The current state of Digital Identity in Australia, and trends to look out for
The importance of digital identity to the Australian online ecosystem is rapidly increasing. From verifying identities in financial transactions to accessing government services, the move towards digital verification has gained considerable momentum. As digital identity is put on a more secure regulatory framework and regulators from different sectors embrace digital identity, the ecosystem is undergoing significant transformation. This article explores the current landscape, the regulatory and technological changes underway, and what the future may hold for digital identity in Australia.
The Changing State of Digital Identity in Australia
Adoption
In recent years, the adoption of digital identity solutions in Australia has accelerated. The transition from traditional, manual identity verification methods to automated, digital alternatives is well underway. This shift is driven by the need for more robust, secure and user-friendly identity verification processes. Austrac reporting entities see the value in automated verification processes as they both reduce user drop-off during the onboarding process and, at the same time pick up more fraudulent applications.
AI
Technology is moving fast. The adoption of AI by both fraudsters and service providers is having two interconnected consequences. Manual verification and database-only checks are vulnerable to deepfake selfies and identity document images, especially when combined with real but stolen data. This is pushing a drive to reliance on automated solutions that can detect these deepfakes. And at the same time, service providers are using AI to train ever more robust identity solutions.
A consequence of service providers’ use of AI is that those sectors or companies that do not quickly react to new technologies (the Super sector, for example) find themselves even more of a target to fraudsters as other sectors tighten up their defences.
The DVS
One of the foundational elements of Australia’s digital identity infrastructure is the Document Verification Service (DVS), which allows organisations to verify identity documents against government records in real time. Recognising some limitations and inconsistencies in the DVS framework, the government has recently revamped its agreements with the companies doing the checks (known as ‘Business Users’ in DVS jargon) and those suppliers who are plugged into the DVS framework (known as ‘Gateway Services Providers’). These changes aim to enhance the reliability, security, and scalability of digital identity verification across sectors.
A key change to the DVS agreements is an uplift in the consent requirements from consumers before a DVS check can be made. Much greater clarity and transparency are required before consumers are asked to consent to a DVS check being made on their data.
It will be interesting to see if this causes a shift in consumer behaviour, as there is less trust in the government in certain circles of society. And if consumers do not consent to either a biometric check or a DVS check, then what is the identity verification fallback?
Regulatory Shifts Driving Change
One of the most significant catalysts for the expansion of digital identity use in Australia is the recent amendment of the Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) laws. These changes have greatly expanded the number of reporting entities, bringing a broader range of industries under the compliance umbrella, including estate agents, accountants and lawyers.
As a result, the demand for reliable digital identity solutions has surged, prompting innovation and investment in the sector. We are seeing UX Law clients introducing innovative solutions to the market, including end-to-end AML platforms, reusable identity solutions and mechanisms for sharing verified identities between different reporting entities in the same transaction.
The Australian government has also commissioned a report into the current state of online age assurance techniques. The report is expected to cover over 40 different solutions from identity service providers and some solutions put forward by the large platforms, including Google, Meta and Snap. This report will be the first of its kind globally. The scale of this project, and the investment made by the government in it, underscore the importance placed on developing robust and inclusive identity verification methods, particularly for age-restricted services. The outcomes of this ambitious effort could shape the future standards for digital identity verification in Australia and globally.
Contradictory Regulatory Signals
However, the regulatory landscape is not uniformly progressive. While some agencies and the Commonwealth Government support the use of advanced digital verification methods, including biometrics, others are taking a more cautious approach. For example, the Australian Communications and Media Authority (ACMA) is currently engaged in consultations that propose a reduced role for biometric technologies in identity verification. This conservative stance appears to contrast with ACMA’s simultaneous acceptance of biometrics in passkeys and identity wallets, reflecting a broader tension in policy direction.
Legislative Developments on the Horizon
The government has already signalled that we can expect laws preventing under-16s from using social media to be in force by the end of this year. Following the social media laws it is reasonable to expect Australia to follow many US states, the UK and many European countries in requiring adult content (porn) sites to verify the age of their customers.
Both laws will be further significant drivers in the widespread adoption of digital identity in Australia.
The Future of Digital Identity: Trends and Possibilities
The DVS service, used by the majority of regulated entities to assist in verifying identity, is being expanded by the introduction of ‘FVS’ – facial verification service. This will allow reporting entities to check the face of the consumer against the government database, and the government will conduct the check using biometric verification. FVS is expected to assist in reducing fraud because merely possessing stolen data as a fraudster will not get you past an FVS check.
One of the most pressing questions in the digital identity space is when government-issued digital IDs will be widely adopted by the private sector. The Commonwealth government’s myID has been used by millions of Australians to pay their taxes, and the state digital driver’s licences have also seen similar download levels. The recently passed Identity Verification Services Acts give the governments the ability to allow use of their solutions in the private sector as well as the public sector.
Another promising trend is the development of reusable digital identity solutions. Projects like ConnectID and Yoti are pioneering efforts to create identities that can be used across multiple services and platforms. These solutions aim to reduce the burden on individuals who currently must verify their identity separately for each new service. In parallel, sector-specific approaches are emerging, such as verified data sharing among brokers and home loan providers. These models have the potential to enhance efficiency and reduce friction in high-stakes transactions.
Conclusion
Regulated sectors that need to verify identity have adopted digital identity solutions with gusto across Australia. They understand the advantages of preventing fraud, enhanced user journeys and easier compliance. As more entities are required by regulations to verify identity or age, we can expect further adoption of digital identity in Australia.
UX Law is working with the leading service providers of digital identity and AML solutions in Australia. Let us know how we can help advise your business.