Smaller online booze retailers battle Digital ID cost hangover

The peak body for Australia’s $120 billion retail liquor industry has warned the federal government that smaller independent online merchants are being priced out of using digital identity to verify the age of prospective online purchasers, saying the technology may not be economically viable for some.

As draft legislation to enable the use of digital identity credentials is circulated across industry, key stakeholder Retail Drinks Australia has cautioned a paucity of digital identity providers and sky-high processing and integration costs could cause some booze retailers to ditch online sales.

The issue of digital identity is a burning platform for the online booze industry because of recent online age verification requirements in New South Wales for same-day online liquor sales.

The checks are largely aimed at stopping teenagers from hopping online and ordering a couple of slabs or a few litres of vodka to fuel an illicit party and are meant to do the same job as over-the-counter age checks.

The NSW requirements are regarded as the front-runner for wider online liquor regulations in other states.

“In New South Wales (NSW), online liquor retailers are legally required to verify the age of a customer at the point of sale using a provider accredited under the Trusted Digital Identity Framework (TDIF) for same-day alcohol deliveries,” an RDA submission on the Digital ID Bill 2023 and the Digital ID (Transitional and Consequential Provisions) Bill 2023 says.

“Retail Drinks supports the concept of digital identity and the overarching intention of the legislation in providing “individuals with secure, convenient, voluntary and inclusive ways to verify their identity for use in online transactions with government and businesses.”

“In expressing our in-principle support for the legislation, we however emphasise the practical needs of online liquor retailers reliant on digital identity solutions to verify the identity of their customers purchasing alcohol products,” the RDA submission continues.

And therein lies the rub. As banks and multinational payment schemes rush to put solutions in the market ahead of digital identity requirements for certain online transactions, industry is already reeling at the costs they are being hit with that are, based on RDA experience, as much as double that of the Document Verification Scheme (DVS) used for know your customer requirements.

“To date, the digital identity sector has been constrained by delays in providers receiving TDIF accreditation, with only a handful of providers becoming formally accredited. Consequently, this has meant that there are limited options for online liquor retailers seeking to adopt digital identity services thereby adding to the costs and inconveniences involved in this process,” RDA said.

“We have received anecdotal feedback from members stating that age verification services amongst currently accredited TDIF-accredited providers range from $0.50 to more than $2.00 per transaction.

“There are also significant costs involved in integrating digital identity verification services with an online liquor retailer’s IT system which add to the costs involved in adopting these systems.”

At two bucks a throw, age verification costs with a digital identity amount to 20% of a standard $10 delivery fee for a few boxes of wine, small wonder the industry is lukewarm on the price.

One of the main competition issues at play is that while major liquor retailers historically or currently aligned with the two major supermarkets can absorb such costs, they cruel their competitors, concentrating market power and driving up prices through a lack of competitive pressure.

It doesn’t help that the two main supermarkets are also major stakeholders in Australia’s domestic payments infrastructure, and run their own transactional switches, leaving banks to plunder the rest of retailers with hefty interchange and merchant service fees.

Liquor stores are also worried about privacy and who has access to transactional data and want the blanket ban on additional sharing of identity data welded into the legislation.

“Information such as a customer’s purchasing history or whether they have previously opted to self-exclude themselves from online alcohol deliveries is highly sensitive information which should not be used by identity providers in an unauthorised way,” RDA said.

“We therefore support the inclusion of Clause 55 in the legislation which prohibits an accredited entity using or disclosing personal information in their possession or control for marketing activities not related to their digital ID services.”

And who would want such information? Think insurers pricing for risk or less scrupulous investigators.

All this said, RDA does support digital identity, even having been a guinea pig. Like regulated many sectors they just want a level playing field where infrastructure remains affordable and competitive rather than distorted into a new opportunity to gouge.

It backs the ACCC’s regulatory oversight but wants to make sure the watchdog has a decent dental care plan in terms of funding.

“Retail Drinks supports the empowering of the [ACCC] with regulatory oversight of the digital identity sector. In doing so, we emphasise the need to ensure the ACCC is provided with adequate financial resources to ensure that it can sufficiently fulfil this role,” RDA said.

Ask yourself this: what would be your reaction if a physical liquor store owner tried to charge you $2 to look at your driver’s licence?

This article was first published by The Mandarin.