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Identification refers to who a person is and whether they can prove it. Standard identity documents like national IDs, birth certificates, passports, voter IDs, and driving licenses generally exist in physical form. However, newer forms of remote authentication via digital platforms are gaining acceptance by national or local governments, private or nonprofit organizations, and individual entities as valid IDs.
\nBy their design, verifying details in an ID document against an individual’s application and photograph prove their identity and allow them to access a service. Verification of traditional forms of identification is easily achieved face-to-face with the individual. However, the situation gets complicated when they need to verify their physical self against a digital identity.
\nIn this article, we’ll look at digital identification, the risks, and how it can help with growth on an inclusion and economic level.
\nA digital ID is a digitized representation of legal identity, and unlike traditional paper-based IDs, digital identification allows for remote verification via digital channels. ID-issuing entities include national or local governments, nonprofit or private organizations, consortiums, or individual platform providers.
\nMany digital identification and authentication technologies apply, including username and password combinations, intelligent devices, RFID, security tokens, or PINs.
\nThe features of digital ID are:
\nAccording to a report, nations that implement and encourage the use of digital identities can potentially increase their GDPs between 3 and 13 percent. Moreover, the development is inclusive, where everyone has an equal opportunity to prosper economically.
\nHere’s how implementing digital identities produce economic growth:
\nDigital ID can play a role in unlocking noneconomic value and potentially bringing progress towards achieving the ideals of transparency and rights protection. Digital identification helps to promote increased and inclusive access to healthcare, education, and labor markets.
\nFurthermore, it can aid in safe migration and promote greater civic participation. A good example is Estonia, which delivers more than 90% of public services digitally. More than 30% of people vote online, and 20% say they would never vote at a physical polling station.
\nDigital ID could also help enforce rights enshrined in the law. For instance, in India, the right of its people to claim government-subsidized food from ration stores is protected. A remote ID system authenticates their identity instead of leaving the task to the discretion of local government officials.
\nThe political world and corporations continue to push for various digital ID initiatives to support transformation by ensuring secure online access to public services. Improved access to public services through electronic identification facilitates trade and economic growth.
\nA good example is the European Union, which adopted the eIDAS regulation that facilitates trust services, electronic ID, and the easy exchange of administrative documents throughout the region. The European digital identity, available to EU citizens and all European businesses, allows users to quickly access public services within any of the Union’s member states.
\nDigital identification can help to lower fraud rates in transactions across the private and public sectors. For instance, there may be decreased payroll fraud rates from worker interactions or lower levels of identity fraud in taxpayer, consumer, and beneficiary transactions.
\nThe most significant sources of value that digital ID offers to the government and the private sector are reduced fraud, cost savings, improved productivity, increased sales of various goods and services, and boosted tax revenue.
\nAt face value, these advantages appear to benefit institutions primarily. However, individuals are also likely to see value through lower prices, government revenue redirected toward social development, higher accountability of officials, and improved service delivery. Furthermore, while digital identity verification providers are not required by law to comply with the PCI standards (meant to protect cardholder data in financial transactions), most do, giving consumers the assurance that their PII is in safe hands.
\nThe fact that individuals are becoming savvier to the benefits of digital ID is seen with most consumers looking for banking accounts that come with essential security features such as Multi-Factor Authentication (MFA), among other digital identification features.
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The increased use of technology within the financial services sector raises questions about digital identity and ID verification platforms’ role in ensuring financial inclusion. These concerns are particularly keen when digital financial solutions and digital ID systems have come to the fore as drivers of economic development.
\nRobust and outcome-based digital identification assurance standards can help many who suffer from financial exclusion through a lack of access to traditional government-issued ID documents. These individuals can access digital identification credentials at less stringent identity assurance levels for appropriate low-risk applications and use the IDs to obtain financial services.
\nEvery great technology has its flaws, and digital identity is no exception. It has the potential for misuse and comes with a few pretty significant risks:
\nThe risks above mean that policymakers, platform providers, and organizations that use the digital ecosystem must grapple with the dangers of the connectivity and information sharing required by digital identification solutions.
\nBesides enabling social and civic empowerment, digital identification is critical for measurable and inclusive economic growth. Although most people are familiar with the apparent benefits of digitizing identification processes, it’s less well understood that private and public services, and the necessary identity verification to use them, are linked to individual progress and overall nation-building.
\nThrough sound design principles and policy enforcement, digital protects individual rights from abuse and creates economic benefits for states, institutions, and people.
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Think about what your purse or wallet looks like today. You probably have many different pieces of identification: driver’s license, work ID, insurance cards, buyer loyalty cards, membership cards, frequent flyer cards, and of course, credit and debit cards. It is time-consuming to sort through them to find the right one, and the risk of dropping one is ever-present.
\nThings get even more complex when you add digital identities. With a new username and password for nearly every site or application you use, it is easy to build a huge list of identities. Indeed, the average person has more than 100 passwords , and business employees have nearly 200.
\nKeeping track of all these identities is cumbersome and leads many users to adopt risky practices (e.g., duplicating passwords) just so they can remember them. There must be a better way, right?
\nThe answer lies in reusable digital identities.
\nReusable digital identities are verified credentials that a person can use both online and offline any time they need to authenticate who they are. These digital IDs may include a range of identifying information from unique ID numbers to birthdates, biometrics, citizenship information, and more. And, importantly for today’s post-COVID world, they can also include health information such as vaccination status.
\nGovernments and companies worldwide are investing heavily in reusable digital IDs, with countries across the globe launching electronic ID initiatives. For example, India now has over 1.3 billion electronic IDs for its citizens (over 99% of all adults).
\nThe adoption rate is also increasing rapidly. According to one study, the global reusable identification market will grow seven times larger in just the next five years, from just over $32 billion to nearly $270 billion.
\nIndividuals, businesses, and governments alike can benefit from reusable digital identities. And as technology matures, the upsides will only increase.
\nThe contents and requirements for different IDs vary widely. Reusable digital IDs offer an opportunity to standardize requirements, simplify information sharing and allow any organization, from national governments to small businesses, to work with a single identity.
\nGovernments and international organizations are already pursuing standardization efforts. In late 2021, the International Organization for Standardization and the International Electrotechnical Commission published standards for a common mobile driver's license (ISO/IEC 18013-5:2021). In the U.S., the National Institute of Standards and Technology recently updated its Digital Identity Guideline SP 800-63-4. And more work is ongoing.
\nNaturally, one driving force behind a single digital ID is convenience. Even with the widespread availability of password managers, many people struggle to keep track of all their identities. Surveys indicate that 33% of users have forgotten a password and tried to recover it. Having a single, trusted ID would offer individuals a much simpler, more streamlined experience.
\nInformation security and data privacy are a constant concern in today’s increasingly digital world, especially for highly sensitive personal information like healthcare status and financial data. A single verified ID decreases the need for people to constantly transfer their personal data to service providers, thereby exposing that data to hackers.
\nWith proper standards in place, individuals can also feel more secure that providers only receive necessary information. You may need to share one set of information when applying for different types of life insurance policies and very different information for a new bank account. Standards for reusable digital IDs can ensure appropriate restrictions on information sharing.
\nBusinesses must navigate a complex web of laws and regulations when it comes to consumer data protections. From HIPAA restrictions to the European General Data Protection Regulation to mobile payment security regimes like PCI-DSS when using mobile invoicing and payments, these often conflicting mandates can make compliance a difficult task.
\nReusable digital IDs will simplify compliance efforts by building in privacy-by-design. They will also simplify ongoing compliance by allowing for easier updates as laws evolve.
\nOf course, there are still some concerns and issues with reusable digital IDs - concerns that must be adequately addressed to ensure widespread adoption.
\nMaking reusable digital IDs generally accessible poses quite a challenge. Many people still lack access to the necessary technology. Focusing digital IDs on smartphones is one way to make them more accessible, as over 80% of the world's population has a smartphone.
\nBut technology is only one side of the issue. Verifying IDs also remains problematic, as the UK experienced when launching its ID verification platform. The UK government projected a 90% verification success rate but managed only about half that after four years. Organizations must apply reasonable verification standards to drive adoption.
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A single, consolidated ID will naturally be an attractive target for cybercriminals. Already, hackers are effectively faking digital IDs, so robust security protocols must exist to protect reusable digital IDs.
\nThere will be questions about federating so much crucial data in one location, just as there has been debate about using password managers. But the overall benefits, especially with proper security provisions in place (not just encryption and multifactor authentication methods, but also strong passphrase requirements, much like those used by cryptocurrency wallets), will far outweigh the risks.
\nOver the years, consumers have grown skeptical about effective interoperability between systems, providers, governments, and applications. So, in addition to general security concerns, there is a level of distrust that a single ID will actually work. Reusable digital ID proponents must show that they can work and work well to reach a critical mass of users.
\nConsumers, businesses, and governments alike need an easier way to deal with ID verification. Reusable digital identities are the next stage in the evolution of authentication, providing a better customer experience and simplifying business compliance efforts as well as overall ID administration needs. Their use will grow substantially in the coming years to everyone’s benefit.
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