Digital Identity in BFSI Market - Global Industry Size, Share, Trends, Opportunity, and Forecast, Segmented, By Offering (Solutions and Services), By Deployment (Cloud and On-Premises), By Identity Type (Biometric and Non-biometric), By Organization Size (Large Organizations and SMEs), By Region & Competition, 2021-2031F

Forecast Period	2027-2031
Market Size (2025)	USD 38.02 Billion
CAGR (2026-2031)	16.19%
Fastest Growing Segment	On-Premises
Largest Market	North America
Market Size (2031)	USD 93.55 Billion

Market Overview

The Global Digital Identity in BFSI Market will grow from USD 38.02 Billion in 2025 to USD 93.55 Billion by 2031 at a 16.19% CAGR. Digital Identity in the Banking, Financial Services, and Insurance (BFSI) sector refers to the digital credentials and validation frameworks used to verify the identity of individuals and entities for secure financial interactions. The market is primarily supported by the critical operational need to combat financial fraud, ensure strict adherence to Know Your Customer and Anti-Money Laundering regulations, and streamline customer acquisition through friction-free remote onboarding. These structural drivers are distinct from transient technological trends, as they represent fundamental requirements for regulatory compliance and risk management. According to the Identity Defined Security Alliance, in 2024, 90 percent of organizations reported experiencing at least one identity-related incident, highlighting the urgent necessity for resilient identity assurance mechanisms.

One significant challenge impeding market expansion is the rapid proliferation of AI-driven synthetic identity fraud, where criminals employ artificial intelligence to fabricate realistic composite identities that evade conventional verification controls. This complex threat vector creates a substantial barrier to growth by necessitating frequent, costly upgrades to security infrastructure and complicating the balance between rigorous fraud detection and user convenience.

Key Market Drivers

Escalating incidence of identity theft and financial fraud is the primary catalyst propelling the adoption of advanced digital identity solutions in the BFSI sector. Financial institutions are compelled to deploy resilient identity verification frameworks to mitigate staggering monetary losses and restore consumer trust eroded by sophisticated scams. The sheer volume of these financial crimes necessitates an immediate infrastructural response to close security gaps. According to the Federal Trade Commission, March 2025, in the 'Consumer Sentinel Network Data Book', consumers reported losing more than $12.5 billion to fraud in 2024, underscoring the urgency for stronger validation mechanisms. This threat landscape is complicated by the rise of composite identities; according to Au10tix, July 2025, in the 'Top Fraud Trends for 2024-2025' report, synthetic identity fraud grew by 45 percent in 2024, highlighting how criminals combine real and fabricated data to bypass traditional screens.

Integration of AI and biometric technologies in security frameworks represents the second major driver, reshaping how institutions authenticate users. As banks transition to digital-first models, they are leveraging artificial intelligence to detect anomalies and implementing biometrics for friction-free access. However, this technological integration is also a critical response to the weaponization of generative AI by fraudsters who utilize deepfakes to circumvent standard liveness checks. This adversarial dynamic is driving rapid investment in defensive AI capabilities. According to Sumsub, June 2025, in the 'Q1 2025 Identity Fraud Trends' report, deepfake fraud surged by 1,100 percent, signalling that generative AI is being used to bypass facial recognition, thereby mandating continuous innovation in biometric defense layers.

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Key Market Challenges

The rapid proliferation of AI-driven synthetic identity fraud presents a substantial barrier to the expansion of the digital identity market within the BFSI sector. Criminal actors utilize artificial intelligence to construct realistic composite identities that effectively bypass standard verification controls. This evolving threat vector forces financial institutions to frequently redirect capital toward updating security infrastructure rather than investing in market expansion or new service adoption. Consequently, the recurring costs associated with countering these AI-generated profiles reduce the budget available for implementing broader digital identity frameworks.

The severity of this operational burden is reflected in recent industry projections regarding technological misuse. According to the Association of Certified Fraud Examiners, in 2024, 83 percent of anti-fraud professionals anticipated an increase in the use of artificial intelligence by perpetrators for fraudulent schemes. This trend necessitates the implementation of highly complex validation layers, which often disrupt the user experience. As organizations struggle to maintain a balance between rigorous fraud detection and friction-free onboarding, the pace of implementing new digital identity solutions slows, directly impeding overall market growth.

Key Market Trends

The emergence of interoperable reusable digital identity wallets is fundamentally reshaping customer onboarding and lifecycle management within the financial sector. Financial institutions are increasingly integrating mobile-based identity credentials that allow users to verify their identity once and reuse it across multiple services, significantly reducing friction during account opening and regulatory checks. This convergence of physical and digital attributes into a user-controlled mobile repository strengthens compliance frameworks by ensuring verifiable, tamper-evident credentials. According to HID Global, March 2024, in the '2024 State of the Security Industry Report', nearly 80 percent of organizations are projected to deploy mobile IDs within the next five years, reflecting a decisive industry-wide shift toward these portable, smartphone-centric verification models.

Simultaneously, the transition to passwordless authentication based on FIDO2 standards is rapidly rendering traditional credential-based security obsolete. Banks and insurers are aggressively adopting cryptographic passkeys to eliminate the vulnerabilities associated with shared secrets, such as phishing and credential stuffing attacks, while accelerating login processes. This architectural evolution moves the security anchor to the user's device, utilizing local biometrics or hardware tokens to authenticate sessions without transmitting sensitive data. The operational efficiency of this approach is substantial; according to the FIDO Alliance, October 2025, in the 'Passkey Index' report, organizations implementing passkeys have observed a 93 percent sign-in success rate, demonstrating the technology's capability to deliver superior access reliability compared to legacy authentication methods.

Segmental Insights

The On-Premises segment is currently emerging as the fastest growing segment within the Global Digital Identity in BFSI Market, driven by an intensifying strategic focus on data sovereignty and granular security control. Financial institutions are increasingly prioritizing on-premises infrastructure to comply with stringent regulatory frameworks enforced by authorities such as the European Union and various national central banks. This deployment model offers unparalleled oversight of sensitive customer data, effectively mitigating third-party risks associated with external hosting. Consequently, large banking enterprises are aggressively investing in on-premises solutions to ensure absolute compliance and fortify their cybersecurity defenses against sophisticated digital threats.

Regional Insights

North America maintains a dominant position in the Global Digital Identity in BFSI market driven by the extensive adoption of fraud prevention technologies across banking and insurance sectors. The region faces significant cybersecurity threats, prompting financial institutions to implement strict identity verification protocols. Additionally, regulatory frameworks provided by the National Institute of Standards and Technology establish rigorous guidelines for identity management. This strong focus on compliance and risk mitigation ensures a sustained demand for identity solutions to secure customer data and prevent unauthorized access.

Recent Developments

• In May 2025, ebankIT entered into a strategic partnership with Prove, a provider of digital identity solutions, to strengthen security frameworks within the digital banking sector. This collaboration integrated Prove’s cryptographic authentication and phone-centric identity intelligence directly into ebankIT’s omnichannel banking platform. The initiative was launched to equip financial institutions with advanced tools for streamlining customer onboarding and mitigating identity fraud without compromising the user experience. By leveraging these pre-integrated identity solutions, banks can rapidly deploy secure digital services, ensuring that customer identities are verified with high precision across various digital touchpoints.
• In October 2024, Entrust announced that Huntington Bank had selected its digital card solution to upgrade the financial institution's digital wallet capabilities. Through this collaboration, the bank integrated technology enabling customers to instantly push their debit and credit cards to third-party digital wallets directly from the mobile banking application. The partnership focused on streamlining the digital issuance process while securing customer identities during transaction provisioning. This implementation aimed to deliver a seamless and secure digital banking experience, aligning with the industry's shift toward instant issuance and contactless payment methods for modern banking customers.
• In September 2024, Mastercard announced the global launch of its Payment Passkey Service to enhance security in the digital payments landscape. This new service utilizes tokenization and biometric authentication, such as fingerprints or facial scans, to secure online transactions, effectively replacing traditional passwords and one-time passcodes. The solution was introduced to strengthen digital identities within the banking and financial services ecosystem by ensuring that sensitive payment credentials are never shared with third parties. The initiative was initially piloted in India through collaborations with major payment aggregators and banks, focusing on reducing fraud and improving the consumer checkout experience.
• In February 2024, Socure and Trustly announced a strategic partnership to provide a streamlined onboarding and "Pay by Bank" solution for merchants and fintech companies. This collaboration integrated Socure’s artificial intelligence-driven digital identity verification platform with Trustly’s open banking payment services. The joint offering was designed to accelerate customer onboarding by up to five times while ensuring robust compliance with Know Your Customer (KYC) regulations. By combining identity screening with payment processing in a single automated flow, the companies aimed to significantly reduce conversion drop-offs and mitigate fraud risks for financial institutions and regulated sectors.

Key Market Players

• Thales Group
• IDEMIA Group
• HID Global Corporation
• Jumio Corporation
• Entrust Corporation
• Cisco Systems, Inc.
• VeriFone, Inc.
• Microsoft Corporation
• IBM Corporation
• Okta, Inc

By Offering	By Deployment	By Identity Type	By Organization Size	By Region
Solutions and Services	Cloud and On-Premises	Biometric and Non-biometric	Large Organizations and SMEs	North America Europe Asia Pacific South America Middle East & Africa

Report Scope:

In this report, the Global Digital Identity in BFSI Market has been segmented into the following categories, in addition to the industry trends which have also been detailed below:

• Digital Identity in BFSI Market, By Offering:

• Solutions and Services

• Digital Identity in BFSI Market, By Deployment:

• Cloud and On-Premises

• Digital Identity in BFSI Market, By Identity Type:

• Biometric and Non-biometric

• Digital Identity in BFSI Market, By Organization Size:

• Large Organizations and SMEs

• Digital Identity in BFSI Market, By Region:

• North America
• United States
• Canada
• Mexico
• Europe
• France
• United Kingdom
• Italy
• Germany
• Spain
• Asia Pacific
• China
• India
• Japan
• Australia
• South Korea
• South America
• Brazil
• Argentina
• Colombia
• Middle East & Africa
• South Africa
• Saudi Arabia
• UAE