The Crucial Role of ID Verification in the Digital Economy

At its core, ID verification tools prove your information – name, address, age, phone number – is valid and linked to you. Many different technologies can be used to achieve that one goal. The author, the CEO of Mastercard, explores how the technology works, where it’s used, and the potential pitfalls of digital IDs.

As millions of small businesses opened new online storefronts during the pandemic, a set of technologies toiled behind the scenes to make all those websites and sales and deliveries possible.

One of the most significant of these technologies, and perhaps most unsung, is identity verification. It’s software that’s been around for decades that proves you are who you say you are. Every time you make a purchase online — and this happens billions of times a day, all over the world — an ID verification system authenticates you.

Without this simple concept, the digital economy can’t operate. All those newly digital businesses, from fashion designers to bakeries, couldn’t have told the difference between their customers and scammers.

There are, of course, many kinds of ID verification systems, and these technologies will become even more important as the digital economy grows. ID tools will be needed to keep fighting the rise in cyberattacks and online scams. And they’ll make it faster and easier for people to access the things they need online. Buying on e-commerce sites, accessing government services, managing your money — in many countries, ID verification is already needed for all these activities.

But as ID tools become more critical, it will become just as critical to make them available to whoever needs them. Millions of people lack access to digital tools. If they can’t verify their IDs online, they’ll be left out. Finding more ways to empower small businesses with ID verification and providing consumers with digital IDs will expand opportunities for millions of people and make the digital economy more dynamic, more inclusive, and more secure.

That’s the vision — using this technology to make the digital economy as vibrant and welcoming as your local farmers’ market or coffee shop.

What Is ID Verification?

At its core, ID verification tools prove your information — name, address, age, phone number — is valid and linked to you. Many different technologies can be used to achieve that one goal.

One of the most common is identity verification software, as I mentioned earlier. It can be used, for example, to verify purchases on e-commerce sites. This software proves your ID is using data like your log-in, password and device IP address without you needing to input any new information. For instance, Mastercard Identity works with the travel site FlightHub to evaluate millions of online bookings in real-time and Greenwood Bank to ensure it’s onboarding real customers.

Other flavors of this technology include smart ID cards, which are physical cards with a chip built in that can store your ID or medical information. And there is a digital version of your driver’s license or passport that can live on your phone.

Lastly, ID management systems, like Apple ID and Google Identity, offer one set of log-in credentials you can use across many websites and services.

Many national governments have leaned heavily into this technology to modernize and digitize their services. One of the most advanced is Estonia, which provides every citizen with a state-issued e-identity they can access using a physical smart card, mobile app or website. These e-IDs can be used to shop, pay bills, sign contracts, access medical records and even vote online.

Singapore’s Singpass national ID app lets people connect to government services and many businesses. It uses a biometric thumbprint or face verification, enabling people to verify their identities across all kinds of digital activities, including banking, food delivery and insurance.

Another major player in this space is India, which runs the world’s largest digital ID platform, called Aadhaar. Citizens can share their ID information using a QR code, which is kept in a mobile app, or on the back of a physical paper or plastic card. Millions of people in India have used Aadhaar to open new accounts with banks and mobile phone providers, accessing digital services that before were out of reach for them.

Mastercard works with both India and Singapore to secure these ID systems, making sure people’s data is protected.

A Path Toward Digital Inclusion

As we’re seeing in India, ID verification has quickly become a powerful tool to spread digital and financial inclusion. Once someone can share their secure and authenticated identity in a digital space, many more opportunities can open for them. There is still a huge need to do more, with 850 million people globally without any formal IDs — digital or otherwise.

One small but promising effort to increase access to ID tools is happening in Austin, Texas. There, researchers at the Dell Medical School are developing a new platform to help people experiencing homelessness get their identities back.

In many cases, these people have their physical IDs stolen, making it difficult for them to access basic services, like government aid and medication. It also results in them getting misdiagnosed repeatedly when going to hospitals, since providers don’t have their medical histories and often have to start from scratch during each visit.

The Dell Medical team created a way for people to verify their IDs using their phones’ biometrics — like a thumbprint. (Researchers have noted that most homeless people in the U.S. have smartphones, using them as critical tools to access the resources they need and stay connected to friends and family.) Their IDs can be accessed online or on their phones, with the data stored using a decentralized blockchain ledger so it can’t be lost or hacked. Critically, it’s the users who control their data and must explicitly consent to sharing it.

This project is still in development but points to the promise of identity verification for broader social benefit.

Potential Pitfalls

The technology is, of course, only part of the story.

While ID tools are widely adopted in many parts of the world, some worry certain forms of digital ID, like a virtual version of your driver’s license, could result in all your interactions and transactions being logged and monitored without your consent.

As is always the case with valuable personal information, many have also raised concerns about creating one centralized place where all your ID and health data can be stored, creating an enticing target for hackers.

It’s imperative that ID verification is used to empower people and build trust in the digital economy — not erode it. The best way to do that is by making sure security, transparency, and consumer privacy are at the heart of these technologies. We need to ensure people can control their data and approve access to it. Directing ID tools in the right way, we can make sure consumers and small businesses have trust in both sides of a digital interaction.

It’s also important to demystify what ID verification is and how it’s used. Estonia and Singapore’s ID system have been around for 20 years, and India’s started 14 years ago. The 3D secure authentication standard for credit and debit card transactions is even older, coming out in 1999. This technology has proven its value over decades.

ID verification can be used to increase privacy, not take it away. For instance, if someone needed to confirm their age to buy alcohol, they wouldn’t need to share all the information on a typical driver’s license — name, age, address, photo. Using ID verification technology, confirmation would exist as a simple yes or no question — is this person older than 21 or not? And that’s the only information someone would need to share.

A Look to the Future

We’ve all seen the benefits of ID software during the pandemic — enabling commerce to continue even when merchants couldn’t see their customers face-to-face anymore. Continuing to hone this technology will help businesses grow, and ultimately build resilience for people and communities, helping them withstand the next crisis.

The work to build this technology continues because so many of us see that promise. Much more is possible and much more is already happening.

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