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Digital Identity: An Evolving Ecosystem

February 2022
IoT & Emerging Technology

Scarlett Woodford

Principal Analyst

The Complexity of Digital Identities

Digital identity is a widely debated concept that is constantly evolving and becoming increasingly entwined with allied areas, such as security, privacy, and management of identity-related data. NIST (National Institute of Standards and Technology) in the US refers to digital identity as an online persona of a subject or, even more simply, a unique representation of a subject engaged in an online transaction. While this is true, digital identity presents a more complex picture when current multi-use ecosystems, heavily dependent on the sharing of identity credentials, are considered. Such an identity is made up of identifiers and patterns that are unique to the subject of identity, which are broadly described as attributes.

Typical Identity Network Tasks

  • Authentication: A proof of an assertion (ie, identity data). This is typically done through credentials such as usernames, passwords, PINs, or biometrics, single or multiple factors in that authentication process. 
  • Authorisation: Association and assertion of rights with a given identity/role/transaction. This is typically done through assigning roles, independent of a given end user. However, this can be done at the transaction or device level. 
  • Verification: Check of an identity or piece of identity data (ie, an identity document such as a passport). 
  • Anti-fraud: Anti-fraud checks are increasingly being used during registration or transactions that have an identity element. 
  • Attribute Enrichment: If required, additional attributes can be requested from external or internal sources. These may require further verification. 
  • Rules of Engagement: A rule applied to an identity event (ie, under condition X, user Y can perform action Z). 

An Evolving Ecosystem

The digital identity landscape has multiple interwoven elements bridging privacy/security and usability aspects contained in a digital identity solution. These different elements shape the trends and illustrate where the identity offerings are maturing in the market. Identity is increasingly viewed as an ecosystem rather than an end product; therefore, new identity systems will heavily depend on both the foundations (ie, federated and/or decentralised identity models) and the technology linked to process layers (ie, biometrics, AI, ML). At the core of these systems will be UX and simplicity/convenience of use. Their success will also depend on how different components are integrated in quite possibly an all-in-one solution.

Security a Core Benefit of Digital Identity 

Digital identity has a significant impact on is B2B and B2C transactions, by bridging the authentication gaps to establish trust networks. By eliminating the reliance on passwords, they reduce the risk of data breaches and fraudulent transactions. Moreover, business can reduce costs associated with switching to a federated model, whereby their digital identities are assigned in different networks.

Verification a Key Digital Identity Trend

Verification is one of the key areas affecting the digital identity market, mostly owing to the catalyst power of the pandemic digitalising transactions across all industries and business verticals. The pandemic did not only boost the already existing needs underlying digital identity use, but also helped spread them into different and previously non imminent areas such as healthcare. Testing the governments’ preparedness to provide access to public services, solutions from vaccine passports to stimulus payments needed to be developed and deployed quickly and securely. Verification spend will exceed $16 billion in 2026, from $9 billion in 2021. 
► Digital Identity Market Research

Our latest research found:
  • Revenue for digital identity vendors will exceed $53 billion globally in 2026; doubling from $26 billion in 2021. 
  • the increased demand for digital onboarding frameworks in the face of the ongoing pandemic will accelerate the uptake of digital identity services.
  • Verified digital identity, where identities are confirmed as genuine using verifiable credentials, will be vital for improving fraud mitigation.
  • The US is significantly lagging behind in digital identity terms; accounting for only 7% of global digital identity revenue in 2026. The US’ lack of national identity schemes and coordinated strategies is a major limiting factor.

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