Why Are Governments Developing Digital ID Systems?

In response to global digitization trends, governments are increasingly adopting digital ID systems to enhance efficiency and accessibility. Countries like Estonia, India, and Singapore have embraced these systems, and the European Union’s eIDAS 2.0 regulation is setting another example, encouraging more countries to follow its lead. This shift towards digital transformation aims to create more innovative and responsive public services, meeting the evolving needs of their populations. Digital ID systems streamline identification processes, reduce administrative burdens, and facilitate easier access to banking, healthcare, and government services. Additionally, they offer better security, protecting citizens and institutions from the growing threat of cybercrime.

Statistics and data experts estimate that countries implementing digital identity systems could unlock economic value equivalent to 3-7% of their GDP. This was highlighted at the 12th StatsTalk-Africa Webinar in Addis Ababa, Ethiopia.

Traditional identification methods are often time-consuming, prone to fraud and forgery, and inaccessible to many. Consequently, they fail to serve their intended purpose of establishing proof of identity.

What Is Proof of Identity?

Proof of identity is a legal document that verifies a person’s identity. This document must be legally valid within the jurisdiction where it is presented and typically contains personally identifiable information such as name, date of birth, address, gender, and other relevant personal data. Proof of identity is required when accessing services like banking, healthcare, and job applications. Traditional forms of identification, such as paper-based birth certificates, national IDs, and passports, are meant to serve this purpose. However, these forms often come with issues that lead to identification challenges, leaving millions without formal and secure proof of identity.

How Lack of ID Limits Opportunities

According to 2023 World Bank data, approximately 850 million to a billion people have no proof of identity or officially recognized means of identification—no passport, birth certificate, or national ID. This issue is most acute in developing regions such as sub-Saharan Africa and South Asia, where inadequate administrative infrastructure is compounded by poor economies. Another significant scenario involves millions of refugees displaced from their homes by tragedies such as war, terrorism, violence, or persecution, often leaving behind their paper-based means of identification.

The lack of formal identification prevents people from accessing essential services, exercising their rights, and participating fully in society. For example, in over 140 countries, a mandatory requirement for SIM registration for mobile phone users exists. Although this policy aims to prevent fraud, identity theft, and related issues, it also makes it impossible for citizens without legal identification to access services as basic as mobile phone connectivity.

Consequences of Lacking Proper Identification

1. Lack of Access to Education

Without proper identification, individuals may find it difficult to access education. In some countries, such as South Africa, children without birth certificates may be unable to enroll in school. UNICEF reports that over 164 million children under the age of five lack birth registration worldwide, with a significant majority residing in Africa. This omission from official birth records can result in these children being excluded from educational opportunities.

2. Exclusion from Financial Services

Mobile money services, which rely on mobile phone wallets and internet connectivity, have enabled many to experience seamless banking. This approach has been embraced in 92 countries to reach rural communities, helping those cut off from traditional banking services common in city centers. While this is a significant solution for over a billion users, an estimated 530 million people in countries that mandate SIM registration with government-issued proof of identity are still excluded from financial services. This exclusion is due to their inability to provide the governmental proof of identification (KYC) required for opening mobile money accounts.

3. Access to Healthcare Services

Lack of proper proof of identity can hinder access to healthcare services. For example, in the United States, undocumented immigrants may avoid seeking healthcare due to fear of deportation, leading to untreated illnesses and public health concerns.

4. Difficulty in Legal Proceedings

Lack of proper identification can pose challenges in legal proceedings. Amnesty International reports that in the UK, refugees and homeless individuals find it hard to get legal help or prove their identity in court. This makes it difficult for them to get justice, often because they lost their personal documents while escaping danger or persecution in their home countries.

5. Inability to Exercise Civil Rights

Lack of proper identification can prevent individuals from exercising their civil rights. For example, in Nigeria, electoral laws seek to identify each voter and, therefore, require individuals to present a unique, valid identification to vote, which can disenfranchise those without proper identification.

6. Restricted Mobility

Individuals may face difficulty traveling domestically or internationally without appropriate identification. For example, in the United States, starting May 7th, 2025, individuals must be REAL ID Act-compliant to board domestic flights, enter federal buildings, and access certain federal facilities.

7. Vulnerability to Exploitation

Without proper identification, individuals may be more vulnerable to exploitation and abuse. For example, some migrants and refugees displaced from their homes remain undocumented in their new countries. They may face exploitation by employers who take advantage of their lack of legal status.

What Is a Digital ID System?

Digital ID systems are electronic methods that provide secure proof of identity. They are designed to authenticate and verify an individual’s identity in a digital environment. These systems often use cryptographic keys or biometric data, such as fingerprints and facial recognition, to ensure that the person accessing a service or system is who they claim to be. Governments, financial institutions, or other trusted entities can issue digital IDs.

A digital ID system is the foundation for “digital identity.” These two are intertwined, much like how an email address enables you to send emails. You can’t have one without the other. Digital identity is the unique set of data that represents an individual or entity online. It encompasses a wide range of personally identifiable information, such as names, genders, addresses, browsing histories, and more. Digital identity can be used to identify and track an individual’s online activity, verify their identity, and provide access to certain services and applications.

A digital ID system is the technology-based infrastructure behind digital identity. It provides unique digital identifiers for individuals or entities, which are used to authenticate an individual’s identity in digital transactions or interactions. Digital ID systems serve various purposes, acting as the gateway through which citizens access government services, banking, healthcare, and online transactions. They help improve efficiency, security, and access to public and private services.

Why Are Governments Developing Digital ID Systems?

Governments are developing digital ID systems to enhance security, improve efficiency, and promote financial inclusion. These systems integrate advanced technologies like biometrics, blockchain, and mobile accessibility into governance, transforming how citizens manage their identities and access services.

Key motivations include: 

1. Sovereign Control 

By developing their own digital ID systems, governments prevent digital ID management from falling into the hands of social media tech giants or third parties. This ensures that identity management remains a sovereign function, protecting citizens’ data from being exploited for commercial purposes. Governments can maintain control over their citizens’ data, ensuring it is used responsibly and securely.

2. Enhanced Security

Digital ID systems strengthen security by using biometrics and encryption for identity verification. This reduces the risk of identity theft and fraud, ensuring safer interactions with government services. For example, in the UK, the GOV.UK ID Check App allows individuals to verify their identity online when accessing government services. Similarly, the United Arab Emirates uses ID cards with biometric data to verify identity, improving security in government transactions.

3. Access to Essential Services

Digital IDs grant individuals easier access to essential services such as healthcare, education, and government assistance. For example, Aadhaar anchors digital IDs for over 1.3 billion people in India, facilitating access to welfare programs and financial services. The Indian Supreme Court’s 2018 ruling made Aadhaar mandatory for most essential services, ensuring that citizens can efficiently access government-provided benefits.

4. Improved Service Delivery

Digital IDs streamline administrative processes, reducing paperwork and improving the efficiency of public service delivery. Estonia’s e-Residency program, for example, allows non-residents to access government services and conduct business online, leading to more efficient service delivery. Digital IDs reduce the time and effort required to manage and verify identities, making public services more accessible and responsive.

5. Cost Savings

By reducing the need for physical infrastructure and paperwork, digital ID systems lead to significant cost savings for governments. In Canada, using digital IDs for government services has saved at least 100 million Canadian dollars annually. Digital IDs eliminate the costs associated with printing, storing, and managing physical documents, allowing governments to allocate resources more effectively.

6. Cross-Agency Collaboration

Digital ID systems facilitate collaboration between government agencies by providing a common platform for identity verification. For example, in Australia, the myGov digital ID system allows individuals to access multiple government services using a single digital ID, improving collaboration and efficiency across different government departments. This unified approach reduces duplication of efforts and ensures a seamless experience for citizens.

Building Trustworthy Digital ID Systems

Building a trustworthy digital ID system requires a user-centric design, implementing transparency and privacy at all levels, and considering various other factors. Here are essential considerations for developing a digital ID system that citizens will trust, especially in an age where privacy is a “deal breaker” for digital platforms and applications.

1. User-Centric Design

User-centric design is crucial because it prioritizes users’ needs, preferences, and expectations, ultimately leading to systems that are more secure, usable, and user-friendly. In 2021, the Alliance for Global Financial Inclusion (AFI-Global) developed a policy model to enhance user-centric design for digital ID systems, especially concerning data collection and user authentication.

2. Strong Legal Framework

Establish a robust legal framework outlining the rights and responsibilities of all parties involved in the digital ID ecosystem. This framework should address data protection, privacy, and security standards. An example of such a legal framework is eIDAS 2.0 within the EU.

3. User Consent and Control

Users should have control over their digital ID information, including the ability to consent to its use and revoke access. Provide clear and transparent information about how their data will be used and shared. Countries like Australia, Sweden, and Singapore ensure users have adequate control over their data.

4. Transparency and Accountability

A digital ID system must clearly disclose how data is collected, stored, and used. Establish clear lines of accountability for the system’s operation and governance. The UK government faced criticism over a data protection law meant to prevent identity and financial fraud. The lack of transparency and concerns about potential government surveillance were major issues.

5. Interoperability

Ensure the digital ID system is interoperable with other systems and standards within the country and internationally. This facilitates cross-border use and enhances usability. Countries like Belgium, Sweden, Estonia, and India have achieved high success rates in the interoperability of digital IDs with other government services, covering over 3,000 government and private business services and collectively used by over 1.3 billion users.

6. Secure Technology

Implement secure technologies for digital ID authentication, such as biometrics, encryption, and secure data storage. Ensure these technologies adhere to international standards for security and privacy. Biometrics is used in digital ID systems across many African countries, enhancing security and efficiency. In British Columbia, blockchain technology has been applied to create a more secure digital ID for the homeless section of the Downtown Eastside community.

7. Education and Awareness

Educate users about the benefits and risks of digital ID systems and their rights and responsibilities. Promote awareness of best practices for using digital IDs securely. Estonia’s emphasis on citizen education has resulted in 99% of Estonians having digital IDs.

Conclusion

The development of digital ID systems offers numerous benefits to governments, citizens, and countries. For governments, these systems enhance efficiency, reduce costs, and improve service delivery by streamlining processes and reducing bureaucracy. Citizens benefit from easier access to essential services, increased financial inclusion, and enhanced online security. Countries can experience economic growth if these systems are implemented efficiently, as digital ID systems facilitate innovation, entrepreneurship, and digital transformation.

However, governments must prioritize transparency, accountability, and privacy when developing and implementing digital ID systems. They must ensure that citizens’ data is protected and used responsibly without infringing on their rights or enabling abuse of authority. By establishing trust through responsible data management and governance, governments can harness the full potential of digital ID systems to create a more inclusive, efficient, and secure society for all.

Identity.com

Identity.com, as a future-oriented organization, is helping many businesses by giving their customers a hassle-free identity verification process. Our organization envisions a user-centric internet where individuals maintain control over their data. This commitment drives Identity.com to actively contribute to this future through innovative identity management systems and protocols.

As members of the World Wide Web Consortium (W3C), we uphold the standards for the World Wide Web and work towards a more secure and user-friendly online experience. Identity.com is an open-source ecosystem providing access to on-chain and secure identity verification. Our solutions improve the user experience and reduce onboarding friction through reusable and interoperable Gateway Passes. Please get in touch for more information about how we can help you with identity verification and general KYC processes.