By the end of the 20th-century, the authority to issue a legal identity became the full prerogative of the state. As may be the case with its other powers, a state does not always apply its prerogatives. As a result, the World Bank estimates that at least a billion people lack an official proof of identity. Today, new technologies allow different approaches to verify legal identity, such as creating for an individual a digital identification.

Unlike a paper-based ID, a digital ID can be authenticated remotely over digital channels. In their recent ground-breaking report on digital identity, McKinsey Global Institute (MGI) state that digital ID systems can unlock national GDP growth of between 3 and 13%. These digital ID’s must be verified and authenticated to a high degree of assurance, unique to the citizen, established with individual consent and protective of user privacy while ensuring control over personal data.

Today 3,4 billion people have some form of ID but no digital trail. For those people, this means being cut off from the digital economy. While the problem is particularly acute in emerging markets, in the EU citizens usually have some form of identification but limited ability to use it in the digital world. Most people are active online but find it hard to keep track of their digital footprint; their personal data and authentication credentials are used, stored and moved by numerous siloes that are vulnerable to abuse. As an enabler of economic, social, and political activity, individuals are believed to gain about 50% of the total potential value of digital ID. In emerging economies, where the average GDP advantage of strong digital ID systems is estimated at 6%, individuals are believed to gain over 75% of the potential value. In its review of over 100 ways  digital ID can be used, MGI identified that some of the biggest advantages derive from: (1) the expansion of the tax base by helping promote formalization of the economy; (2) lowering the barriers to accessing financial services by accelerating “know your customer” checks for financial institutions; (3) improving access to employment through an authenticated digital employment record; (4) improving agricultural productivity by generating digital land titles; and (5) reducing the occurrence of fraud with more accurate consumer authentication. Examples of digital ID systems can be found in Argentina, Canada, Estonia, Austria, India, Nigeria, Sweden, and the United Kingdom.

Digital ID is the new frontier in value creation for individuals and institutions. Countries, companies and consortia around the world are establishing digital identity standards. There have been some success stories as well as abuses and disasters. The EU Institutions, governments and international organizations should be interested. The policy- and law-makers should be encouraged to better understand how digital ID should be designed, implemented and enforced with well-considered policies. Investors should explore opportunities.

There exist today a number of unique identifiers that are being used in the digital world to identify an individual: voice, fingerprint, recognition by face, gait, retina, ear, etc. There are mobile phone numbers, social network IDs, smartphone device IDs and constellations of browser cookies. There are also accounts online and user-created data. The International Data Corporation forecasts that by 2025 the global data-sphere will grow ten times the level in 2016. They can all be connected to official ID documents. Together they can produce detailed portraits of an individual like never seen before. This introduces new opportunities and vulnerabilities.

The digital identity movement is well underway. States and public-private partnerships are launching foundational digital ID systems, such as the Aadhaar system in India which was launched in 2009 and now has over 1bn members. Private companies and consortia are launching functional digital ID systems, such as Mobile Connect from the GSMA which is used by 52 mobile network operators in 29 countries.  The projects are either run centrally by a state or a single corporate provider; federated where ownership is shared among multiple players; or decentralized. Some, like ZAKA, are experimenting with distributed-ledger technologies to create a consumer-owned digital ID used for economic purposes.

ZAKA is a venture initiated in Europe and developed by British, German and Rwandese entrepreneurs. The company is building a digital ID and service aggregation platform in Rwanda. They seek to ensure that Africa’s digital economy is inclusive and empowering to its participants by connecting a decentralized and consumer-owned digital ID with digital services. Their first application is in Rwanda’s health system, where patients, clinics, pharmacies and insurance companies stand to benefit from improved patient authentication and verification of services between parties.

The multi-disciplinary and multi-national experience that ZAKA possesses suggests that a systemic approach is required for the successful adoption of digital ID. Collaboration between public, private and non-profit actors with broad national and niche private interests is necessary. Government policies are needed to set the framework for the ID system and to address systemic risks. Digital identification programs should promote careful experimentation and mass adoption. The governments and the EU should prioritise use cases that generate meaningful value. User experience and risk profile should be the key determining factors focusing on decision and access rights, enforcement mechanisms and contingency planning. Governments, businesses, and civil society actors should think through (i) how to address potential misuse of the digital ID system and approaches to safeguard users, (ii) acceptance of digital identities, while protecting user privacy and other rights, (iv) how to collaborate with international bodies to develop cross-border standardisation, (v) how to partner with private-sector institutions to understand country-specific economics of digital ID; (v) when to explore public-private and consortium-led models of provision; (vi) how to encourage businesses to responsibly explore, experiment and create value.

Businesses, and particularly startups, should be empowered to responsibly innovate processes that could leverage digital ID, while governments, the EU and civil society institutions should ensure that individuals retain control over how their data are used and protected.