The Financial System Inquiry has endorsed a move towards what it calls a "trusted digital identity" in the form of a single government identity credential that could be used by financial institutions, government agencies and others to perform customer due diligence.The FSI's interim report points out that a number of other countries have moved, or are moving to, such a system to streamline an aspect of online commerce that currently involves costly duplication.According to the report, Australia currently has no comprehensive approach to the issue of digital identities. "There is no single government identity credential; instead, the identity infrastructure is provided by approximately 20 government agencies managing over 50 million core identity credentials," it said."Traditional identity verification has involved sighting and collecting a person's original documents. In a digital environment this process is slow and onerous for customers, and expensive and cumbersome for financial institutions."However, it said Australia had the building blocks in the form of the Document Verification Service, being put together by the Attorney General's Department, and myGov, a sign-on access system for government services such as Medicare and Centrelink.While consumers might be surprised that some form of electronic Australia Card (an earlier initiative that met with strong opposition) may be under development, financial institutions would welcome a move to "efficient digital identity verification and authentication solutions."ING Direct's FSI submission said the Inquiry should look at overseas developments in online customer identification and verification.It said: "Electronic verification relies on the availability of and access to public databases. As customers move from simple savings accounts to more complex banking products, the identification requirements increase. There is customer resistance to complex on-boarding processes. Globally, other jurisdictions have met the challenge."And the Australian Bankers Association said in its submission: "One potential option that is operating in other countries is to have a centralised KYC [know your customer] service provided by a third party that is government approved and where customers can register once."The Inquiry also believes the creation of a trusted digital identity would assist the development of a more effective cyber security regime. It said the rise of e-commerce and widespread internet connectivity exposed financial institutions to increasing cyber crime. The Government's Cyber Security Strategy has not been updated since it was first formulated in 2009. A number of submissions raised concerns that it was out of date.Among all the submissions calling for a lighter touch at the regulatory tiller, there have been calls for greater intervention in the area of cyber-security.KPMG recommended that regulators be given the power to oversee the adoption of cyber-security standards by corporations that deal with or process large numbers of consumer-generated financial transactions.