Banks expected to seek digital identity-management solutions.

While identity fraud and identity theft have long been hot topics in the financial services area, the challenge of authenticating identity in an increasingly digital world is not limited to the financial services industry alone, according to new research by Needham, Massachusetts-based TowerGroup.

The TowerGroup report, The Business of Identity Management: Leveraging Core Competencies to Create Value for Clients, found that a number of factors are driving both private and public enterprises to seek solutions for digital identity management.

These factors include the explosion of business-to-business (B2B) commerce; the push to automate inefficient, paper-based processes; the growth in Internet fraud and data theft; and the overarching drivers of regulation and globalization.

Demand for identity management among corporations, institutions and government enterprises is also fueled by these organizations' increased reliance on electronic means of communicating with employees, trading partners and other third parties, noted TowerGroup.

"The extension of eCommerce into the B2B and business-to-government contexts is essential to helping organizations streamline, automate, integrate and, ultimately, gain competitive advantage," said the report. "Yet with business losses from computer-related crime on the rise, the future health of the global economy will increasingly depend on the ability of corporations, banks and government agencies to conduct business electronically in a safe environment."

The TowerGroup report concluded that banks possess unique qualifications that support their ability to provide high-assurance identity-management solutions.

"Banks are well-versed in highly regulated processes for authenticating customers, are established in their traditional role as trusted service provider, and have the ability to provide assurance to third parties that a client is legitimate and can be counted on to meet its obligations," stated the report.

Other types of organizations that might provide identity-management services on a large scale--such as technology firms, telecommunications companies and government agencies--lack one or more of the critical criteria of experience, trust, willingness to manage risk and a large base of already authenticated relationships, the report added.