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The need for digital identity and the many ways forward

09 August 2017
Bram Nawijn

As money travels around the world faster and easier, many governments and INGOs are focusing on the need for digital identities. In fact, the World Economic Forum recently stated in one of their reports that financial institutions need to lead the way in creating digital identity systems. But so far, the process has been slow. As with other areas of technology, traditional financial institutions are slow to adapt. Fintech may be ready to make progress in this area, but for identity purposes, they still need to collaborate with organizations that use traditional forms of identification. While digital identity is the way of the future according to many leaders in finance, the practical issues related to this process are complex.

Who leads digital identity?

With so much push toward creating a digital identity system, but with so little oversight, there are many questions about how this technology will evolve. Like with most new technologies, there is some confusion in the beginning about what will happen and who will control it. That is the currently the biggest question concerning digital identity: who will own it?

There are three main potential owners of digital identity: financial institutions, governmental agencies, or third-party companies.

Lees ook: Toekomst van Blockchain in de financiële sector [e-book]

1. Financial institutions

The financial sector would be a natural choice for leading the way in digital identity as they are often involved in transactions that require verification, legal issues, and assets. In addition, financial institutions are already bound by many regulations due to the fact that the already handle a lot of sensitive information.

2. Governmental agencies

Governments around the world already handle identity documents like passports, birth certificates, permits, visas, licenses, and other documents. As many services move online, it would be a natural progression for agencies to create a unified digital identity system.

3. Third-party companies

Most people already have some form of digital identity online, although an unofficial one. Accounts on Facebook, Google, and other similar social media sites all create a true to life evolving digital identity. If financial institutions or governments do not act quickly, it would be no surprise if some of these innovative companies created their own standards for digital identity.

The reality of digital identity

There is no easy answer for who will lead digital identity and how they will get there. But the process and the end product will have significant impacts on the role digital identity plays in our lives.

With a financial system backed digital identity, companies can access all a customer’s vital data with a single identification process. This will make it easier to serve consumers efficiently and effectively. Consumers will also be able to access more services as all institutions will use the same kind of verification system.

For governments, creating a digital identity will improve efficiency and decrease waste as people can enter a universal identity marker that can translate to any kind of public service program. The hope is that this will increase collaboration with the public and improve efficacy. Another bonus would be that this process would decrease the tax burden related to current processes.

Third-party companies likely hold the most amount of information related to people’s identities. The interesting and complicated aspect of this is that the are not regulated like financial institutions and could create a system that is outside of regulatory control.

As all three continue to form what digital identity will look like, there are risks and challenges for everyone involved.


Creating a system that holds a person’s most sensitive data and is accepted by companies and governments around the world will be no easy feat. There are many challenges that have to be overcome to make this vision of the digital identity future a reality.


With this kind of system, both institutions and consumers need to trust it. With so many data breaches in the past, it can be difficult to put everything into the cloud or on a server and have faith that all the information will be fully protected. Whoever creates a digital identity needs to make sure they have many security measures in place to protect all the data.


Whichever entity creates a digital identity needs to make sure that it is accepted by everyone else. If certain groups do not accept it (consumers, businesses, or governmental agencies) then it will not fulfill its purpose of universal ease and greater efficiency.


Another aspect of the technology is its reliance on other technologies. In order to make digital identity work, it needs to be work in collaboration with a blockchain. This type of system will require many types of experts to work together. 

When people and companies come together, there is a lot of potential for digital identity technology.

Potential uses of digital identity

There are many different associations and organizations involved in supporting digital identity. Many are just in the beginning phases of seeing this technology

1. ID4D

According to a 2014 World Bank survey, almost 18% of adults without access to financial services are in the situation due to not having identity documents. The majority of those people are women and children in Africa and Asia. The ID4D program through the World Bank states that by creating a digital identity system, over 375 million people could gain access to financial services.

2. Yoti

In an effort to help consumers prove who they are to businesses, Yoti created an app to store a person’s digital identity and allow them to share it with businesses for verification purposes.

3. M4D

The GSM Association is working with the mobile industry and governments to create the M4 Digital Identity program. They hope that the use of mobile can help lead the way in government and private-sector digital identity systems.

4. ID2020

ConsenSys, Microsoft, and Blockstack Labs have started a collaboration to create an open-source, blockchain-based digital identity system under the non-profit ID2020. This non-profit, working with the UN, seeks to help the almost 1.5 billion people worldwide who have no way of proving their identity.

5. uPort

As part of their work in digital identity, ConsenSys has created uPort. This system acts a container for all aspects of a person’s life: email addresses, Facebook accounts, government IDs, and other forms of identification. Consumers can control the type of information that is stored in uPort to add to their identity reputation.

6. Deloitte Smart Identity

Recently, Deloitte introduced their blockchain-powered digital identity prototype called Smart Identity. Their system will allow consumers to create their own digital identity. They are working to create a process where businesses can use a single digital key to access one digital record that contains identity location services, automated identification and verification, and storage of identity documents like licenses and passports.

7. Easypaisa

In Pakistan, telecommunications company Telenor linked national IDs to biometric verification in order to improve access to financial services through Easypasia. In 2014, Pakistan introduced legislation that required SIM cards to be validated by biometric scans of consumer fingerprints and their national ID cards. This type of verification allowed Easypasia to extend their mobile financial services to more people.

A digital identity system accepted by people worldwide

No matter how we get there, it’s essential that every keeps working on a way to create a digital identity system accepted by people worldwide. Both people who currently have access to financial services and those who do not will greatly benefit from this technology and its potential to revolutionize the way that consumers, businesses, and government agencies work together.


Lees ook: Toekomst van Blockchain in de financiële sector [e-book]

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