The government-backed Centre for Finance, Innovation and technology (CFIT) has outlined its plan to fight economic crime through digital business IDs.
Digital IDs for business will improve business efficiency, security and trust, according to the CFIT, which was launched in February 2023 with £5.5m funding in response to a report into UK fintech carried out by WorldPay chairman Ron Kalifa in 2021.
The organisation has published its blueprint for the plans it first announced in December. At the time, chancellor Rachel Reeves said she would “consider any findings that emerge from CFIT’s work”.
The business IDs will consolidate information about companies in one trusted place, easing the process of accessing finance for them and streamlining compliance costs.
CFIT said they will reduce regulatory and administrative burdens for businesses, particularly SMEs, and financial institutions could see compliance costs reduce by £1.7bn a year. It said the IDs, which it likens to digital passports for businesses, will also help reduce the annual £6.8bn cost of fraud.
Fraud, it said, will be reduced directly “through unified and secure data sharing that will disrupt fraud networks and close exploitable gaps” and indirectly “by enabling financial institutions to redeploy compliance savings into strengthening anti-fraud efforts”.
Emma Reynolds MP, economic secretary at HM Treasury, said: “The UK’s leading financial services sector is key to driving growth and putting money in people’s pockets through the Plan for Change. CFIT’s work in countering fraud demonstrates the UK’s position as an innovator within the global financial ecosystem. I look forward to considering the coalition’s findings as part of our range of work to grow the sector.”
Charlotte Crosswell, chair at the CFIT, said the organisation has brought together “some of the brightest industry minds to work together and find solutions to reduce the fast-rising, multi-billion-pound annual cost of fraud to the economy”.
“Access to verified, authenticated and centralised data sharing through Digital Company ID would help to dismantle systemic barriers, close the loopholes exploited by fraudsters, reduce compliance costs for banks and transform the business landscape in the UK,” she added.
Elyn Corfield, Lloyds Bank CEO for business and commercial banking, said: “The coalition has proven that digitising how banks undertake know your customer obligations will help to make compliance checks more user-friendly for small businesses and support the UK’s fight against financial crime.”
Jordan Shwide, general manager at Monzo Business, added: “Driving innovation and supporting initiatives that make life easier for SMEs is in our DNA – so we’re incredibly excited to be at the forefront of delivering a Digital Company ID solution. This will enable quicker access to financial services for legitimate businesses and ensure that key business information lives in one place. This will also make it harder for fraudsters to set up fake companies and ultimately help to prevent people falling victim to fraud.”
The CFIT blueprint makes seven recommendations:
Develop a prototype for digital company ID: The CFIT, in collaboration with industry, should launch and test a fully functional Digital Company ID prototype, preferably with the support of FCA Innovation services.
Enable reciprocal and secure data sharing: The government should consider mandating all relevant organisations across the ecosystem to share data on economic crime, via Digital Company ID.
Appoint a lead authority: To address market coordination failures, the government should consider appointing a responsible body to oversee implementation and governance.
Promote standards for interoperability: CFIT should work with industry to establish standards that ensure interoperability, accountability and secure adoption of Digital Company ID.
Create a multi-stakeholder taskforce: Establish a taskforce to identify, prioritise and develop high-value use cases for Digital Company ID within financial services.
Review the regulatory framework: Policymakers, working closely with industry, must review the regulatory framework for Digital Company ID ensuring it is fit for purpose.
Drive market confidence through government adoption: Government departments should lead by example, adopting Digital Company ID for critical interactions such as procurement, tax filings and confirmation statement submissions.