authentication (MFA), customers gain confidence that the bank is doing all it can to prevent unauthorised access and to protect personal data.

However, this mechanistic view of digital identity is only one piece of the puzzle: a broader perspective is to consider digital identity as a valuable asset in its own right. This has many practical implications.

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For example, consider the McKinsey report entitled ‘Digital Identification: A key to inclusive growth’ which created a framework to understand the potential economic impact of a well-managed digital identity scheme in 7 major economies. It is estimated that almost one billion people globally lack any form of legally recognised identification, and looking at nearly 100 ways in which digital identities can be used, the report concluded that full digital identity coverage could create economic value equivalent to between 3% and 13% of GDP in Brazil, China, Ethiopia, India, Nigeria, the United Kingdom, and the United States.

Thinking about money

Taking this one step further, we can also see digital identity completely up-ending our view of money and its role in society. Dave Birch’s excellent book, the provocatively titled Identity is the New Money, was written almost a decade ago and explores the intersection of identity and money in the digital age.

Dave argued that as identity becomes increasingly important in the world of commerce, traditional forms of money are being supplemented and even replaced by new forms of digital identity-based currency. He made the case that we must change our understanding of what digital identity is and reformulate technical, business and social strategies for the digital economy.

In large part, Dave has been proved right. As can be seen in frequent announcements of the impact of cryptocurrencies, plans for central bank digital currencies, and questions about the future role of the banking sector, digital identity issues are at the heart of the debate about what services we want and how they can be effectively provided in an online world increasingly overwhelmed by digital doubt.

This has led some to state that the future of banking may lie more as vehicles for trust management than as financial institutions. Using their extensive data sets and knowledge of customers, identifying and authenticating individuals may be their main future value. At a time when the focus and stability of the banking sector is being challenged, this key role in managing digital identity may be just what they need, and be a major step forward for digital transformation.