Charting a 21st Century Digital Identity Framework for Financing

October 27, 2020 – By Vaishant Sharma and Shaily Acharya

Around the world, one billion people are unable to properly prove who they are. That’s one billion people who are potentially barred from accessing critical government, healthcare, and financial services. Moreover, one in five people can’t open a bank account due to a lack of documentation. Even for those who do have some form of identification, accessing services digitally is inefficient due to verification issues and a generally lacking digital infrastructure.

The COVID-19 pandemic spotlights and renews the urgency to solve these challenges. While many countries (including the United States) struggled to deliver social and financial assistance services to those in need, over 200 countries with some type of effective identity system were able to respond much more rapidly and effectively.

Solving digital identity challenges plays a critical role as we look to strengthen our larger digital infrastructure. The Beeck Center recently hosted an Ideas That Transform conversation to explore this topic with experts from the global development, private, and public sectors. This conversation is part of a series hosted in partnership with Flourish Ventures, which aims to catalyze insights on how we might spur digital infrastructure towards a more inclusive, people-centric financial system. While the discussion touched on specific ideas on data needs and sources, verification, assurances, and standards, there was unanimous consensus on the critical roles that privacy, trust, and inclusion play if we are to move solutions forward.

Watch the conversation on Digital IDs

There are models working globally. Vyjayanti Desai, Practice Manager for Identification for Development (ID4D) at the World Bank, pointed out that while there are many successful global models for digital identity, there is no universal solution. There are a few key differentiators across the various ID systems in place.

• What’s being implemented. Countries use either a single, centralized ID system (India, Austria, Estonia) or a federated approach that relies on different institutions and inputs (U.K. and Thailand).
• The data needed for verification. Governments and private institutions rely on different inputs for ID-creation based on the standards in place.
• The authorizing sources for verification. Countries must rely on sources that validate identities that are created for there to be a high-level of trust.

For every country with a developed digital identity system, there are many countries that are still grappling with the above to ensure a strong ID system can be built.

“Saying no to Digital ID is like saying no to cooking with fire. It’s there, so use it.”

In the U.S., effective approaches are emerging at the city and state levels. Miguel Sangalang, Deputy Mayor for Budget and Innovation in the City of Los Angeles, described how his city launched Angeleno accounts to better connect residents to city services. The contactless nature of the Angeleno accounts made meeting residents’ needs during the height of the COVID-19 pandemic faster and easier. Using a people-centric framework, approximately $30 million were dispersed during the pandemic when economic support was needed most. Traditional systems could have been used, but the city embraced the tools at their disposal for a safer facilitation of services. As Miguel said, “saying no to Digital ID is like saying no to cooking with fire. It’s there, so use it.” Moving forward, he views Angeleno accounts as the “digital key to LA city services”. The program has now expanded to ensure that every resident, business, and tourist can have an account, while the next step is strategizing how to scale the program.

“Digital ID is just a continuation of problems that we’ve had in the US with identity.”

Scaling in the US Requires Solving Dual-Challenges. Building a strong digital payment system infrastructure will require the public sector to effectively address both its fragmented legal identification system and its lack of digitization. Of these issues. Robin Carnahan, Data + Digital Fellow at the Beeck Center and former Secretary of State of Missouri, notes: “Digital ID is just a continuation of problems that we’ve had in the U.S. with analog identity.” The issue is less about available technology, but rather the absence of identity standardization across cities and states. Without a national ID, equal access to services becomes especially difficult. While cities (like Los Angeles) and states are turning to the private sector for identity solutions, there are some increasing successes within government. One example is login.gov, currently managed by the General Services Administration: eighteen federal agencies can now use this for government services, and it recently expanded to provide provisional services at the state and local levels during a time where digital services are essential. As Robin notes, while we can certainly use the private sector more in the short term – in the longer term, we need to figure out how to implement this in government.

“Digital ID is an evolving term. It’s not a what, it’s a how.”

Leaders are looking to the private sector. Travis Jarae, Founder + CEO of One World Identity, has worked on identity challenges across sectors, focusing on the finance industry with Deloitte, and then Google’s “know your customer” systems and the challenges to include people with no registered identities. He notes that digital identity is actually more about how people access services, rather than what services are being offered. While earlier efforts focused on building the data “pipes” (content),there has been a transformational shift to playing a data alchemist – asking what data elements we need, for what services – and combining these to provide people services at the highest level of assurance. Travis is also an advocate of private-public models, noting there are many pre- and post-COVID organizations primed for partnership with the public sector to deliver services. However, the lack of standards is becoming an increasing challenge that the private sector has not met, and are frankly looking to the government to lead. He acknowledged that there is a high-burden for the public sector to create standards, and the importance of trust and privacy. While the private sector has been able to solve some issues around trust through transaction interaction insurance and user experience, as we see in gig economy models like AirBNB, Travis noted that there is a lot of older software that breaks down trust and prevents the growth of digital identity at scale.

“An overarching goal we want to see is trust in the system and inclusion in the system.”

Trust and inclusion are fundamental to moving forward. As Vyjayanti aptly noted: “all of this comes down to managing privacy and ensuring trust.” Civil society needs to trust that the creation of a digital ID will be protected through proper laws and regulation, and that privacy will be ensured through both technical tools and “privacy by design.” For example, the identity data needed to get a dog license is quite different from what’s needed to pay your bills or access funds: the more you move towards financial and other value transactions, the more levels of assurance play a critical role. This is where the government needs to come in – particularly in regulated sectors – and all the panelists agreed on the important and much needed role for government in assurances and setting standards. The question is no longer on how the government will do this, but when. The digital economy is here and we have many models across sectors and countries showing us how to get this done. The urgency to do this is clear: governments will not be able to do public service delivery going forward unless we get this right.

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Digital identity and verification has become increasingly important in our modern societies, and all of our panelists agreed on the importance of improving service delivery and access through a people-centered digital identity system that prioritizes trust, transparency, and inclusion. Specific recommendations focused on issuing government standards, leveraging existing government capabilities, and learning from international examples.

The Beeck Center is grateful to Flourish Ventures for supporting this conversation, which is part of a series of discussions this fall that aims to spur digital infrastructure toward a more inclusive, people-centric financial system.