What is a digital ID?

Digital IDs can be authenticated over digital channels, unlike paper-based forms of identification such as driver’s licenses, passports and Social Security cards. Authentication can be carried out using tokens, PINs, passwords or biometrics. Digital IDs can be used to access banking, government, education and other services. The risk of using digital IDs for fraud and other illicit activity are legitimate concerns. But when security concerns are mitigated, digital IDs can allow more people to access government services and improve economic conditions for individuals and nations. Entities that can issue digital IDs include local and national governments, nonprofit institutions, private organizations and individuals. 

What are the benefits of a digital ID?

Digital IDs can allow more people to participate in the economy, have greater access to goods and services, reduce fraud and, by emphasizing digital technologies, lead to faster, efficient transactions. The World Bank estimates that out of the 7.6 billion people in the world, nearly 1 billion people who lack a legal identification, according to consulting firm McKinsey. There are 3.4 billion people who have a legal identification but have a limited ability to use it digitally. And there are 3.2 billion people who have a legal identification and engage in the online economy but can’t easily use their ID digitally. Digital IDs can help all of these groups by giving them a legal identification that permits them to efficiently participate in the digital economy. 

In addition to economic empowerment and fostering greater participation in the online economy, here are some other digital ID benefits that McKinsey cited. 

Banking the unbanked: Approximately 1.7 billion people lack access to financial services. Digital IDs enable them to open bank accounts and deposit and withdraw money, allowing them to participate in commerce. 

Increased GDP: Countries that implement digital IDs can reach economic value that’s between 3 percent and 13 percent of their GDP over the next 11 years. In emerging markets where there’s the potential for more people who require remote onboarding, GDP could increase by an average of 6 percent. In more mature markets, a higher level of assurance drives the benefits. Those markets could see GDP growth between 3 percent and 4 percent. 

Reduced government paperwork: The public sector could save 110 billion hours by spending less time handling paperwork and completing other manual processes. 

Faster customer onboarding: Customer registration could be reduced by 90 percent if digital IDs were used instead of making people fill out paper forms.

Decrease fraud: Using digital IDs has the potential to reduce global fraud by $1.7 trillion. In the U.S., fraud could be reduced by $56 billion. 

What technology is needed to use digital IDs?

The technology required for digital IDs — Internet connectivity and smartphones with biometric sensors — is already being used. An estimated 4 billion people are connected to the Internet and over a quarter of a billion connected in the last 12 months, according to McKinsey. Smartphones with biometric sensors are now common and people are accustomed to using this technology for authentication. Veridium found that people prefer to use biometrics instead of passwords to unlock their smartphones. 

Economic and technology developments could make digital IDs an option for more people. The price of smartphones with biometric sensors has decreased by 27 percent from 2010 to 2017, according to the World Bank. Meanwhile, by 2020 an estimated 4.8 billion devices will have biometric capabilities, leading to increased importance of mobile authentication and identification technologies, the World Bank predicted. 

What to consider before using digital identities

Before people and organizations start using digital identities, here are some points to consider.

Keep security in mind: People expect that their digital identity and the sensitive information it contains, which may include their home address, birthday or biometrics, will be securely stored. 

Don’t forget about user experience: A digital identity has to be easy to use. If people find it too cumbersome, they won’t adopt it. People want an experience that’s fast, seamless and usually able to be carried out on their own technology. For most people, this means allowing them to use their digital identities with their smartphones and biometrics.

Integrity is key: The verification and integrity of the digital identity must be created with a high level of assurance. People then can feel confident in their use of and creation of the digital identity.


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