Why SMEs are ready to embrace Digital Company IDs

Running a small business can often feels like an endless cycle of admin – submitting company accounts, filing tax returns, proving compliance, and sharing the same documents again and again with banks, insurers, and regulators.

With a third of small business owners saying they can't fit all their admin into working hours, the burden is clearly unsustainable. Each process is time-consuming, repetitive, and — in some cases — vulnerable to fraud, so it's unsurprising that research from the Centre for Finance, Innovation and Technology (CFIT) suggests SMEs are ready to embrace a solution.

In fact, 85% of UK SMEs have said they would pay for a Digital Company ID – a single, trusted profile that could replace the reams of paperwork with a secure, one-stop way of proving a business’s identity.

It's a striking figure that hints at how ready businesses are to adopt tools that save them time, improve security, and unlock faster access to financial products.

But what exactly is a Digital Company ID, and why might it matter so much for UK SMEs?

What is a Digital Company ID?

A Digital Company ID is a trusted, standardised way of verifying a business online. It would allow businesses to authenticate themselves quickly and securely when dealing with banks, insurers, government departments or even suppliers.

The appeal is obvious. Instead of repeatedly submitting paperwork for different applications — whether opening a business bank account, applying for a loan, or registering for a permit — a business could use a single digital identity. This would not only reduce duplication but also limit opportunities for fraud.

Why SMEs are so keen

CFIT's study suggests that SMEs see clear benefits. Fraud prevention was (understandably) the top motivator, with half of respondents saying a Digital Company ID would lead to more secure payments and fewer scams. Others highlighted time savings for tax returns and licence applications, while nearly two-thirds thought it could reduce costs when opening a bank account.

These are not abstract benefits. Fraud remains a major drain on the UK economy, with criminals stealing £1.17 billion through unauthorised and authorised fraud in 2024 alone. For small businesses, even a single incident can be devastating. Research from Visa shows 41% of UK SMEs have been fraud victims, losing an average of £3,808 – a potentially business-ending sum given that more than 1 in 6 UK businesses have £1,000 or less in savings.

A trusted ID system could give SMEs greater confidence when transacting with customers, suppliers and financial institutions.

The bigger picture: a growing industry

Digital identity is already a thriving sector in the UK. According to the Office for Digital Identities and Attributes figures, there are more than 250 firms active in the space, employing 10,000 people and generating over £2bn annually. With SMEs showing such strong appetite for digital company IDs, the growth potential is substantial.

CFIT itself has been working on the case for Digital Company ID for several years, pulling together industry coalitions and publishing reports on how it could help combat economic crime.

Importantly, CFIT’s research suggests that the benefits multiply as more companies sign up, creating a ‘network effect.’ Essentially, the more businesses that use Digital Company IDs, the more complete and reliable the system becomes, making it easier to spot fraudulent applications and harder for bad actors to slip through the cracks. 

Such widespread adoption would also create a stronger foundation for data-sharing between legitimate institutions, leaving fraudsters with fewer vulnerabilities to exploit.

What this means for entrepreneurs and small business owners

For business owners, the rise of Digital Company ID could bring practical changes in the near future. Applying for business insurance would become even simpler, with insurers able to verify information instantly. Getting approved for a business credit card or a savings account could happen in seconds, since providers would have greater trust in verified company details.

Beyond convenience, digital identity could unlock faster access to finance, giving SMEs more flexibility to seize opportunities and scale. For businesses in heavily regulated sectors like financial services or healthcare, the savings could be significant.

What to watch out for next

The momentum around Digital Company IDs is building. Government policy is actively supporting this shift, with recent legislation paving the way for trusted digital identity services and tools like the GOV.UK Wallet. CFIT’s working groups are due to publish recommendations later this year on building prototypes and defining governance standards – steps that will be crucial if SMEs are to feel confident in adopting the system.

For entrepreneurs, it’s undoubtedly worth keeping a close eye on developments. Just as digital bookkeeping transformed accounting and online banking became essential, digital identity looks set to become another tool that no competitive SME can afford to ignore.