The Road to Digital IDs For All Relentlessly Marches On: Pros and Cons

As governments worldwide prepare to advance their digital identity (ID) rollouts in 2024, various companies are developing solutions to create ecosystems to support digital identity management and digital payments.

Digital ID systems store the information that establishes a person’s identity in digital format and provide credentials as proof of that identity. This allows individuals to prove their identity online — to government agencies, financial institutions, and so on, without having to provide a physical ID card, passport, or driver’s license.

Digital identity verification reduces paperwork, speeds up processing, and reduces the risk of identity fraud. It also increases the convenience of public services such as healthcare, welfare, and licensing for users.

Governments are leading the rollout of digital ID systems, but in the future, digital ID is expected to expand into consumer services by enabling digital payments and contracting.

Several countries have passed legislation in recent weeks to introduce or refine their programs.

Digital IDs Rolling Out

In November, the European Parliament and the majority of its member states reached a provisional agreement to establish the European Digital ID (eID), the bloc’s first central and fully digital identification system.

Australia is in the process of expanding and upgrading its digital ID, Indonesia has amended its legislation to introduce a digital ID for authentication and access to government services, and Malaysia started enrolling citizens in its National Digital ID (NDID) on December 1, 2023.

Burundi aims to issue residents with biometric identity cards before its election in 2025. The move to replace paper documents is considered crucial to preventing electoral fraud in the East African nation.

Digital ID platforms are at the forefront of the global shift towards digitizing and modernizing public services.

Digital wallets enabled by a digital ID are key to expanding financial inclusivity and could prove to be a killer app for blockchain technology.

Recognizing this, the Cardano Foundation, which develops the Cardano blockchain, has launched its W3C-compatible mobile wallet, which supports multiple identity and credential standards to manage self-sovereign identities across blockchain networks.

The wallet integrates key event receipt infrastructure (KERI) for interoperability in various future use cases.

The progress governments are making in rolling out their schemes is accompanied by various companies launching platforms and wallets.

The global market for digital identity solutions was valued at $27.51 billion in 2022 and is forecast to expand at a compound annual growth rate (CAGR) of 17.2% from 2023 to 2030, according to Grand View Research.

From Passports to Payments

Global payment firm Visa has recently signed a collaboration deal with Swiss biometrics and digital identity management company TECH5, focusing on developing and enhancing digital government ecosystems.

The two firms will develop a roadmap encompassing a series of initiatives and projects to establish a foundation for advancing digital payments and digital identity management powered by self-sovereign identity (SSI)-based digital wallets.

They aim to design and implement digital government ecosystems in selected countries, develop a SuperApp and enable Visa card credentials for citizens and non-residents through multiple digital channels, and expand card acceptance for government payment programs across platforms.

They also plan to cooperate in drafting digital payment regulations and initiate programs for financial literacy and digital inclusion.

TECH5 offers technology components and identity wallet infrastructure, including biometric software development kits (SDKs), software platforms for contactless biometric capture and matching, and digital ID issuance and management.

They can be deployed for integration with Visa payment services to support the implementation of digital public infrastructure and e-commerce marketplaces nationally and in economic zones where services can be implemented cross-border.

Visa is also working with Nigerian technology services provider e-Gate and the Nigerian government to issue citizens with digital IDs and unified biometric payment cards that can be initially used in healthcare and agriculture.

As of August 28, 2023, Nigeria had issued a biometric National Identification Number (NIN) to 102.39 million citizens, according to the National Identity Management Commission.

No ID, Block a SIM

The Nigerian Communications Commission has ordered the country’s telecom service providers to block all SIM cards not linked to a NIN by February 28, 2024. The government has said the move is targeted at improving national security and enabled by the uptake of the digital ID.

US-based Trinsic, a provider of reusable identity infrastructure, has launched Trinsic Connect, which enables one-click identity verification and will support upcoming integrations with government ID schemes.

“The recent rise of AI-generated media, age verification, and trust and safety online are all driving the need for better forms of digital identity,” the company said.

“Today, users repeatedly photograph physical identity documents to prove who they are throughout the digital world. With Trinsic Connect, after users verify once, they can easily reuse that verification in the future.” Using passkeys removes the problem of users having to manage multiple keys instead of providing biometric authentication that encrypts data.

UK-based digital ID firm Yoti provides a digital ID travel card with age verification for Translink, Northern Ireland’s main government-owned public transportation provider, to allow 13- to 16-year-old students to easily verify their age to purchase discounted fares.

Yoti received ￡12.5 million ($16 million) in debt funding from HSBC and an additional ￡7.5 million from shareholders in December. That follows a ￡10 million investment in the company from Lloyds Bank earlier in 2023.

Privacy and Security Concerns

As governments roll out digital ID-based services, conservative lawmakers and cybersecurity specialists are sounding the alarm about the potential for fraudulent misuse of digital credentials and government control over citizens.

The WorldCoin blockchain project, backed by OpenAI chief executive officer (CEO) Sam Altman, has launched an upgraded version of its digital passport, World ID 2.0, designed to enable users to validate their unique human identity on the Internet to address “the imperative challenge of establishing personhood proof in the age of AI”.

The upgrade introduces Apps for integrations with major platforms such as Reddit, Discord, Shopify, Minecraft, and Telegram, allowing tailored levels of identity verification. WorldCoin’s ID system can also be used within government apps and services.

This raises concerns about governments’ access to real-time information on citizens’ online interactions.

Surveillance Nation

In November, more than 550 cybersecurity experts, researchers, and civil society organizations signed a joint letter warning that the EU’s proposed digital identity reform “radically expands the ability of governments to surveil both their citizens and residents across the EU by providing them with the technical means to intercept encrypted web traffic.”

The letter adds that although the legislation repeatedly refers to the need for the European Digital Identity Wallet to protect privacy and prevent profiling, it “still allows relying parties like governments and service providers to unnecessarily link together and gain complete knowledge about the uses of credentials in the new European Digital Identity System.

Given the broad intended uses of this system, which span all areas of life from health, finance, commerce, online activity up to public transport, we believe that failing to require both unlinkability and unobservability will severely compromise the privacy of EU citizens.”

And in countries where governments have frequently suffered data breaches, such as Malaysia, there are concerns about hackers’ potential to steal citizens’ personal data.

The Australian government, which aims to unify various previous ID schemes under a new system to be launched in 2024, has faced security issues to the extent that in 2020, security researchers warned the public against using its MyGovID because of design flaws.

And in the past three years, more than 40 data breaches have been reported by government agencies, according to a list compiled by Webber Insurance.

There may be some ways to go to convince enough citizens to trust government digital ID systems to reach widespread adoption.

The Bottom Line

Digital ID infrastructure providers are increasingly working with governments worldwide to incorporate their platforms and applications into public services to make it easier to verify citizens’ identities without piles of paperwork.

From public and financial services to telecoms and healthcare, digital IDs can increase efficiency and inclusivity. However, as various governments roll out digital ID systems in 2024 and beyond, they will need to address privacy and cybersecurity concerns to reach their uptake goals.