(THIS ARTICLE IS MACHINE TRANSLATED by Google from Norwegian)
Co-author: MUMBAI and Olivia White
Worldwide, over 4 billion people have access to the Internet and spend an average of about six hours a day on Internet-based appliances and services. In Thailand and the Philippines, average daily usage is 9,5 hour, while in the United States, 26 percent of the population is connected to the internet "almost constant". Within 2022, another one billion people are expected to be Internet users. But as we embrace the digital world, navigating it in a safe, efficient and personal way is becoming increasingly complicated. A promising solution to the problems has already been implemented in some countries: electronic identification.
The benefits of Electronic ID – the digital side of physical identification – is many. For example, most Internet users have trouble keeping track of their digital tracks. On average, a single email address is associated with 90 Internet accounts, a number that doubles every five years. Then it is easy to understand that 25 percent of users forget at least one password every day, and that about a third of all calls to the bank relate to issues of recovering misplaced or forgotten passwords.
Nearly one billion people in the world lack identity cards.
A carefully crafted electronic ID can also help protect customers during data attacks on the consumer industry. Only in the past two months has security failure been reported by the Marriott hotel chain and the user-oriented website Quora. This means that personal information about hundreds of millions of customers has gone astray. As the scale of hacking increases and the procedures become more sophisticated, the need for better security is evident.
But perhaps the most compelling argument for electronic ID is also the most basic: People in developing countries need it to prove who they are. According to the World Bank's ID4D initiative, nearly one billion people are missing a legitimate identity card. This makes it difficult – or impossible – to vote, get a bank account, access food stations and buy real estate. Of the 1,7 billion adults who are currently without a bank connection, 20-30 per cent report missing documentation on their own identity as the main reason.
Since one realizes the problem – and the potential – several countries are in the process of implementing electronic ID in one form or another. For example, India's Aadhaar program has given over 1,2 billion residents a biometric identity card, which is used in the distribution of public goods. In Estonia, 98 percent of the population has an electronic ID, and 99 percent of public services – including voting by choice – are available online.
The topic is emerging more and more frequently on the agenda of development and aid work: In Africa, representatives from governments, business leaders and aid and development agencies meet annually in the ID4Africa forum, which promotes "robust and responsible ID ecosystems".
A digital ID system can allow discrimination and unfair distribution.
Businesses – with the financial services and technology industry at the forefront – are taking steps to develop digital ID systems. For example, since 2003, an association of banks in Sweden has used BankID to authenticate digital transactions, and the system has since been used by the government to streamline access to public services and medical records.
But digital ID programs have so far had mixed success. While a few have been implemented on a large scale, many have barely even achieved modest use. Most of the world's electronic IDs are limited in scope and utilize only some of their many economic, political and social features. Electronic ID could play a far greater role in the way individuals and institutions interact with each other.
Successful digital ID systems can create significant financial gains for individuals, businesses and government institutions. As we recently documented in a report, electronic IDs have the potential to reduce fraud, limit customer start-up costs, stimulate the use of financial services, and open the door to customers who have so far had little access to banking services. They can also encourage development by enabling digital talent development and streamlining hiring procedures, thereby increasing workforce participation. Overall, extensive use of electronic ID will, in our opinion, contribute to financial gain equivalent to three percent of GDP in a typically well-developed economy, and as much as six percent in a typical emerging economy.
However, digital ID technology can be used for both benefit and harm to society: Weak systems pose a risk, and without control and design principles, a digital ID system can give administrators tremendous power and enable discrimination and unfair prejudice. To reduce the risk, countries must develop solid data protection and privacy laws, as well as robust penal and security measures. Safer registration and authentication – such as electronic cards, cryptography and biometrics – helps, but clear political control will be crucial.
Nevertheless, even though the challenges are real, our research shows that the economic, social and political benefits are simply too great to ignore. If governments and software developers are aware of the risks and are minimizing them, electronic ID can become a key to inclusive growth.
White is a partner in McKinsey & Company's division in San Francisco. © Project Syndicate
