Goodbye ID cards - is it time to say hello to identity banks?

As expected, the new government has scrapped the controversial and unwieldy identity cards project created as a flagship of Labour policy.

Labour’s problem was that it never properly explained why ID cards were necessary, or a good thing – perhaps they never really had a good reason other than the control it would give the government from universal biometric identities.

But there is a growing recognition that an increasingly internet-enabled society will need some form of electronic identity verification system to tackle identity fraud and provide the confidence needed to transact securely online, especially as more public services are provided over the web.

So now perhaps it is time to go back to a proposal that was largely ignored by Labour, despite it coming from a report commissioned by the Treasury when Gordon Brown was still chancellor.

In 2008, former HBOS chief executive Sir James Crosby recommended a private sector-led approach to identity management. “The potential of any mass ID system such as ID cards lies in the extent to which it is created by consumers for consumers,” he wrote in his report.

Crosby’s plan was essentially for banks and other trusted institutions to act as an identity vault – we would store our essential identity details in the bank in much the same way as we do our money. The bank is responsible for the initial verification that you are who you say you are, and that the information you provide is correct.

When you later attempt to prove your identity – perhaps to make an online purchase or to apply for a government service – you give the service provider permission to securely access the relevant information in your ID bank to allow them to verify the transaction. This could also include credit card information – removing the need to enter card details over the web and minimising the chances of that data being stolen or intercepted.

Not only did this seem to me to be a sensible and workable solution, it is one that could easily be “sold” to the public – with no central government command and control infrastructure, the likelihood of establishing trust between customer and identity bank is increased. Furthermore, it is a solution in which the UK could lead the world – our banks and financial institutions are already ahead of most of their global rivals in their capability to verify electronic financial transactions.

Sadly Crosby’s report was largely ignored when Labour put its ID card plans in place, and he was subsequently vilified for allegedly ignoring the advice of a key HBOS adviser that the bank was growing too fast – it was eventually forced into a merger with Lloyds TSB in the height of the credit crunch.

But even if Crosby himself was pilloried, his proposals for an alternative to ID cards merit serious consideration by our new coalition government.