Digital identity in 2021: everything you need to know

In the real world, it’s a pretty straightforward process to prove your identity. You can rent a car, open a bank account, book a hotel room, purchase alcohol, or gamble at a casino simply by presenting PhotoID. The company you are interacting with can make the connection between your physical body and the ID that you present.
However, identity becomes extremely more complex in the digital realm. Companies must verify your identity, even though you can’t physically present documentation. They rely upon your digital identity — which is a relatively new concept. In this guide, we’ll show you everything you need to know about digital identities in 2020—2021.
What Is Digital Identity?
What Is a Digital Identifier?
Main Attributes and Activities of Digital ID
Don’t Mistake Digital Identity for This
What Is Trusted Digital Identity?
How Does Digital Identity Work?
How Is Digital Identity Created?
Capturing
Verifying
Digitalizing
What Makes Up a Digital Identity?
What’s Wrong With Traditional Approaches to Online Identity Verification?
Benefits of Using Digital Identities in Business
Problems of Digital Identity
Digital Identity Theft
How Your Digital Identity Information Can Fall Into the Wrong Hands
Online Identity ≠ Real Life Identity
What Is Digital Identity Management?
How Companies Can Take Advantage of Digital Identity Development
Real-World Examples of Digital Identity Use
Summary
FAQ
Why is digital identity important?
What is digital identity verification?
What documents can be used to verify identity?
How do identity management systems benefit a company?
What are the functions of digital identity?
What does it mean to have a digital footprint?
What Is Digital Identity?
A digital identity is a networked or online identity claimed by an organization, an electronic device or an individual for use in cyberspace. These parties may claim multiple digital identities across a variety of communities. Put simply, one’s digital identity is a compilation of data about them, and it exists in a digital form — it can contain all sorts of information about you, such as your date of birth or even Pages that you like on Facebook.
Digital identities are grouped into two main categories: your digital activities and your digital attributes. These can be used for identification purposes, both when used alone or when combined.
You can use digital identity as a kind of currency on the web — not as a payment for goods, but rather as a way to open a new account, access existing accounts, and gain credibility so you can engage with services. However, since your personal data is stored online, it may also be vulnerable to breaches, theft, and hacks.
What Is a Digital Identifier?
There are a couple of different types of digital identifiers. For instance, a DOI (digital object identifier) is a persistent and unique identification number assigned to every document that is published online. However, in a way, every individual who has a web presence also has a digital identifier. Rather than this being a string of numbers, it is data gathered about your web activity and personal attributes.
Main Attributes and Activities of Digital ID
Each digital identity has attributes and activities. An attribute contains information about the subject. This can be further divided into three categories: inherent, accumulated, and assigned attributes.
Inherent attributes are part of a person’s identity that is not influenced by external factors — for instance, your age, date of birth, and fingerprints. Accumulated attributes are ones that are developed over time and may change on several occasions — for instance, your health records and transaction history. Lastly, assigned attributes are pieces of information attached to a person without being part of one’s intrinsic nature. Think Social Security Numbers, custodianship, and so on.
The activities portion of a digital ID refers to what they do on the internet — like search queries, purchase history, social media photos, signed petitions, downloaded apps, geotagging, and cell phone usage.
Don’t Mistake Digital Identity for This
So, what isn’t a digital identity? There are some common misconceptions about digital identity, and we’re going to clear them up for you.
- It’s not a device ID. There are too many external factors for a single device to be attached to somebody’s digital identity. Devices can be used by more than one person, and people tend to break, switch, and upgrade devices on a fairly frequent basis. What’s more, hackers can install malware on somebody’s device to remotely control specific actions.
- It isn’t behavioral analytics. This kind of analytics measures data like clicks, shopping patterns, and navigation paths — however, there is no specific link to a user. Therefore, it cannot be used for identification purposes.
- It isn’t only reliant on personally identifiable information. While PII may be a facet of digital identity, it is not all-encompassing. The reason for this is simple: with security breaches and the illegal selling of data growing more and more common, we can’t assume that anybody’s personal identifiers are safe. Frauds are able to purchase your information and open accounts that are in your name.
What Is Trusted Digital Identity?
A trusted digital identity contains verified attributes that provide a certified link between a person and their unique digital identity. Examples of such attributes include biometrics, verified identification documents, and third-party verification procedures. To create a trusted digital ID, there are typically three steps: capturing verified attributes, verification of the documents, and digitization of the ID.
How Does Digital Identity Work?
A digital ID starts with the collection of fundamental credentials that verify a person’s identity, like a driver’s licenses or a passport. The process of tokenization replaces personal information with randomly generated numbers. Then, the encrypted credentials are used to securely verify a digital ID. For instance, you may need to verify your birth year and name when you make an age-verified purchase. With a digital ID, you can do this without transmitting your personal info — you can access the same services while also retaining your privacy.
How Is Digital Identity Created?
As aforementioned, the three steps of creating a digital ID include capturing attributes, verification, and digitization. Let’s take a closer look.
Capturing
Either remotely or in-store, a user’s identity attributes are captured via ID documents and biometrics.
Capturing ID Documents: The user’s ID information is gathered from an ID document — this might be a driver’s license, a passport, a national ID, a residence permit, and so on. During the process, image analytics (specifically, optical character recognition) extracts the user’s name, birth date, and other relevant data.
Capturing Biometrics: Mobile phones, tablets, web cameras, kiosks, and specialized fingerprint scanners, to name a few, are all biometric capture devices that can be used to capture an individual’s biometric attributes. Some kinds of data that may be collected include facial and fingerprint information.
Verifying
Verification aims to confirm the authenticity of an end-user’s form of ID or biometrics and to validate their claim to identity.
Verifying ID Documents: After a form of ID has been captured, the digital ID system will use dedicated software to verify its authenticity. The cardholder’s personal information might also be extracted in order to automatically fill out a registration form’s fields — which, in turn, saves time for customers and ensures better data accuracy for MNOs.
Verifying Biometrics: First, a reference model or a “template” is stored. Whenever the person thereafter enters biometric data, it is compared to the stored model for authentication.
Digitalizing
After there is a match established between the person’s identity document and biometric data, the digital ID can be created. From then on out, the user may gain access to a service by simply providing their biometric attribute.
What Makes Up a Digital Identity?
Digital identity falls under four main categories of usage: a credential, a character, a user, and a reputation. Through national initiatives, innovations, and other modern projects, digital IDs are slowly becoming more closely-knit with their real-life counterparts. In many instances, there is a blurred line between a physical person and their digital ID — for instance, in the process of accessing mobile devices, visitor management software, and e-commerce histories.
Four Main Digital Identity Interpretations
Credential | Character | User | Reputation |
---|---|---|---|
Name | Social media profiles | Online purchases | Employment history |
Residence | Networking sites | Website visits | Criminal record |
Driver’s license numbers | Career sites | Webinar registrations | Credit Scores |
Factors included in Character and User categories | Dating apps | Email newsletters opened | Reviews and testimonials |
What’s Wrong With Traditional Approaches to Online Identity Verification?
The majority of businesses use some facets of a classic security structure in order to gain reasonable assurance that their online customer’s identity matches their real-world identity. This structure includes:
- A password or a security question that the customer knows
- A badge, a cryptographic key, or another item that the customer has
- Biometric data or something else inherent to the customer themselves
However, there is a major problem with this model: organizations have been disproportionately relying upon the first two categories. Passwords and security questions are easily captured and sold on the Internet. Possessions such as badges, keys, phone numbers, and SIM cards, can be stolen, lost, or damaged.
In Gartner’s 2019 Identity Proofing and Corroboration Guide, it was recommended for organizations to distance themselves from identity solutions that depend on shared private information (i.e., memorable personal data or out-of-wallet knowledge questions).
Benefits of Using Digital Identities in Business
The development of a comprehensive and standard digital ID can deliver numerous major benefits to businesses. Some of the most profound advantages include:
- Processes will become more streamlined. Users are required to store or memorize an abundance of usernames and passwords, which can be very frustrating. This is currently a point of contention between consumers and businesses. This hindrance is easily removed by the use of a singular and reliable digital ID.
- Access will increase. With a standard digital ID, more records and services can be accessed remotely and digitally. When digital IDs are designed to be compatible with multiple country’s standards, service access can go beyond borders — thus, making international travel and commerce more accessible as well.
- A business’s understanding of its consumers will increase. When a digital ID is able to accurately map out a consumer’s real-life identity, businesses will be able to carry out more seamless multi-channel marketing and personalized promotions.
- Security will improve. Personal information, PINs, and answers to security questions are often compromised — and this can have severe consequences for the victims. With a robust digital ID scheme, this risk is lessened due to the elimination of these easily-compromised verification techniques.
So, what happens if a business ignores the pressing need for digital IDs? Potential consequences include bogged-down processes, limited understanding of consumers, poor security of PINs and passwords, and limited remote access to services.
Problems of Digital Identity
While digital identities have many advantages, they aren’t perfect yet. There are two main problems in existence — a digital ID isn’t universal and accurate data is not always equated with an accurate identity.
Not Universal: Various digital IDs can only work in different contexts. An individual’s identity as a character will not be enough to register to vote or to transfer money from a bank account. However, using identity as a credential won’t tell a hiring manager if a job applicant is suitable — for that, you’d want to look at the identity as a reputation. Remember, there are four contexts that digital IDs can fall under: credential, character, user, and reputation.
Digital Identity Theft
When your digital identity is stolen, a plethora of negative consequences could happen:
- Your financial accounts could be compromised.
- New credit cards and bank accounts can be opened in your name.
- Somebody may file false tax returns under your name and receive a fraudulent refund.
- The thief may commit criminal identity theft.
- Your social security account could be compromised
- Your information could be sold to other people.
How Your Digital Identity Information Can Fall Into the Wrong Hands
There are many ways that your digital ID could fall into the wrong hands, including:
- Purchasing items from unsecured sites
- Using public WiFi networks
- Sharing geotagged posts on social media
- Using one password for multiple accounts
- Accepting privacy policies without reading them first
- Accepting friend requests from strangers on social media
- Data breaches
If you want to protect your digital identity, follow these best practices for your online activity:
- If you must use public WiFi, encrypt your activity with a VPN.
- Create new and strong passwords for all of your online accounts.
- When possible, use Two-Factor Authentication
- Don’t post personal information on public sites or social media.
- Don’t store passwords in your browser.
- Monitor your credit report for unusual activity.
Online Identity ≠ Real Life Identity
Just because somebody has access to account credentials, their real-life identity doesn’t necessarily correspond to who they are claiming to be. When businesses ask for memorable information that can be stolen, they neglect to ask, “Are you actually who you say you are?” Identity verification, when used properly, will confirm the link between an online identity and a real-life identity.
What Is Digital Identity Management?
Digital identity management is how a business collects, stores, and accesses its customers’ information. So, why is this important? Currently, data is one of the most valuable commodities in the world — however, along with the value comes many risks. For businesses that gather and store consumer data, it is vital to win and maintain trust through gold-standard security measures: collecting only what’s needed, encrypting and hashing data, limiting access to sensitive customer information, and enabling multi-factor authentication.
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How Companies Can Take Advantage of Digital Identity Development
Businesses can help usher in digital identity developments and enjoy the associated benefits ahead of the curve. Four actions a company can take to join this digital revolution include:
- Creating an extended definition of the digital ID. Rather than using one context of digital ID for security, another for HR, and yet another for marketing, companies can consider ways to consolidate these forms.
- Break free of a silo mentality. This kind of mentality refers to when a business withholds information from certain departments within the company. Businesses should consider ways to share information across the entire company — thus, they can work together to enhance digital security, understand customers, and develop cross-selling opportunities.
- Adopt relevant technology. Using automated software can help your business streamline the expansion of digital identity — for instance, you can speed up the onboarding process that new employees have to go through.
- Setting digital ID values. Determine the balance that your company makes between utility and privacy.
Real-World Examples of Digital Identity Use
There are numerous countries that are working on making digital identities for their citizens — for instance, Singapore, the EU, Canada, the Netherlands, Estonia, and Thailand. And this isn’t even the full list — check out these case studies to learn more.
Here are a few examples of digital identity use in the real world:
Singapore: The country is integrating biometrics within its National Digital Identity program. This way, businesses and residents within Singapore may complete digital transactions within the private sector and the Government. Fingerprints and facial recognition will be incorporated to reduce the need of filling out forms.
The EU: In 2018, it became permissible for electronic identification to be used across borders. EU citizens are able to perform transactions, share information, and access services with digital ID across the entire Union.
Estonia: This nation has one of the most developed digital ID systems in the world. Every citizen has an official digital identity, and they may provide digital signatures with a Mobile-ID, a Smart-ID, or an ID-card.
Summary
Even though digital identification has its shortcomings, modern enterprises and even governments are turning to developing these systems more and more often. As digital IDs continue to develop, companies will be able to strengthen defenses targeting online fraud, easily maintain KYC and AML compliance, and foster a sense of trust in their online space. Digital identification is here to stay.
FAQ
Why is digital identity important?
Such systems are able to balance privacy, security, and civil liberties while also making online identification a more streamlined process.
What is digital identity verification?
Computer technology validates a user’s identifying traits and then verifies that the person is who they say they are.
What documents can be used to verify identity?
Passports, residential permits, and driver’s licenses are examples of verification documents.
How do identity management systems benefit a company?
Companies can understand their customers better, increase remote access to services, streamline processes, and improve security.
What are the functions of digital identity?
The four functions of digital identity are credentials, user information, character information, and reputation.
What does it mean to have a digital footprint?
Your digital footprint is what you leave behind when you use the internet: app usage, emails, Skype calls, social media photos, and so on.