The Boston Consulting Group (BCG) in their Liberty Global Policy Series defines a digital identity as, “the sum of all digitally available information about an individual.” These digital identities are essential to electronic transactions, online banking for example. Mobile and epayments are becoming progressively more common, and with the rise of these approaches taking the forefront, the necessity of secure and verifiable digital identities will only grow in response.
Improving ecommerce through digital identity
Digital identities have been influential in changing the way online transactions take place. According to a MyBank paper, authentications of payments are no longer exclusive, meaning that authentication occurs at the check-in – when the customer enters the site – rather than at check-out, as the customer submits payments. Payment information can be input once and saved, allowing the customer to return to the site in the future to shop without taking the time to give that information again, only to confirm their identity at check-in. This creates a more convenient and personalized shopping experience for the customer. On the merchant side, the advantage is that historical shopping data can be used to increase the shopping cart value and likelihood of additional, instinct driven purchases.
Overall, the entire process from selection to payment becomes a one-click confirmation rather than sequential steps to authenticate, provide credentials, details and confirm the payment.
Digital identity and financial transactions for eGov
These identities are useful not only in the private sectors, but also hold great potential for the public sectors. Government organizations have been able to fight tax-evasion, and have begun using citizen self-service portals by using digital identities. Italy is known for its tax evasion issues, and citizens already have tax identification numbers required for insurance, mortgage and other large transactions; the government is now using collected data to determine citizen annual spending in an effort to prevent tax evasion. These steps have increased tax revenues as well as lowered spending. Denmark is another example, a country which has one of the most advanced e-government programs in the world and generates €200 million in annual savings.
Privacy in digital identity
Consumer insights have revealed that along with the security and privacy of their data, convenience and greater control of how their data is used and shared are also important to them, including data that is collected and remembered versus being forgotten. One example of how this is currently being addressed is the General Data Protection Regulation which aims to allow individuals better control over how their personal data is used and shared. BCG has found that when given control over their privacy settings, individuals are more willing to share their personal information, which will set those companies that can provide this apart.
Security is a concern both for consumers and the organizations, but emerging technologies and safeguards are reducing the security risks. One example is biometrics, which uses information unique to each person that cannot be replicated or transferred. Laws and regulations have been put in place, or are scheduled to be in the next years, to ensure more security and privacy for consumers. Access to the Account stipulates that all third party providers must be licensed or registered, as well as supervised as payment institutions in order to operate. This ensures better safeguarding of consumer data. There are other statutes being considered or put in place to ensure transaction infrastructure. Physical forms of security for digital identities are growing as well. These include USB drive or a Smart Card provided by a digital identity service provider, which allow secure access to multiple sites and the ability to authorize transactions on these sites without the need for a new password and username at each site.
Provisioning critical for adoption
Digital identity is necessary for mobile and internet transactions to succeed in mass adoption, and their use is only set to increase. The problem lies in the limited provision of services that can assure universally verifiable and recognized digital credentials. When services can more widely verify a digital identity, the possibilities for electronic transactions, financial or not, will no doubt broaden.
The benefits of being able to verify online identities goes beyond banking and payments, accessing sensitive information securely, as medical records, is part of the envisioned use cases. The applications are extensive and a broad recognition is needed as support and use of online and mobile financial services is rising, the demand for digital identification services will increase as financial markets adopt the new payments model, and the world becomes cashless.
9 November 2023
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