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Perspectives Blog

Consumers’ Security Concerns a Barrier for Digital Identity

February 20, 2018

by Daphna Meroz & Steve Deggendorf

A digital identity is an electronically verified set of attributes that uniquely describe a person. The benefits of a standardized digital identity used across many different types of identity-dependent transactions, including home buying and renting, may be significant – for example, a simplified application process, swift transaction approval, lower costs, and enhanced security. However, according to the Fannie Mae National Housing Survey® (NHS), consumers have significant safety and security concerns about digital identity. This is not surprising given the growing number and severity of personal data breaches.

During the second quarter of 2017, we surveyed consumers on their perceptions of digital financial identity. Key findings include:

  • Only 13 percent of Americans say they are interested in having a digital financial identity.
  • Those who are more highly educated, those with higher incomes, and those in the 18-34 age group (Millennials) are only slightly more likely to be interested in having a digital financial identity.

Figure 1.  Very few Americans are interested in having a personal digital financial identity (click image to view full size)

Interest in Having a Personal Digital Financial Identity by Education, Age, and Income

  • The security and safety of personal information was cited by 50 percent of respondents as the biggest concern regarding digital financial identity. At 18 percent, consumers' second biggest concern was the use of information for purposes other than what the individual chooses.
  • Meaningful benefits resulting from a digital identity when applying for a mortgage – such as reduced costs, a simplified process, and instant approval – did not inspire the majority of respondents to be more interested in having a digital financial identity.
  • Large financial institutions and the U.S. government are most commonly seen as the institutions that should manage digital financial identities, and they are seen as being able to keep information safer than other organizations can.

Figure 2. About one-half of Americans believe large financial institutions or the U.S. government should be in charge of creating digital financial identities (click image to view full size)

Who should be in charge of creating digital financial identities?


Most consumers currently have many digital identities, maybe even unknowingly. These identities were formed through various online activities designed for a single purpose or transaction, such as logging into their bank or social media accounts. Nevertheless, consumers have told us they are reluctant to adopt a digital financial identity. This is not surprising. Identity theft is a costly and widely experienced problem, with more people affected every year. At the same time, we might infer many consumers do not know or believe in the potential benefits of a robust digital identity system – one that is used across multiple activities and controlled by the consumer – particularly compared to the current system.

Consumer concerns need to be thoroughly and thoughtfully addressed to win the trust necessary to encourage the adoption of a standardized and widely usable digital identity that applies to financial, medical, governmental, and other activities. Different groups such as The World Economic Forum1 have proposed the characteristics of a digital identity system that addresses the consumer security and safety issues we identified, summarized in Figure 3 below.

Figure 3.  Characteristics of a more secure digital identity system and benefits (click image to view full size)

Characteristics and Benefits of Digital Identity

Building a more robust and secure digital identity system is a more common occurrence outside the United States. In Norway, about 80 percent of the population use it. Various enhanced digital identity systems are being developed by established financial and technology organizations as well as many start-ups. In the United States, both financial services companies and consumers soon will likely confront the issue of having a better digital identity system. The creation of one, if done well, has the potential to reduce cyber-related risks and empower the consumer by making buying and renting a home safer and more efficient.

Daphna Meroz & Steve Deggendorf
Economic and Strategic Research Group

February 20, 2018

Opinions, analyses, estimates, forecasts and other views of Fannie Mae's Economic & Strategic Research (ESR) Group or of survey respondents reflected in this commentary should not be construed as indicating Fannie Mae's business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Although the ESR group bases its opinions, analyses, estimates, forecasts and other views on information it considers reliable, it does not guarantee that the information provided in this commentary is accurate, current or suitable for any particular purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts and other views published by the ESR group represent the views of that group as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.