Is 2025 the Year of Digital ID in the UK?

January 2025

Fintech & Payments

Michael Greenwood

Principal Analyst

The UK is a market often noted for its resistance to digital ID or national identity systems in general. It is often believed that the UK public are less open to the idea than citizens of other countries and prioritise privacy over the efficiency gains a digital ID system could offer. However, this is slowly changing, as indicated by a YouGov poll in December 2024 which found strong support for a system of national identity cards in the UK.

Question: Would you support or oppose the introduction of a
system of national identity cards in Britain?

Source: YouGov

Another significant movement in December 2024 occurred with the unveiling of new proposed legislation that, if passed, would enable UK residents to use digital IDs to verify their age when buying alcohol. This will be applicable in pubs, clubs, and shops. The IDs will be provided by third-party companies and checked against government records, with these checks carried out by either NFC or QR codes, ensuring the process is streamlined. These digital IDs will also not reveal the user’s name or address, as is the case with traditional IDs.

These changes will come from the Data (Use and Access) Bill, introduced to Parliament in 2024. The bill is currently in the House of Lords, with it still needing to pass the House of Commons and gain Royal Assent before it becomes law. In its press release, the Department for Science, Innovation and Technology state they expect it to be in force by the end of 2025. 

This follows on from the 2023 decision, by the previous government, to allow UK citizens to upload identity documents to apps in order to carry out Disclosure and Barring Service (DBS), right to work, and right to rent checks. These services are provided by third-party identity services, such as Yoti, and it is expected that the same companies will be involved in the provision of the new digital IDs.

Source: Yoti

It is worth stressing that this will be a fairly limited programme, with participation entirely optional for both consumers and businesses. This will likely result in slow and uneven adoption, as was seen with the 2023 roll-out of digital IDs, with the vast majority of locations which accepted these IDs being in London or other major cities. This is due to the fact that consumers are unlikely to adopt the technology unless it is usable in a good number of the locations they use. Equally, businesses are less likely to adopt it if consumers are not using it. This results in the market for these technologies taking longer to reach critical mass and become widespread. 

It is not only in the consumer sector that digital identity is growing in the UK. In December 2024, a coalition of leading financial institutions and technology companies, led by the UK’s Centre for Finance and Innovation Technology (CFIT), unveiled their progress on designing a digital company ID.

Proposed Components of 'Digital Company ID'

Source: CFIT

The proposed model would enable CFIT to create a working prototype, in the form of a virtual passport for businesses. CFIT suggest that the widespread adoption of a digital company ID would help prevent fraud, boost efficiencies for banks and other financial institutions. This work was supported by the Chancellor, in the National Payments Vision published in November 2024, with the document pledging to ‘consider any finding that emerge from CFIT’s work in due course’. CFIT will announce the results, recommendations and next steps from its programme in March 2025.

The adoption of digital IDs for businesses would reduce fraud as it is more challenging to fake a digital identity. This would give businesses the confidence that those they transfer money to are who they claim to be. The IDs would also be used for Know Your Business (KYB) checks, along with ultimate beneficial owners (UBO) checks and comparison to anti-money laundering (AML) databases. If implemented well, this technology could not just reduce financial crime but also allow businesses to save costs on carrying out these checks by conventional methods. Adoption in the financial sector is likely to be strong if made available, as several major FIs are already involved in the project. Regulatory support is also likely as the Financial Conduct Authority (FCA) and the Payment Systems Regulator (PSR) are both involved.

With both these announcements coming at the end of 2024, 2025 is shaping up to be a big year for digital identity in the UK. While it seems unlikely there will be widespread adoption of a digital ID in the UK by consumers before the end of 2025, the foundations for such a success story are being laid. If the Government wants this to happen, targeting key use cases will be essential. Common points of friction for consumers, such as age verification at self-service checkouts, or entry to licensed premises, will play an important role in promoting adoption. It is usual for consumers to have their mobile device on them in such circumstances, so as such, having their ID on that device offers great convenience. It will be the convenience of use and acceptance rate by businesses which ultimately will determine the success of the technology. 

A Senior Research Analyst at Juniper Research, Michael primarily conducts research on digital identity and payments markets. His recent reports include Digital Identity, Instant Payments, and Digital Wallets.