The nation’s big banks want to be in cahoots with your state’s Department of Motor Vehicles.
So are they looking to figure out if you have any speeding tickets or points on your license? Hardly.
They want new ways to verify identity in a digital world, and the banking industry believes the DMV and other databases like it have the answer.
Banks take a new approach to the ‘know thy customer’ rule
Back in the pre-digital days, there was one key rule of relationship banking: Know thy customer. Banking used to be a local activity where judgments were made not always based on assets, but sometimes on your character.
Today, however, it can be hard to determine that you are who you say your when you open a new account — forget about trying to make a character judgment about you!
That’s why the nation’s Big 4 banks — Bank of America, Chase, Citi and Wells Fargo — are now hoping to use your driver’s license as a prime identifier.
According to the Wall Street Journal, DMV records are seen as a great repository of accurate data about identity. That’s because you’re required to present a treasure trove of documents like birth certificates and Social Security cards when applying for a license or other government-issued ID at the DMV.
Recent changes in banking regulations now allow banks to use digital images of driver’s licenses in determining identity when processing a new application. Previously, that could have been prevented under a patchwork of state legislation.
Meanwhile, as the Journal points out, the DMV is facing an existential crisis right now: It risks losing relevancy in a world where fewer and fewer people drive. So a partnership with the banking industry could restore it to a place of importance in American life.
The extra revenue that would come in from linking up with the banks would help the DMV pay for technology upgrades to its systems.
Industry coalition hopes to open up DMV databases
Bank of America, Chase and Wells Fargo, among other players, have formed a trade group called the Better Identity Coalition in an effort to convince state and federal agencies to open up their databases more freely.
Chase and Wells Fargo are also leading the way in working with the Social Security Administration to verify identity. They’re reportedly using info from the SSA to weed out phony applications in a number of scenarios, including when criminals use the identities of deceased people to apply for new credit.
The main reason why verifying identity is proving so vexing for the banks is that the U.S. does not have a national ID, unlike many other nations.
Some people might balk at the finance industry having deeper access to your data than ever before. However, the new regulations require the banks to destroy any electronic image of your license after they use it.
But let’s face it: The never-ending rash of data breaches in the financial sector certainly doesn’t inspire a lot of confidence in the banks and other related industries.
So how does Clark Howard feel about this new development?
“The banks are just starting to ramp up [this effort,]” the money expert says. “The problem with it is we’re not supposed to have a national identity card in the United States, but this sure sounds like the next step…”