Digital Identity: What's Driving the Market in 2029?

Digital identity systems have become integral to modern society, enabling individuals to access a wide range of services securely and conveniently. As digital interactions increase, the need for robust identity management solutions has grown, leading to the development of various models for handling digital identities.

Juniper Research classifies these into three primary categories: centralised, federated, and decentralised identity systems. Each model offers unique advantages and challenges, reflecting different approaches to security, privacy, and user control. Understanding these forms of digital identity is crucial for navigating the evolving digital landscape and ensuring safe and efficient identity management.

Centralised Identity

Centralised identity systems store digital identity credentials in a single location, used for a specific purpose, with the identity provider handling authentication. A common example is a digital driving license issued by a government. These systems are simple to manage and allow easy access to information, but they pose significant privacy risks due to potential data breaches and often rely on outdated government IT infrastructure.

Federated Identity

Federated identity systems also store identity credentials centrally, but these credentials can be used across multiple systems. This model supports Single Sign-On (SSO), allowing users to access various services with one set of credentials. Examples include India's Aadhaar system. Federated identity systems adhere to principles like user control, minimal data disclosure, and competition among providers. They enhance security and convenience, especially for financial institutions complying with regulations like PSD2 and GDPR. Technologies like JWT and SAML facilitate secure credential sharing across platforms.

Decentralised Identity

In decentralised identity systems, individuals create and manage their credentials, stored in a distributed manner such as on mobile devices. This model replaces traditional logins with cryptographic keys and may use blockchain technology. Users control their information through identity wallets, sharing only necessary details. For example, proving age without disclosing a birth date. Public and private keys in the wallet allow secure interaction with the distributed ledger, ensuring privacy by keeping identity information off the ledger.

Source: Global Digital Identity Market 2024-2029

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