Why Governments Are Embracing Digital Identity
Before the events of 2020 called a halt to face-to-face collaboration, the World Economic Forum Annual Meeting in Davos, Switzerland, was one of the biggest events on the international calendar. During the previous two meetings in 2018 and 2019, digital identity became a discussion topic high on the agenda due to its role in unlocking new economic value for governments of developed and developing countries alike.
Now that the fallout from the global pandemic continues to unfold, the imperative for digitalization is more dominant than ever before. So it’s unsurprising that many governments are now researching and developing their own national digital identity schemes.
Governments Ramping Up Digital Identity
In the European Union, the Electronic Self-Sovereign Identity Lab (ESSIF) is providing up to €5.6 million ($6.8 million) in funding to projects that can make a meaningful contribution towards furthering the implementation of self-sovereign identity solutions across the bloc.
Individual governments in the UK, Australia, and other countries are also progressing their own digital identity efforts. In September, the British government committed to strengthening digital identity delivery and policy across the country. The move came following the need to verify 1.4 million people with no prior digital ID credentials needing to pass through the government’s income support scheme implemented in response to the pandemic.
The Digital Transformation Agency of the Australian government has a branch dedicated to a nationwide digital identity scheme. It’s currently tasked with a consultation exercise working with businesses and members of the public to put in place the necessary legislation to underpin the scheme.
Other countries have already progressed to the implementation stage. Estonia, perhaps one of the most progressive nations in digitalization and identity, has been operating a digital identity system complete with electronic signatures for several years now. Ninety-eight percent of Estonian people have their own government-issued digital identity card, allowing them to interact with services contactlessly and remotely.
The more cynical or less technologically-minded may argue that the current system isn’t broken, so why does it need fixing? But there are plenty of issues with using physical documents, along with the economic benefits for governments in switching to digital identity solutions.
The Challenges of Physical Identity Documents
The problems with physical IDs are legion. Firstly, they’re easily lost, damaged, or stolen. They may be fraudulently duplicated, or their issuance can even be subject to interference by corrupt officials. They either require an individual to be present in-person to issue or involve postage or courier services, introducing yet more opportunity for documents to be lost or misappropriated. They can also be expensive to produce.
Perhaps one of the most pressing issues is that physical identity documents simply no longer fit with the way we interact with the world. Increasingly, we register for goods and services online. For instance, to open a bank account, the bank requires that we submit a scan or photograph of our identity documents to comply with anti-money laundering legislation.
However, as arduous as this process may seem for customers, it creates a far bigger headache for banks. A survey among UK and German banks conducted by analytics software company FICO found that manual validation processes are the most significant challenge faced by over 50% of respondents when establishing customer identity based on physical government ID documents. Time, cost, and duplication of effort were also flagged as problematic by over 30% of respondents.
Despite the challenges of physical documents, switching to a digital identity solution comes with its own set of challenges for governments.
The Challenge of Privacy and Centralization
Citizen’s privacy concerns are one of the most critical challenges facing governments looking to implement a digital identity system. The UK provides some interesting case notes on previous efforts to introduce a nationwide ID system. Scrapped in 2010, it proved to be too controversial among citizens, resulting in the country becoming one of the few in Europe that doesn’t operate a national ID card system.
The issue is rearing its head once again with the UK’s investigations into a digital identity system. However, the emerging response to the coronavirus pandemic has also revived alarm that governments may go further than necessary in monitoring citizen’s personal data.
The pandemic resulted in the British government establishing emergency powers, under which it has engaged in data collection activities using private companies. The data in scope extends far beyond what the average person may imagine is needed for fighting the spread of a virus. For instance, credit ratings, social media data, and utility bills have all been collected and analyzed.
The issues that this presents are many and complex. For instance, governments and private companies collect this data and store it on centralized servers under their control. Doing so means it may become easy prey for hackers, opening the doors for identity theft on an unprecedented scale.
Another concern is around future intentions. Data can be harvested today for one seemingly necessary or innocuous purpose. But once it’s sitting under the control of a government or company, they can easily use it again for any other purpose without the individual’s knowledge or consent. It’s all well and good to point out the existence of legislation such as the GDPR, but legislation can only help after the fact, once an incident has taken place.
The Case for Self-Sovereign Government-Issued Digital Identity
Self-sovereign identity (SSID) solutions offer a way out of the maze of privacy concerns thrown up by government-issued digital IDs. If citizens have control over their data, to whom they give it, and how it is used, then there’s a far greater chance that the issue avoids becoming a political hot potato. Citizens are more likely to accept an SSID solution, and governments and private companies can remain compliant with legislation such as the GDPR.
An SSID solution based on the blockchain can meet all of these requirements. With a blockchain account, a user is equipped with a set of cryptographic keys, unique and private to them. The private keys offer the only way to authorize the use or storage of data.
Furthermore, innovations in blockchain technology and cryptographic techniques provide the means to secure digital identities and prevent misuse by governments or companies.
Now, the individual or entity can transact on the blockchain with complete privacy. Nobody can ever see their ID, as it’s held off-chain. However, anyone transacting with that user can verify any aspect of their on-chain proofs by making a request. So, for instance, if the user wants to rent a car and the leasing company needs to verify their driver’s license. The user can authorize this verification. The leasing company receives an assurance that the user has had their driver’s license confirmed as legally valid by the identity provider, but without having to hand over a copy of it.
Similarly, if someone wanted to purchase age-restricted goods via an online website, the vendor could verify that they are old enough without seeing their birth date. Or, if they wanted to apply for a loan, the lender could check that they had a clean credit rating without having to see their financial history. The individual always retains complete control, deciding who gets to verify which parts of their identity and for what purpose.
The benefits for governments in switching to a digital identity solution are many and extensive. However, national and business leaders also recognize the need for “good” digital identity systems that empower citizens to take control of their own data and how it’s used. Therefore, the ultimate question is not when digital identity will arrive, but how governments will choose to implement it in a way that’s beneficial for the economy but also good for its citizens’ rights to privacy and data security.
