The shift towards digital identity verification is well underway globally, and in Australia, a government-led push for a national digital ID framework is gaining traction. But will it deliver a seamless and secure experience, or just add another layer of complexity to an already frustrating process? And more specifically—what does it mean for superannuation?
What is digital ID?
At its core, a digital ID is a way to verify identity online without the need for physical documents. The idea is simple: rather than entering personal details or uploading scans of passports and licences, individuals could verify themselves using a secure, app-based system.
The Australian Government Digital ID System (AGDIS) is central to this push. Under the Digital ID Act 2024, a framework is being established to expand the use of government-backed digital IDs, with private sector participation expected in the coming years. The government’s myID app (formerly myGovID) serves as the primary gateway for creating and managing digital identities, though other private providers may eventually offer alternatives.
For now, participation in the government’s digital ID system is voluntary. Whether it becomes widely adopted—or remains just another option in an already fragmented identity landscape—remains to be seen.
Digital ID in superannuation: A practical solution?
Superannuation funds deal with identity verification at every stage of the member lifecycle:
• Withdrawing funds.
• Rolling over to a self-managed superannuation fund (SMSF).
• Searching for lost super.
• Starting a pension.
• Updating key account details.
Currently, these processes rely on a mix of document checks, cross-referencing databases, and, in some cases, members physically certifying and submitting ID documents. It’s not just cumbersome—it’s a security risk.
Digital IDs could change this. Rather than funds handling and storing sensitive documents, they could verify members instantly through a digital ID system, reducing friction for members and lowering the risk of fraud. Given the sheer volume of identity-related transactions in superannuation, even marginal efficiency gains could translate to significant cost savings.
The potential benefits extend beyond convenience:
1. Security – Digital ID systems can incorporate biometrics and cryptographic verification, reducing the risk of identity fraud.
2. Compliance – With increasing regulatory scrutiny on AML (Anti-Money Laundering) and KYC (Know Your Customer) processes, a secure, standardised ID system could help funds meet their obligations more effectively.
3. Fraud Prevention – By eliminating the need for funds to store copies of passports, licences, and other sensitive documents, the attack surface for cybercriminals is reduced.
Barriers to adoption: What’s standing in the way?
Despite its promise, the road to widespread adoption of digital ID in superannuation is far from straightforward.
1. A critical mass problem – For digital ID to work seamlessly, both consumers and businesses need to be on board. But until enough businesses accept digital IDs, individuals have little incentive to create one—and until enough individuals have digital IDs, businesses have little incentive to implement the infrastructure. It’s a classic chicken-and-egg dilemma
2. Trust and privacy concerns – Digital ID systems centralise identity verification, which inevitably raises privacy questions. Who has access to the data? How is it stored? What safeguards exist against misuse? Trust in government-run digital infrastructure isn’t universal, and any perceived overreach could hinder adoption.
3. Regulatory and operational hurdles – Even if super funds are keen to adopt digital ID, legacy systems, integration challenges, and regulatory uncertainties could slow progress. Meanwhile, funds will still need to support traditional verification methods for the foreseeable future.
4. Security Paradox – Digital IDs offer stronger security features than traditional ID verification methods—but only if widely adopted. If funds must continue accepting physical documents alongside digital IDs, some of the security benefits are diluted.
What’s next?
Digital ID could be a game changer for superannuation—but only if it’s implemented effectively and adopted at scale. The potential to improve security, reduce costs, and streamline processes is clear. However, until the industry moves beyond pilot programs and tentative trials, digital ID risks being yet another promising initiative that struggles to gain real traction.
For super funds, the real question is not if digital ID will take off, but when—and whether they should wait for widespread adoption or invest in the infrastructure now. Because while digital ID might not bring back the joy of being asked for proof of age, it could make accessing and managing superannuation accounts a whole lot easier.
This article was produced as part of The Quarterly – Q2 FY25
For more information about anything you’ve read here, or if you have a more general inquiry, please contact us.
Key Contributors:
Kevin Fernandez is General Manager, Market Strategy and Propositions at Novigi, and is based in the Melbourne office.
Sophie Coianiz is an analyst in the Market Strategy and Propositions team at Novigi, and is based in the Sydney office.