Mike Tuchen, CEO, Onfido.
getty
Since the pandemic, we've seen the use of digital identity evolve alongside our hybrid lifestyles, as more businesses and government agencies were pushed to move interactions online rather than in person. By 2021, several countries began exploring digital vaccine passports for travel given the acute need for convenient, secure confirmation of a traveler’s health status. Although not a concern anymore for most governments and individuals, it’s a use case that drove home the value of digital identities more clearly to both private companies and government entities.
2022 was another major year for digital identity as we saw some foundational pieces fall into place. In the U.S., the TSA authorized the first few companies to use mobile IDs to pass through airport security, including Airside and Apple. Apple took this a step further to begin partnering with states that offer mobile driver's licenses to enable storing and using them within its digital wallet, including for the TSA screening process. These moves show an increasing trend toward a world of reusable identity—or a "verify once, share anywhere" approach to digital identity verification. In fact, according to market research firm Liminal, the global market size for shareable or reusable identity will grow from $32.8 billion in 2022 to $266.5 billion by 2027 (pg.5).
In this context, here are five key trends that will define the trajectory for digital identity this year. And as a result, I believe 2023 will end up being the year when digital identities start to become mainstream.
1. The EU is now mandating digital identity.
The European Union will mandate digital identity under eIDAS 2.0, which will go into effect in September 2023 and ensure all Member States offer a digital identity wallet (DIW) to citizens and businesses. According to the European Commission, "At least 80% of citizens should be able to use a digital ID solution to access key public services by 2030."
2. In the U.S., private companies will lead the charge while states continue their slow mobile driver's license rollout.
In the U.S., states are the source of the most commonly used identity documents. Each state has its own identity infrastructure of birth records, marriage certificates, death records and driver's licenses, which are the most ubiquitous form of ID in the U.S. While some states like Colorado, Maryland and Arizona offer mobile driver's licenses (mDLs) today, other states are going to operate on their own timelines, and there’s no overall mandate to increase digital identity penetration and usage as there is in Europe.
As a result, it's doubtful the U.S. will be in the same place as Europe come 2030. In that vacuum, we will likely see an increasing interest in the private sector to bring digital identities mainstream, with comprehensive digital identity systems being rolled out from Airside, Authentify, CLEAR, Apple and Mastercard, aiming to simplify identity sharing for end users while ensuring businesses can protect themselves from fraud and remain compliant to specific KYC and AML regulations.
3. Increasing identification mandates create a new era.
The recent conversation around Twitter has made verifying identities a hot topic. Adding identity verification could solve a number of problems for social media platforms, but for this to take off in 2023, it should be something that users can opt into. Ensuring a balanced process would mean that prominent personalities can create confidence through verification while retaining space for anonymity for those who need it, such as whistleblowers or political dissidents.
While allowing anonymity in some specific cases has benefits, authenticating digital IDs more broadly would improve the transparency around social media ads—who is buying them and why—while also reducing fake accounts. Similarly, account lockout is one of the many annoyances faced by social media users. Identity verification can accelerate account recovery, so people are waiting minutes, not days or weeks, to get back in.
Hotels and home-sharing companies are increasingly mandating owner and renter verification due to security concerns. Similarly, I just ran into a required identity verification step when I rented a storage locker. In addition, we are seeing a renewed focus on children’s online safety in state capitals around the globe, with mandates for adult content purveyors to verify age before allowing access. How these requirements shake out, what types of services are affected and the consequences for failure will have big ramifications—but it’s clear that we’re seeing a large increase in digital identity verification requirements in a number of sectors that hadn’t required it before.
4. AI is a catalyst when introduced safely.
As AI is increasingly used alongside biometrics and other technologies that enable digital identity verification, regulations around bias and fairness must be robust. Despite the boost it can give the user experience, governments must prioritize safety, security and equality. But it’s also up to businesses using AI to know what their rejection rates are by different user demographics so they can uncover biases in their own algorithms.
Practically, there is a lot of infrastructure that comes with integrating AI. You can’t do so without the requisite data, technology and people. The process takes time and investment, and for those businesses without unlimited resources that want to offer digital identity verification, it’s important that governments provide guidelines to ensure it remains fair and transparent.
5. Privacy-first, user-managed digital identities are the future.
With fraud on the rise and consumers increasingly conscious of their data, privacy will likely feature higher on the agenda this year. In fact, I expect privacy-first, user-managed digital IDs to be the future of digital identity. Companies need to ensure they’re pursuing use cases that are relevant to their customers—balancing the user experience benefits with security and safety—to boost adoption and make digital identities a reality.
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