Digital Identity: Who Needs It, Who Wants It and Why?

The last time you were asked to produce your birth certificate, you most likely rolled your eyes and thought, “We’re still doing that?” Even as much of the world has moved online, proving who we are is often still an analog process that involves showing your government-issued records, remembering passwords and security questions, or filling out CAPTCHAs.  

Digital identity, which has the potential to change these processes, is both the ability to authenticate who we are online safely and seamlessly – and the tools and services that make it happen. This can make it easier to navigate the digital world, reduce the costs to buy and sell online, and help people who lack formal proof of their identity access essential services, powering economic gains across the globe.

Some countries, companies, and organizations have already adopted digital identity services to make this happen. Here’s what you need to know.

If we’re already online, don’t we have a digital identity?

Yes, basic building blocks of your digital identity exist online already. But establishing your identity with each provider — or even for each interaction — is inconvenient and time-consuming. The typical person now manages 100 digital logins, each with its own kind of credentials.

The pandemic has accelerated the shift to digital, deepening the need to prove who we are online — when we’re opening a new account at an online retailer, taking a test virtually, or checking in for a doctor’s appointment. It’s an annoyance at best. At worst, sharing personal data online can expose us to identity fraud, which is on the rise. In the U.S. alone, 49 million people fell victim to identity fraud in 2020, costing them about $56 billion, one study showed.

The threat could get even worse, as the Internet of Things leads to billions of devices in the coming years, each of them a connection that may require some form of verification that could also present a security issue.

What kind of data is needed to establish a digital identity?

That depends on who is asking. Your digital identity could include traditional forms of your ID that you may have scanned and downloaded online, like a digital version of your driver’s license, but it also could include an array of data unique to you — from your physical biometrics, such as a live selfie, to the dynamic information associated with your devices, such as your IP address and location, to behavioral signatures, such as the way you hold your phone or how fast your type your name. All these data points can be packaged to let you verify who you are and to easily authenticate yourself whenever you access a digital service or account.

Australia’s Deakin University had already been looking at a digital identity program for its students when the pandemic forced schools to shut down. Officials needed a way to verify the identity of students taking exams remotely so Deakin students set up their digital identity with Australia Post’s Digital iD app. When they logged into their exam portal, a QR code was generated that opened the app, where students then gave permission to share certain details using Mastercard’s integrated secure ID service to verify themselves.

What are the benefits of a digital identity service?

They include faster, streamlined access to your online life without unnecessarily sharing personal data.

You could use a digital identity service to purchase an age-restricted product without showing your date of birth or renting a car without having to share your driver’s license number. Using digital identity, government agencies could cut down on fraud and streamline how they provide their citizens with digital services, such as government aid or small business loans. Health care providers would be able to share data on their patients much faster in medical situations where time is of the essence.

There are a billion people in the world that have no formal proof of identity. Would digital identity help them?

For many people, the ability to physically document their names, addresses, birthplaces, and the like maybe even more difficult, if not impossible — and it can shut them out of the digital economy or prevent them from accessing basic services. Without an easily confirmed identity, people have trouble getting a bank account or a mobile phone SIM card.

For these billion people, the lack of easy verification inhibits both personal financial security and stunts economic development in their communities. They “are effectively invisible to providers of services and face a fundamental barrier to meaningful participation in their society and economy,” according to the World Bank’s Identification for Development program. They are cut off from the things many people take for granted, like the ability to open a business or enroll in school.

So what’s holding digital identity back?

To some extent, this is already happening. Biometric identification such as our fingerprints and faces already helps us to secure our phones and confirm access to many services, and will likely provide the basis for initially establishing a standardized digital identity.

Research shows that people don’t want to trade their privacy and control over their data for convenience and that 9 out of 10 would trust a company that commits to data responsibility principles. That indicates that the services that will gain traction are those with foundational commitments to privacy and their consumers owning and maintaining control of their identity.

And this is likely to be bolstered by regulation: The European Union, the U.S., and other countries are beginning to establish regulatory frameworks around digital identity — not only to ensure the technology can be widely used but to safeguard privacy for consumers. Critically, they can also establish that consumers will have control over their data, with whom they share it, and for what purposes. It would make proving who we are easier, but also protect us and our data at the same time.

Source: Mastercard