CV Madhukar
Investment Partner

Digital Identity Can Be the Rails for a New Revolution

December 11, 2017

Who are you?

For many of us, answering this question requires nothing more than flashing a driver’s license, pulling out a passport, or providing a Social Security number. But what if we didn’t have a means of proving who we are? We wouldn’t be able to perform such basic tasks as voting, opening a bank account, receiving government benefits, or even enrolling our children in school.

It may sound like a bad dream. But more than 1 billion people around the world, or one in seven individuals, lack an official identification, according to an estimate from the World Bank. Even for those who have official identity credentials, they are often paper-based artifacts not suitable for a 21st century digital economy.

The challenge for all of us is how to bring these unidentified people into the global digital economy in a way that gives them agency, security, and control.  The good news is that a solution is in the making.

Thanks to the spread of the internet, the ubiquity of mobile phones, and advances in technologies such as biometrics, an individual can uniquely identify and authenticate herself digitally. Further, a stack of public and private sector applications can enable a wide variety of use cases not available in the past. The upshot: Digital identity, if done right, has the potential to empower billions of people to engage with the modern world.

Think about the Industrial Revolution and the role the steam-powered railway played in ushering in the industrial age, serving as the ‘rails’ that connected distant people and catalyzed trade between them. Today, we’re on the cusp of another revolution: the revolution of inclusion. And digital identity will be the railway of the 21st century economy – the rails that can enable trusted, secure engagement in the digital and physical world.

While still in its early stages, digital identity is already spreading as governments around the globe start to implement identity programs and businesses use data to identify and authenticate their customers. The most widely-cited example is India, where the Indian government has collected the fingerprint impressions and iris scans of more than one billion people to create Aadhaar, the world’s largest biometric digital identity system. Aadhaar has paved the way for millions of people to open bank accounts, while helping the Indian government transfer billions of dollars in funds to beneficiaries. Or Estonia, which has created an e-residency program to greatly simplify many processes for non-residents.

The private sector, too, is increasingly taking advantage of digital identity. Several financial services are using new sources of data to provide services to ‘thin file’ customers. In India the development of technology layers, above the identity layer, is setting up the possibility of realizing major inclusion gains by enabling eKYC, seamless and low-cost payments systems, and driving innovations in sectors from healthcare to education.

The Dangers of “Bad” Digital Identity

But while digital identity offers enormous potential benefits, when mishandled it can also cause tremendous harm. As digital identity becomes a prerequisite for engaging in modern society, those who are excluded from identity systems could become increasingly marginalized. At the same time, mandatory identity schemes can result in unintentional exclusion. Usage of digital identity to provide basic services, such as food rations or old age pensions, must create viable alternatives to ensure that no one is denied benefits if the technology were to falter. Identity systems can mitigate, create, or shift vulnerabilities, and this needs to be monitored carefully.   

Further danger arises when governments, businesses, and other institutions use digital identity schemes to exploit, not empower. The risks of surveillance and predatory commercial practices can be amplified by these powerful digital tools. Meanwhile, data breaches and hacks have become a frequent affair, underscoring the need for privacy and identity protection.

These are some examples of the risks that digital identity can create for both issued identity and the “de-facto” identities we create through our digital activity. Such risks need to be better understood, prevented, and remedied. Technological innovations, such as zero-knowledge proofs and tokenization, will be key components of the solution. Much work is also required to create the right legal and regulatory environment to protect individual privacy and security.

Omidyar Network begins work on Digital Identity

As a philanthropic investment firm dedicated to harnessing the power of markets to improve people’s lives, we at Omidyar Network want to ensure that identity systems are designed to expand economic and social inclusion for everyone.

That’s why we decided to work on digital identity. In the last two years, we’ve taken a series of steps to research the landscape, begin to define “good digital identity,” and seek opportunities to invest in for-profit and nonprofit ventures that put individuals at the center of their digital identities.

Research Provides the Foundation for Omidyar Network’s Work

On the research front, we commissioned international development organization IDinsight to study the deployment of identity systems and to understand their impact on people in India. That work resulted in a State of Aadhaar report, which highlighted critical knowledge gaps in the public’s understanding of the large-scale identity program.

We also provided the Indian School of Business funding to launch the Digital Identity Research Initiative (DIRI), which will commission studies on key policy questions with respect to the implementation of Aadhaar.

To gain an understanding of how citizens are interacting with identity systems, we commissioned Caribou Digital and the International Institute of Information Technology, Bangalore to conduct the Identities Project, a collection of in-depth interviews with 150 individuals across three locations in India.

Omidyar Network’s Point of View on Digital Identity

In February 2017, we joined a broad coalition of global partners led by the World Bank’s ID4D initiative to endorse the Principles for Identification for Sustainable Development. These shared beliefs recognize that individuals “are at the center of identification systems and have the right to know and exercise appropriate control over how their data is collected, used, stored and shared.”

We also set down our views on ID and Privacy. Omidyar Network believes digital identity can lead to empowerment only if it positions the individual in control of his or her identity, and is built with checks and balances to protect personal information.

With these principles in mind, we now want to use our resources to support entrepreneurs, in civil society and the private sector, who are on the cutting edge of digital identity solutions committed to promoting privacy, data control, and inclusion. 

Our first investment was in Digi.me, a U.K.-based company that puts individuals in control of how and when their personal data is shared with third parties. We’re also interested in supporting entrepreneurs who are building on the India Stack to develop apps that empower citizens in a secure, cost-effective, and privacy-enhancing manner.

As we continue to engage in the revolution of inclusion, we look forward to working with governments, policymakers, non-government organizations, businesses, and other stakeholders. Together we can build the kind of digital identity rails that will expand economic and social opportunities for all.

 

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