The Promise of Digital Identities (IDs): Access and Crime Prevention
February 02, 2026
A new paper from the Federal Reserve Bank of Atlanta and Federal Reserve System colleagues, Using Digital Identity to Support Access to Payments, examines how digital identity systems could support access to payments. As you know from reading Take On Payments, producing adequate documentation can be a barrier to full financial access for many consumers. A digital ID combines the three pillars of secure transactions—identification, authentication, and authorization—and creates an ironclad system that uniquely identifies a person making a payment or purchase online. It has promising applications such as supporting broader financial access, fighting fraud, and combatting money laundering.
As a consumer, it's appealing to me that only the information required to make the payment is supplied to the payee. Just like using a digital wallet, when I pay a bill, the vendor won't see my bank account or card info. Additionally, certain applications would only have access to such info when necessary to complete a transaction or verification. For example, if I make an alcohol purchase where digital IDs are accepted for age verification, the merchant would not see any of my other personal information. This is a terrific benefit! Beyond convenience, with less of my personal info floating around, I feel more comfortable authenticating my identity and confident that my private data is protected.
Prior research has shown that fears about security and fraud discourage some people from using online payments and financial services. Moreover, some may lack the required identification to open a financial account. This is where properly configured digital ID systems can offer an efficient and secure method for individuals to access financial services.
The identification, authentication, and authorization solutions proposed in the paper would open digital IDs to larger groups of consumers, even those without certain bank accounts or cards. For financial institutions, digital credentials could drive down the cost of know-your-customer procedures and lessen the burden of coordinating different trusted parties to execute the identification processes needed to create a digital ID. And, of course, when digital IDs are portable, consumers have more choice.
The authors of the paper include my Payments Forum colleague Lali Shaffer. Reach out to her if you'd like to learn more.