Market Insights

The Rise and Potential Impact of Digital Identities

February 28, 2017


The first form of identity or individual consensus records dates back nearly 4000 B.C., with the Babylonians. We think they primarily used this for determining how much food they would need per person. Not much has changed since the Babylonians – we still use a census to determine macroeconomic decisions such as domestic social welfare needs and foreign aid. How we conduct the census differs from country-to-country and region-to-region. In places like the United States, it is common practice to use surveys to determine population and demographics. However, in places like Papua New Guinea, we rely heavily on visiting each village and working with the tribal elders to verify the country’s population. In either case – a physical verification of an identification card, physical attributes (i.e., biometrics), or other proof of identity is required. We refer to these forms of identity as “analog.”

Up until now, analog identities have worked well for western civilization. With the rise of modern globalization and growth of e-commerce, businesses and governments are eager to find new and innovative ways to verify the identities of their new customer base – everyone, everywhere. The increase in attention may be useful for people who are often referred to as “the next billion users,” a Silicon Valley term for people living in and around the BRIC countries. As one of the many technologists who was tasked early on to verify these users, I came to the quick conclusion you need an identity to verify an identity. Obvious, yes; but often not a problem you think about growing up in a country where you’re issued a birth certificate at birth. With no legal identity to help verify themselves, millions of would-be customers are unable to use our products and services.

After falling face-first in my quest to verify the next billion users, I decided not accept the fact the analog method of identity verification was the only way to verify people. That decision led me to digital identity and the community of technologists, bankers, government officials, international development officers, and regulators trying to make it a reality.

A shift from analog to digital

During the summer of last year, One World Identity conducted a small survey of 50 people from around the world, ages 15 to 70. We asked two questions: “What criteria do you think of when you hear the question “Who are you?” and “What does identity mean to you? How would you define it?” We expected to receive similar responses between the two questions. For example, we expected to see name and passport paired with name and government issued identity. When we reviewed the responses, no one responded with the same answer for both questions. Solving for the gap between how we view ourselves and how we define identity is a critical first step when trying to build identity verification solutions. Without reconciling the two, we may be creating unnecessary confusion and friction throughout the process. If we manage to close the gap, we can make the process be and feel logical, and easy to understand.

Based on the survey, we broke the results into two distinct groups: tangible and intangible. For the tangible results, we created three sub-categories: government issued IDs (e.g., social security numbers, driver’s licenses), trusted third-parties (e.g., utility bills, bank statements), and biometrics (e.g., fingerprints, iris, DNA). For the intangible results, we created two sub-categories: digital & online (e.g., Facebook, LinkedIn, World of Warcraft), and personal backgrounds (e.g., birthplace, family history, hobbies).

Interestingly, the results did not vary by geography, but by age and generation. People who fall into Generation X and older typically associate with analog & tangible identities. While individuals who fall into Generation Y and younger usually associate with digital & intangible identities. These results make sense given the fact the Generation Y and younger group grew up in parallel with the rise of a digital lifestyle.

While the number of children born without a legal form of identification continues to increase, so too, does the number of people connected digitally via mobile. That means while the world does a poor job at ensuring analog identities are being created and maintained, a progression towards a digital identity is occurring naturally.

What can we do in a digital identity future and how do we get there?

Building a future with digital identities can help solve significant challenges such as improving financial inclusion, mitigating fraud and AML risks, as well as provide better macro socioeconomic data to predict global trends. We can build apps that allow us to have our identities be universally accepted, portable, private, and secure. Think about a time when you can show up to a new doctor’s office and tap your phone on a reader, sharing only the medical information you want to provide and never leaving your social security number jotted down on a piece of paper in a filing cabinet behind the receptionist. Think about a time when a doctor, an architect, a scientist, can escape their war-torn country and provide all of their credentials to their new home country without having to start over.

Before we can get there, we must all agree on a single set of open standards. Without universal standards, no single attestation service provider can exist. Without a single attestation service provider, a lack of trust may exist within the system, thus reducing the effectiveness of digital identities as a legal form of identity that can replace our current outdated analog system.

Although we have not achieved the dream state outlined above, we have come incredibly far in the past five years. From fraud risk mitigation, KYC and AML compliance, to IAM, and customer identity management & marketing, companies involved with digital identity today continue to push the boundaries of what has seemed possible.

This post was drafted in tandem with The Identity Economy: Evolving from Analog to Digital – a webinar featuring Travis Jarae, hosted by IdentityMind Global on March 1, 2017 @ 11 AM PST.