Bridging payments and identity: Unlocking trillions in shared opportunities

The payments and identity sectors have long operated as critical, yet distinct, pillars of digital interactions. Every online purchase or government service relies on seamless coordination between payment verification and identity authentication. With current estimates predicting 2 of every 3 people would own a digital wallet by 2029, the urgency for seamless integration and collaboration has never been greater.

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By working together, these sectors can create integrated ecosystems that secure transactions and simplify user experiences, paving the way for a more trusted digital economy which benefits all participants. This blog explores the shared challenges between these industries and how collaboration can unlock transformative solutions.

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Shared foundations: How payments and identity intersect in a digital world

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The payments and identity sectors are built upon trust, security, and user-centricity. When making an online purchase, payment systems confirm the transaction while identity verification ensures the buyer’s credentials match the account’s owner, reducing the risk of fraud. This involves handling high-value data that demands airtight security and compliance with stringent regulatory landscapes.

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1. Data Privacy and Security: Both sectors face the relentless pressure of securing sensitive data. For payments, it’s protecting financial transactions, with global payment card fraud reaching an alarming $34 billion in losses in 2023. For identity, it’s safeguarding personal identity information, with identity theft impacting over 24 million individuals annually in the US, costing billions in recovery efforts. Cybersecurity threats such as fraud and phishing attacks target both, emphasizing the need for advanced, integrated, and interoperable defence mechanisms.
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2. User Convenience vs. Compliance: Balancing seamless user experiences with the need for high assurance is another shared struggle. Users often face delays and cumbersome multi-step processes due to stringent security checks and anti-fraud measures. While these steps protect against unauthorized access and money laundering, they frequently frustrate users, who expect faster and more streamlined transactions.  
   
   

3. Fragmentation and Interoperability: The payments ecosystem often grapples with siloed systems and lack of interoperability across payment platforms. Small businesses frequently encounter difficulties when integrating multiple payment providers, leading to inefficiencies and higher operational costs. Similarly, the identity sector is fragmented by diverse standards and technologies, as seen in the challenges of cross-border travel, where varying digital ID systems create barriers to seamless identity verification.

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How payments and identity can drive each other forward

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Collaboration between the payments and identity sectors could address these shared pain points while fostering innovation:

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• Embedding Trust into Every Interaction: By adopting trust networks, both sectors can embed security and efficiency into their core transactions. For instance, a user could instantly verify their identity when checking into a hotel, eliminating the need to share physical IDs. Simultaneously, the relying party—the hotel—benefits from reduced risk of fraud and faster customer onboarding through this same infrastructure.
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• Reducing Operational Costs Through Mutual Benefits: Shared use of digital credential technologies reduces operational overheads for both payments and identity systems. For payments, leveraging unified digital wallets can save financial institutions billions by streamlining transaction authentication and reducing chargeback rates. In the identity sector, digital IDs eliminate manual verification processes, cutting onboarding times while significantly reducing compliance costs associated with Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations.
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• Enabling Regulatory Compliance at Scale: Jointly developed standards and systems create a unified framework that simplifies the complexities of global regulatory requirements. By adopting shared protocols the payments and identity sectors can streamline compliance with regulations like GDPR for data privacy and PSD2 for payment services. Collaboration ensures that these standards are interoperable across platforms, reducing duplication of efforts and enabling cost savings. For businesses, this means fewer resources spent on fragmented compliance measures, and for users, it translates to consistent and reliable experiences across services.

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Seizing trillions in potential: New value propositions through collaboration

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The collaboration between the payments and identity industries isn't just about solving problems; it's also about creating new opportunities:

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• Interoperable Networks: Allowing users to move seamlessly across platforms using a single trusted credential can transform daily experiences. A user could utilize the same digital ID to log into their favourite e-commerce site and make a purchase while also using it to verify their identity for a bank loan application. This interoperable infrastructure ensures that the e-commerce platform can trust the buyer’s credentials for a seamless checkout, while the bank saves time and resources with instant identity verification, avoiding redundancy and wasting resources. With the digital identity market projected to exceed $70 billion by 2027 and global digital payments expected to reach $15.2 trillion by 2027, it’s clear that unlocking synergies between these industries could unlock exponential value for businesses, governments, and individuals alike.
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• Phishing-Resistant Transactions: Leveraging verifiable credentials to ensure every transaction is secure and authenticated creates tangible benefits. A user purchasing a high-value item online can authenticate their identity and payment in a single seamless step, using a digital credential stored in their wallet. For the merchant, this reduces the risk of fraudulent transactions, minimizes chargeback disputes, and accelerates checkout. Similarly, when applying for a home loan, a digital credential allows the bank to instantly confirm the applicant’s identity and financial details, speeding up the approval process while ensuring compliance with regulations. With global e-commerce fraud losses projected to reach $91 billion by 2028, implementing phishing-resistant, secure transactions could save businesses billions in fraud prevention and chargeback costs while streamlining customer experiences.
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• Inclusive Solutions: By integrating identity verifications into payments, services can be extended to underserved populations, fostering financial inclusion. For example, consider a small business owner in a rural area who lacks access to traditional banking services. With a digital ID linked to their payment system, they can easily set up a merchant account to accept online payments and verify their identity remotely. This not only opens up new revenue streams for the business but also allows financial institutions to onboard previously excluded users without requiring costly in-person verification. Such integration enables a more inclusive economy while reducing barriers for both users and service providers. Financial inclusion could add $3.7 trillion to global GDP by 2025.

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Looking ahead: The STA Summit

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Payments and identity share the opportunity to redefine how trust is managed, scaled, and delivered in a connected world. Collaboration isn't just an option; it's a necessity for solving today’s most pressing challenges and creating resilient, user-centric ecosystems for the future.  

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Marquee players who embrace this shift early will cement their status as leaders in their domains, reaping significant rewards by driving innovation and shaping the standards of tomorrow. Conversely, those who hesitate risk being left behind, as the market rapidly evolves around integrated solutions that prioritize seamless, secure, and scalable interactions.

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The STA Summit provides a pivotal platform to deepen the dialogue between these two sectors. By exploring shared goals and the potential of trust networks, stakeholders can collectively envision a future where payments and identity systems work hand in hand to redefine digital trust.