Japan’s three leading financial institutions – MUFG, SMBC and Mizuho – are embarking on a joint digital identity initiative towards enhancing online banking authentication. The cohort of banks will implement an initiative building upon past proof-of-concept trials of digital ID that enable secure transactions for their customers. In 2020, Mizuho Bank jointly tested potential systems alongside Fujitsu, JCB where one of the learnings was to understand how sensitive user ID information would be protected between B2C and B2B interactions.
This time, a coalition including other regional banks, Fukuoka Financial and Shizuoka, will pilot a digital ID solution crossing over with blockchain technology. The big institutions are supporters of the Progmat tokenization solution founded by MUFG.
The recent collaboration will strengthen their retail businesses as the digitalisation of web-based and mobile-based banking accelerates, and even incorporates Artificial Intelligence in the near future.
Data is a familiar focus when it comes to securing identity, but aside from individuals’ data being the subject of proper due diligence by banks, individuals will be able to store their data on their mobile phones as a transferable credential. This includes data such as their name, address, date of birth and driving licence stored on a mobile device.
The banks envision using digital certificates for opening bank accounts and credit/debit card issuance, which will be trialed by this year. The barriers of onboarding without an effective decentralised ID solution is a potential barrier for banks for commercial reasons.
Mizuho has helped other banks pursue several initiatives to become digital and raise their own financial infrastructure to offer trusted KYC procedures to customers.
The current Japanese anti-money laundering legislation requires the presentation of a photo ID, which could complicate the implementation of a digital identity solution.
Whilst customers are getting used to using digital ID, Japanese money-laundering legislation still states photo ID must be presented for identification, creating a potential loss of momentum to implement digital ID solutions easily.
