5 questions on the topic of bank identity

Since 1 January this year, our country has joined the ranks of those that have introduced rules for the existence of digital identity. The initiative has been taken by banks, hence the name Bank Identity. In this context, I can think of five questions about the state of digitalisation in our country and its further prospects.

1. Who is actually moving the digitalisation of the Czech Republic forward?

It is mainly the private sector. This is not surprising, but even our candidate for the Act of the Year would not have been created without a private initiative. It was the banks and their associations that came up with the concept of bank identity. The state does not help with digitalisation very much. We have achieved greater user improvements in data boxes, insolvency register or commercial register (and even though it is a century old, thanks for its free accessibility!). We are waiting anxiously to see how the state will cope with the digitalisation of the entire portfolio of services (Act on the Right to Digital Services, last year’s winner). However, electronic identity was beyond its abilities. State-implemented solutions are either cumbersome or have limited usability for identification (e-identity, ID cards with chips, data boxes). Not even courts encourage digitalisation, for example through judgments regarding e-signature.

2. Is the European Union helping us?

It has already helped us a lot. If anything leads to a breakthrough in Czech legislation in the field of e-contracting, it will be the eIDas regulation. Article 25 says that An electronic signature shall not be denied legal effect and admissibility as evidence in legal proceedings solely on the grounds that it is in an electronic form.”  One day, this article will be carved in stone (we do not yet have a digital variant of this saying…), as it enshrines a prohibition of discrimination against electronic legal actions. As a standard superior to Czech law, it has the potential to change local judgements and practice.

3. What remains to be digitalised?

A lot. Among the most urgent remains, we can mention, for example, the HR area, where the Labour Code puts several “shrapnels” in the way (a requirement for recognised electronic signature, delivery during electronic signing). Another candidate is the impossibility of using video for AML identification (e.g. when opening a bank account), which has already been introduced by our neighbours in Germany and Slovakia. Bank identity or the complex procedure of the so-called penny transfer are the only digital alternatives to identification in the physical presence of the client.

4. Who will benefit the most from bank identity?

It is hard to predict now, but probably the state. It will be state authorities that will use bank identity to identify their clients – citizens and businesses – when providing their services. It will save the cost of counters or clerks and maybe – who knows? – there will be more money left for further digitalisation…

5. Is bank identity or digitalisation itself risky?

Like anything, bank identity and digitalisation have their risks. What is important is how aware we are of them and how we can guide and manage them. With the advent of digitalisation, the importance of security will certainly increase, primarily against cyberattacks. This will be a key issue in the near term, and its successful managing even at a micro-level is a precondition for further development. Every user needs to be aware of the risks of phishing or clicking on unknown links. Even digitalisation does not mean that services provided in a standard way, whether commercial or state-owned, do not deserve their place in the sun. When a Czech bank’s internet banking went down for a few days less than four years ago, it was said that brick-and-mortar branches were actually a kind of defensive measure for these cases. When the covid-19 pandemic hit a year ago, it turned out that it was the digitalisation of their business and their employees’ work that allowed many companies to continue to operate. Some things, even in the digital era, have a decisive benefit in the “physical” form, primarily education at all types of schools and grades. Moreover, we must not forget those who are not involved in this digital transformation, either because of age, financial situation or a lack of (digital) education.

The article was published in the magazine Právní rádce on 19 March 2021.

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