National digital identity systems: why private sector participation matters
Interest in digital IDs increased during the COVID-19 pandemic as many governments looked to deliver services remotely and at scale. The experience has highlighted the benefits of enabling private sector organisations to integrate with state systems
In the US, COVID-19 stimulus payments for citizens took the form of physical cheques. They were delivered by mail to a last known address and needed to be deposited into a bank before they could be spent. In India, money was sent directly in citizens’ bank accounts at the touch of a button thanks to a national digital ID system, known as Aadhaar.
There has been a flood of interest in national digital IDs in recent years. This was reinforced by the COVID-19 pandemic as many governments looked to deliver services remotely and at scale. The experience highlighted the benefits of enabling private sector organisations to integrate with state systems, according to IDEMIA, the Paris-based leader in digital identity provision and one of the companies involved in building India’s Aadhaar system. For example, if bank accounts had not been linked to Aadhaar, it would have been much harder to use the system to provide subsidies.
Trust as the foundation of secure national digital identity systems
In the first decades of internet development, security around private and public services was not widely available. As technology has matured and its use proliferated, this has led to an increase in security breaches and cases of identity theft and fraud.
This is very different to the physical world where identity documents integrate powerful security elements. So why should our identity in the virtual world fall prey to malicious organisations or individuals, even though our activities on the web are part of our daily life?
We are full living in a “global village”, as Canadian academic Marshall McLuhan described it, which has vastly increased the possibility of fraud and vulnerabilities. In a world that is moving towards full e-services, being able to verify identities remotely in a robust way is crucial so that people can use them in complete confidence.
A state-issued digital identity is the necessary trust intermediary between the citizen and the services they use. “The government brings trust and legitimacy,” says Marie-Sophie Bellot, marketing manager at IDEMIA. “But the private sector is a catalyst. It accelerates a digital ID programme.”
“Most citizens only file taxes once a year, but they interact with their banks on an ongoing basis,” Bellot explains.
Mutual benefits
There is a virtuous circle for citizens, the private sector and governments when it comes to opening up digital identities. Public entities are eager to develop secure remote services as part of their digital transformation plan and the private sector is looking for both trusted and convenient means of ID verification to comply with regulations.
“Most of the digital ID programmes that have been launched by governments had an initial focus of providing online public services to citizens,” Bellot says. “But progressively they have opened access to the private service provider.”
There are obvious advantages for private companies to integrate with national digital ID systems as it offers an easy way to confirm the identity of customers with the highest level of confidence. “The main interest from the private sector of having a state issued digital ID is to benefit from the highest level of assurance for ID verification,” explains Bellot.
Systems that integrate with the private sector also benefit citizens by ensuring simpler access to a range of services. Once banks in India used Aadhaar, for example, citizens could open accounts in minutes, rather than days or weeks, according to Bellot, because it was easier to prove their identity.
Such tangible benefits support governments’ digital ID initiatives by boosting public adoption and ensuring confidence around securing and protecting citizens’ privacy. This is essential as the details held are highly sensitive. As well as biographical details about citizens, the Aadhaar system includes biometric data such as fingerprints, iris scans and face scans, according to Bellot.
Ideally, governments should consider private sector needs from the outset of a digital ID scheme, ensuring simple integration. The risk, otherwise, is that governments build expensive and cumbersome digital ID systems which citizens are forced to use to interact with the state, but for which they see little other benefit.
There are also advantages for wider economies when improvements in user experience are rolled out across a variety of private and public sector services. A 2019 report from management consultants McKinsey found that with high levels of adoption, digital ID systems have the potential to add the equivalent of 6% of GDP in value for emerging economies, and 3% in mature economies by 2030.
Solutions adapted to the country
Bellot emphasises that countries need to build digital ID systems that match the specific needs of their citizens. When IDEMIA starts working with a new government client it helps them to understand the needs of the state, citizens and service providers, and defines the right digital identity scheme. These are based on IDEMIA’s experience in other countries but also on local needs.
Another consideration is whether there should be a physical aspect to the ID system, or if it can be a wholly virtual enterprise. France’s new electronic identity card will enable citizens to remotely prove their identity when accessing services via the FranceConnect platform. A series of physical centres, “France service”, has also been put in place for citizens to log in and access public services. The establishment of a national digital inclusion policy in parallel to rolling out a digital ID system is fundamental to successful implementation.
Solutions will not always take the same shape. In the UK, for example, there is no universal government ID system, but citizens still use government documents to establish trust. IDEMIA is helping the government pilot its Document Checking Service for use by private companies, for instance. This service allows citizens to use their British passport to remotely prove their identity to companies when accessing private sector services.
This presents something of a reverse for the UK government, which previously spent several years building a scheme that operated in the opposite direction: a system for citizens to prove their identity to the state by logging into private sector identity verification services The patchwork of different providers from banks to credit rating agencies was not optimal in the private sector so a different path was chosen for the project.
“The establishment of a state-issued digital identity goes hand-in-hand with current reflections leading to a greater emphasis on regulation and the role of the state. The pandemic has demonstrated more than ever the great return of states in the capacity to provide care, vaccines or to help the economy resume. What is more sovereign than managing the identity of a population?” Bellot concludes. The experience suggests state-owned verification mechanisms can benefit the overall ecosystem – citizen, public and private service providers.
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Most of the Economic Impact Payments in the US were delivered to eligible recipients to either a bank account or a debit card via ACH, not by check.