Amid the pandemic-fueled surge of online services, organizations require secure solutions to safeguard digital interactions. These solutions must be uniform, interoperable, and fortified against security threats.

Although the digital identity ecosystem has garnered significant attention and investment, many organizations remain uncertain about its potential for authentication and authorization required for B2B and B2C transactions.

They still wonder if digital ID can help reduce cost of operations and transfer data risks.

Limited or lack of understanding of the global Digital ID ecosystem and its varying approaches across countries handicap businesses in defining the potential benefits Digital ID can bring to customer interactions and overall business management.

In addition, key obstacles exist in balancing customer privacy (including the right to be forgotten), data security, and regulatory requirements while pursuing desired end-user experience and high customer adoption.

Digital ID has many dimensions, and its ecosystem's sustainability lies in the key principles it is built on. Understanding the digital identity ecosystem and its responsibilities is crucial to formulate an approach to adopt it. Also, focusing on key success factors drives digital ID adoption.

Before embarking on the digital identity adoption journey, it is essential to assess your readiness. It is also necessary to understand the risks and challenges. Specific steps to digital ID adoption can help realize the potential of digital identity and enhance the customers' experience.

Manish Jain

Principal Research Director

Analyst Profile

“I just believed. I believed that the technology would change people's lives. I believed putting real identity online - putting technology behind real identity - was the missing link.”

- Sheryl Sandberg (Brockes, Emma. “Facebook’s Sheryl Sandberg: who are you calling bossy?” The Guardian, 5 April 2014)

Sometimes dismissed as mere marketing gimmicks, digital identity initiatives are anything but. While some argue that any online credential is a "Digital ID," rendering the hype around it pointless, the truth is that a properly built digital ID ecosystem has the power to transform laggard economies into global digital powerhouses. Moreover, digital IDs can help businesses transfer some of their cybersecurity risks and unlock new revenue channels by enabling a foundation for secure and efficient value delivery.

In addition, digital identity is crucial for digital and financial inclusion, simplifying onboarding processes and opening up new opportunities for previously underserved populations. For example, in India, the Aadhaar digital ID ecosystem brought over 481 million1 people into the formal economy by enabling access to financial services. Similarly, in Indonesia, the e-KIP digital ID program paved the way for 10 million new bank accounts, 94% of which were for women2.

However, digital identity initiatives also come with valid concerns, such as the risk of a single point of failure and the potential to widen the digital divide.

This research focuses on the verified digital identity ecosystem, exploring the risks, opportunities, and challenges organizations face relying on these verified digital IDs to know their customers before delivering value. By understanding and adopting digital identity initiatives, organizations can unlock their full potential and provide a seamless customer experience while ensuring operational efficiency.

1 India Aadhaar PMJDY (https://pmjdy.gov.in/account)

2 Women’s World Banking, 2020.