Digital ID: Why it’s crucial for the new economy

“What we want is a new kind of identity. What we don’t want to do is to take the sorts of identity that we’re used to having at the moment – things like passports and driving licenses – and try to make electronic analogues of those things,” says David Birch, director of UK-based secure electronic transactions consultancy Consult Hyperion.

A digital identity is one that can be used online and in the virtual world. It puts the consumer in control of how they share their identity to verify themselves for services.

Once they have established their digital identity they can use it across platforms for a variety of transactions and services, both private sector and government.

For instance, if someone goes into a bar today and needs to prove they are aged over 18, they show their driver’s licence.

“Making a sort of electronic version of a driving licence and moving it into the virtual doesn’t make any sense. And the reason it doesn’t is because identity in the virtual world can do things that identity in the physical world can’t,” says Birch, who was a guest speaker at a recent series of talks and workshops on digital identity hosted by Australia Post.

In doing so, they also reveal their name, their address and their date of birth, whereas they really only want to reveal one specific piece of information – whether or not they are aged over 18.

“With a virtual identity, that’s not the case. Virtual identities can do very clever things. We can have identities that deliver partial disclosure – an identity that proves that you’re over 18 and nothing more, nothing else about you. You can have identities that will only prove that to people who are entitled to ask,” says Birch.

A virtual identity will become increasingly important as more transactions move into the virtual world.

For example, when someone uses their credit card to make a purchase in a shop, they are not really interacting with the shop. Instead, it is their virtual identity, stored in a credit card chip that is effecting the purchase by interacting with the virtual identity of the store.

“The more transactions we can move into that space the more efficient it is, and we want digital identity to be able to anchor both kinds of transactions,” Birch says. 

Digital ID can build trust

Birch says digital identities are crucial for introducing the sort of trust that is needed to interact online: “This is why lots of people – not just Australia Post – are focusing on digital identity as the platform for the evolution of the new interconnected world. Without that identity platform, it means we can’t have the trust that we need to make transactions take place.”

And, there are three main drivers for corporates to start using digital identities for transactions.

The first is the reduction of fraud. Birch says the cryptography involved with manufacturing and using digital identities and the utilisation of computer “keys” to use them means they are harder to forge and misuse than a credit card, for instance.

The second is convenience. It is much more convenient for consumers to be able to reuse a single digital identity rather than proving their credentials over and over again.

Third, digital identity checks are cheaper to administer. For organisations that need to verify customers’ identities, it is much cheaper to use the a digital identity already established by a trusted third-party than to have to gather and check the customers’ passports, driver’s licences and utility bills, for instance.

Birch envisages a business model where companies pay another trusted company such as Australia Post a small fee to use an already established identity rather than having to go to the cost of re-establishing the customer’s identity themselves.

“There are models that we can think of whereby we can begin to construct businesses around identity, which makes sense for everybody,” says Birch.

A digital identity could help with something even as simple as renting a car. Rather than needing to physically show their drivers licence to the rental company, a customer could rent a car online and their digital identity could contain their driving credentials.

There are significant drawbacks with the current methods used for online identity. Birch gives the example of online dating service Ashley Madison, which suffered a security breach last year when its customers’ names and addresses were leaked.

Birch said there was no reason for the site to have these details, except that it collected customers’ credit card details as proof they were aged over 18 and got their other details as a by-product.

“We want to move away from that sort of thing and digital identities give us plenty of opportunities to do it,” he says.

For more insights on digital identity, including its potential to unlock up to $11billion of economic opportunity, read our white paper, A frictionless future for identity management.