Digital identity has become increasingly important for businesses as they transition their products and services online. From creating bank accounts to age verification, demand for digital identity is only expected to increase and become more mainstream.
The digital world is rapidly evolving, with digital identity becoming a prerequisite for consumers interacting online. However, the volume of personally identifiable information available online and the adoption of cloud technology have exposed potential risks in the digital era. Considering these threats, organisations and regulatory bodies are searching for innovative measures to combat these challenges. While digital identity will unlock infinite possibilities for consumers and businesses, it’s essential to recognise its immense power.
What is digital identity?
Digital identity is a collection of personally identifiable information (PII) about an individual that exists online. This information, including name, date of birth, address, and passport number, can be pulled from numerous online platforms and provides a digital representation of an individual once grouped.
What is digital identity used for?
The use of digital identity has increased as more businesses and government agencies shift to online instead of in-person interactions. Companies can use digital identity to verify that their customers are who they say they are and provide protection from fraudulent exchanges. There are several ways businesses can verify the identity of their customers online, including ID checks, proof of address and document verification. It is common to combine verification several methods to ensure a secure match.
Many businesses require customers to provide proof of age to access their products or services. In the past, this was a manual process that impacted the customer experience. Nowadays, digital identity allows this process to be automated and streamlined. This ensures that age-appropriate customers can easily access services while protecting businesses from risks.
In addition, digital identity can be used during the account set-up process. This protective measure was implemented to prevent possible fraudsters from accessing sensitive data like banking details. Following the mass shutdown of physical bank branches during the COVID-19 lockdown, it has become clear that most bank and financial interactions can occur online. In fact, mobile banking use increased from 15.1% in 2017 to 43.5% in 2021. Consumers value the convenience of digital banking and access to real-time payments. Digital identity allows consumers to access these services quickly and securely.
The challenges of the digital era
Over the past decade, rapid technological advancements and e-commerce growth have created multiple challenges and threats to businesses and consumers. In 2021, e-commerce sales hit $870 billion in the US, a 14.2% increase from 2020. This shift created a substantial influx of online personally identifiable information (PII) held by businesses using cloud technologies. In addition, half of the world is now active on social media, contributing to an endless amount of personal data circulating online.
As cloud technology adoption increases, businesses and consumers become susceptible to data breaches and identity theft. The information organisations collect when they onboard and verify an individual’s digital identity is extremely sensitive and valuable to fraudsters. In recent years, there has been a rise in large-scale data breaches resulting in devastating consequences for both consumers and businesses. This year, a data breach at Australian telecommunications company Optus reignited calls for an overhaul of Australian cybersecurity measures. Businesses experiencing a data breach face long-term reputational damage and a loss of consumer trust.
Protecting digital identity
Regulatory bodies and privacy organizations have introduced new measures to combat external threats in response to the ever-evolving threat of data breaches and digital identity theft.
Data protection laws are accelerating and becoming proactive rather than reactive. For example, Europe’s core digital privacy regulation, General Data Protection Regulation (GDPR), ensures the protection of PII through numerous mandates imposed on businesses and their data handling. Countries like the United States have also considerably changed their data protection policies and introduced increased fines and penalties for mishandling information that can put consumers’ digital identities at risk.
In addition to these protective mandates, data storage and deletion have become necessary safeguarding measures for sensitive data. Businesses can protect their customers from bad actors by deleting or anonymising data once the onboarding or verification process is complete.
Additionally, businesses stay ahead by introducing advanced technology such as biometrics authentication. These methods, such as fingerprints and facial recognition, add an extra layer of protection between digital identities and fraudsters. Biometrics makes it significantly harder for identity theft due to the active and passive liveness tests that are hard to imitate.
Moving forward
Faced with the digitisation of society, digital identity is only set to increase. Identifying the convenience and benefits that digital identity provides, digital identity documents are set to exceed 6.5 billion globally by 2026. Digital wallets will dominate the government agenda worldwide, and physical documents will slowly be replaced.
The future of digital identity is exciting and offers enormous benefits and possibilities for society. By implementing protective measures and adapting to rising threats, digital identity can help improve and simplify digital experiences for businesses and consumers.