Digital identity the keystone for digitising government services

Australia ranked seventeenth in the world for its digital economy on the 2020 Digital Intelligence Index, a downgrade from the last report in 2017 when its ranking was at number eleven. It’s not so much that Australia has slowed down; it’s just that a lot of other nations have accelerated their rate of digital transformation.

Digital identity underpins everything

One of the keystones in the digitisation of government services and the development of the global digital economy is digital identity. Although it has provoked cybersecurity and data privacy concerns in some instances, digital identity can encourage financial inclusion, reduce fraud and facilitate participation in the economy and public services.

Our second annual Global Financial Regulations Report, which was published recently, covers the extent to which national digital identity infrastructure and regulatory frameworks are being established around the world. It’s a good way to gauge how Australia is faring here in relation to the rest of the world.

Australia is making some positive steps. The federal government has allocated $1.67 billion over the next 10 years as part of its 2020 Cyber Security Strategy, and an ambitious 2021 digital agenda has focused on the expansion of the national digital identity scheme, reforms to the anti-money laundering and counter-terrorist financing framework, and amendments to the Consumer Data Right framework. In October this year, the government released an exposure draft of the Trusted Digital Identity Bill to support the expansion of the Australian Government Digital Identity System, an important final community consultative step before the legislation is introduced to the federal parliament.

Improved digital identity framework a much-needed addition

With so many of our engagements and transactions with government services and our financial institutions now taking place online, an improved national digital identity framework is a much-needed addition to our lives. Most Australians have experienced this need first-hand in the complexities of linking their vaccination certificates (available digitally through Medicare) with state-based COVID-19 check-in apps.

In part, the difficulties are due to the siloed nature of both digital identity and data in Australia today — and that’s preventing the nation from reaping all the benefits of a digital economy. The 2020 Digital Intelligence Index sums up the mantra for highly digitally evolved economies as, “more data privacy protections and less data protectionism”:

“Open data flow policies that lower the barriers for digital business activity combined with a strong privacy protections and security environment encourage greater digital activity and further data generation. These are key to building competitive and innovative digital economies.”

By moving forward confidently on establishing a national digital identity framework, it will open up areas for digital transformation that have been stymied — such as the legislative acceptance of e-signatures in the financial services sector. With Victoria passing the Justice Legislation Amendment (System Enhancements and Other Matters) Bill 2021 back in March, it has made permanent the emergency e-signature measures that were implemented due to the COVID-19 lockdowns to allow for the electronic signing and remote witnessing of legal documents. That’s made Victoria the first Australian state or territory to make permanent reforms that will allow the use of e-signatures for mortgage documents.

Broader application

The issue from here is how we take this isolated legislative innovation and make sure we can apply it more broadly to allow for digital transformation initiatives to be accelerated across Australia. Further adoption of e-signatures will allow complex financial transactions to be completely digitised, creating opportunities for greater efficiencies within the existing banking sector, and also allow new players in this space, notably the fintechs, to compete on an even footing. Heightened competition between fintechs and traditional banks will lower costs, simplify transactions, provide consumers more choice and expand access to financial services.

However, in its Non-Bank Lending and Financing Sector Risk Assessment released in June this year, AUSTRAC believes the main threat facing the sector is fraud, particularly loan application fraud, identity fraud and welfare fraud — something that a robust, secure and effective national digital identity scheme can address by confidently verifying the online identities of the parties to a transaction.

ATO leads the charge

The good news is in the work being done by the Australian Taxation Office. In a paper delivered for the 2021 Pearcey Oration, Jeremy Hirschhorn, the ATO’s Second Commissioner, Client Engagement said that the agency is now almost wholly digital, where “only about 1.5% of individual tax returns were lodged on paper last year”.

The ATO is using the myGOVID/RAM (Relationship Authorisation Manager) as a robust security framework to prove online identity, and the digitisation of the entire tax return process means that the ATO sits “over one of the most interesting data sets in Australia” according to Hirschhorn.

That’s given other government agencies a glimpse of what’s possible.

“Increasingly, the government is looking at a whole-of-government approach to the provision of services to the Australian community. This of course requires a whole-of-government approach to digitisation and data,” Hirschhorn said.

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