Digital identity: key trends driving the adoption of new technologies
By Anais Descleves - 04 February 2022
Since the pandemic erupted, digitalisation has been considered the ultimate solution. Indeed, it allowed people to carry on with their activities and stay in touch. A growing number of people had to create their digital identity to navigate through the digital space. Individuals, governments and companies share a common interest in having trustworthy identity verification systems for efficient service delivery and personal data security purposes.
Digital identity solution market revenue worldwide is expected to reach $49.5 billion in 2026, almost double that of 2020 (Statista). Startups are responding to the growing demand by bringing solutions to make digital identity creation, usage and management easier and safer.
A desire for a smoother and safer user experience
2021 showed that the world has gone (almost) completely mobile. More than half of global online traffic is already mobile-based. Meanwhile, people increasingly need to prove their identity to participate in social, political, economic and cultural life. More and more financial institutions, governments, travel agencies and healthcare providers are adopting new digital identity solutions. Therefore, people are looking for the easiest and safest options to achieve those ID checks and get the best customer experience possible.
The main use cases related to digital identity are concentrated in the banking sector. Digital identity makes it easier to make transactions and check account balances online. It is not compulsory to use physical documentation and face-to-face meetings anymore. Banks are entitled to provide digital identity services thanks to their investments in secure authentication technology and KYC processes. However, banks must improve their digital offerings without compromising user safety. According to Statista, mobile banking fraud has increased by 41%, incurring financial losses valued at $21.6 million. So financial institutions are undeniably on the front line.
Beyond banking applications, digital identity technologies are also a must-have for governments. Covid-19 has accelerated the digitalisation of government services and, as a result, citizens have had to embrace technology. Governments accelerated the dematerialisation of public services to enable contactless, rapid and high-quality service delivery. Indeed, govtech is operations-oriented and seeks to improve internal efficiency within a government. We can take the example of the French govtech application TousAntiCovid (i.e. All Against Covid). It contributes to the fight against the pandemic by detecting contacts at risk of transmission via Bluetooth or QR code scanning. But more importantly, it stores vaccination certificates and Covid-19 tests, as a digital wallet would do.
Development of new technologies for identity checks
More recently, we saw the development of solutions combining biometrics and blockchain for digital identification.
With a world moving towards a mobile-first approach, biometric technology applications are expanding. It is a quick and reliable way of identifying and authenticating individuals. Biometric systems can be physiological, i.e. identifying unique facial features, fingerprints, vein patterns, iris or DNA. They can also be behavioural like analysing a person’s signature, keystroke patterns or voice. Early Metrics’ database of 4000 rated startups reflects this wide variety of biometrics – with examples like FinGo, which uses vein pattern mapping, and PayByFace, which leverages facial recognition for payments.
All in all, the three most commonly used biometric techniques are:
- facial recognition
- voice recognition
- and fingerprint scans.
Blockchain is a decentralised certification system increasingly being considered for the deployment of secure digital identity schemes. Indeed, it encrypts the data in the different blocks of a chain. It makes it challenging to tamper with the information stored in it. Blockchain can also enable users to have better control over their own identity. Indeed, organisations can use digital ID information only with a user’s consent. This technology could contribute to building a self-sovereign identity. They can decide when and with whom to share information.
New solutions are needed to safely manage digital identity
People used to consider the digital space as an open field of freedom. However, it is the field of many malpractices like organised payment fraud and identity or personal data theft. Securing digital identity is therefore a key element in establishing trust in an increasingly digitally connected world.
Meanwhile, many companies now rely on personal data to do business, either through data monetisation or advertisement. With the rise of big data and the internet of things (IoT), the concept of data monetisation has gained in popularity. The volume of data generated by individuals every day is astronomical, mainly thanks to sensors and other web applications. It hasn’t taken long for companies to realise that that data could provide invaluable insights, therefore boosting the data analytics market. While data monetisation has many benefits for companies, it comes with its own set of challenges.
The sale and exchange of data are subject to a solid governance framework. This is for example the case with the European Union’s General Data Protection Regulation (GDRP). This regulation outlines some procedures organisations need to follow to ensure data protection. GDPR stipulates that you need to protect data and eIDAS provides the technical requirements for doing so. The eIDAS regulation makes the interoperability of digital identities for electronic exchanges mandatory since September 29, 2018.
As one leading solution providing security and feasibility doesn’t exist yet, startups have been multiplying to present different offers that would help respond to the current situation. For instance, Serendptech (rated by Early Metrics) offers a mobile identification solution based on identity documents. It develops a software development kit (SDK) and machine learning algorithms.
Metaverse and Web 3.0 will further push the adoption of digital identity
The need for a reliable and secure digital identity has increased further with the emergence of the metaverse and Web 3.0, the next iteration of the internet. Mark Zuckerberg defined the metaverse as “an embodied Internet that you’re inside rather than just looking at”. While Web 3.0 features more decentralised technologies such as blockchains, the metaverse allows one to jump from the real world into a fully immersive virtual reality.
The line between real and virtual worlds are going to get blurrier, according to tech pundits. These new tech trends raise many questions about digital identity. How can we prove someone’s real identity if it hides behind multiple avatars? How can we know that something is “authorised” or “authentic”? New technologies like Self-Sovereign ID, Zero-Knowledge Proofs, and NFT might help address those issues.
Therefore, digital identity technologies will become essential in a digital world to know who individuals and companies are interacting with. However, it is critical to redefine the concept of digital identity in the metaverse environment as it is essential for its proper functioning.
Digital identities will be one of the key tools to provide “safe harbours” to operate in this volatile and uncertain environment. Collaboration between financers, large companies, governments and startups are also an important success factor of this fast-expanding ecosystem. Early Metrics helps drive meaningful collaborations, benefiting all members of the innovation ecosystem with transparent insights. Feel free to contact our experts if you wish to discuss these exciting opportunities with us!