Voice of the Industry

Are digital IDs the future of user verification?

Friday 14 July 2023 06:52 CET | Editor: Irina Ionescu | Voice of the industry

Vicky Bindra, Chief Operations and Product Officer at Nuvei, discusses the future of digital IDs and how understanding their full potential can help organisations enhance privacy, security, and user experience.

The number of users joining digital ID schemes globally is skyrocketing. It is set to increase by more than 50% over the next few years, from 4.2 billion in 2022 to 6.5 billion in 2026. At the same time, identity fraud is down 17% from 2022 – a significant decline, which can be attributed to the persistent efforts of the financial services industry to keep criminals at bay. 

While digital IDs can unlock access to online and physical services like banking, travel, rations and healthcare, their success varies worldwide. As with any new digital technology, there are several risks involved concerning security, privacy and interoperability. To combat these, digital ID programmes must prioritise a consistently positive user experience and cultivate a strong sense of trust.

Why now?

There are 5.18 billion internet users worldwide, amounting to 64.6% of the global population. This number is currently growing at an annual rate of almost 3%, with YoY growth even higher in some developing countries. As the world becomes increasingly digital, the need for secure and efficient digital identity verification has never been greater.

In contrast to a physical ID, such as a driving license or passport, a digital ID is a form of identification that can be authenticated remotely over digital channels. This could include government-issued IDs as well as more widely used methods of ID verification, such as 3DS in Europe. As more services and payment methods become available online, secure but frictionless authentication is even more crucial for businesses to combat fraud.

Centralised ID programmes – Success stories

India, Estonia, and Sweden are among the first countries to successfully implement a centralised digital identity system. This is where a government-issued digital ID serves as the primary means of authentication and identification. While other approaches to the digital ID exist, such as Federated Identity Systems, the centralised system has seen the most success. 

In India alone, there are roughly 1.2 billion people with live digital IDs registered in the Aadhaar programme, which began in 2009. As of 2021, India’s digital ID programme has provided 85% of its population with access to financial services, when just a decade ago only 20% had access to formal banking. 

The e-ID in Estonia is used by more than 90% of the population. The portal is visited by 10,000 users every day and is used to vote, pay taxes (94% of Estonians now pay their taxes online), and access more than 160 government services. Private-sector entities, such as banks and telecommunications companies, also offer services through the state portal, providing the incentive to invest in maintaining the infrastructure.

How can Digital IDs help with customer authentication?

Digital ID technologies could be the future of online authentication, mitigating the risks associated with unauthorised access, data breaches, and identity theft. Examples could include: 

  1. Single Sign-on (SSO): Allows users to log in once with their digital ID and gain access to multiple apps or services without re-entering their details. This improves user convenience and reduces the burden of managing multiple authentication credentials. An example could include super-apps, such as China’s Alipay and WeChat, or digital wallets like Google and Apple Pay – payment methods that are hugely popular with consumers across the globe. These success stories highlight that anti-fraud measures can be both frictionless and secure, to meet the needs of both the merchant and the end-user.

  2. Two-Factor Authentication (2FA) and Multi-Factor Authentication (MFA): Digital identity technologies enhance authentication security by implementing additional verification layers beyond traditional username/password combinations, such as SMS codes and email verification. Two-Factor Authentication has been widespread since PSD2, which introduced SCA, followed by 3DS and 3DS2. An experienced payments provider would have the capability to ensure businesses and consumers are protected from fraud, while still providing a seamless payment experience. 

  3.  Mobile Authentication: Digital identity technologies for mobile leverage biometrics – such as fingerprint or facial recognition - device-specific identifiers, and secure elements to authenticate users. Scenarios can include unlocking devices, authorising mobile payments, or accessing mobile banking applications.

  4. Application Programming Interfaces (API) and Identity Providers: Identity providers act as trusted intermediaries, authenticating users and providing them with access tokens or credentials that can be used to access multiple services. This simplifies authentication for users and reduces the burden on service providers to manage and secure user credentials.

  5. Blockchain-based Authentication: Blockchain technology can be used for authentication by creating decentralised and tamper-proof digital identity systems. Users can control and prove their identity without sharing unnecessary personal data, enhancing privacy and security.

By adopting these technologies, organisations can provide frictionless and user-friendly authentication experiences while maintaining a high level of security.

Undoubtedly, there are risks involved as digital ID adoption grows internationally. These include user privacy, security breaches, regulatory compliance and issues with interoperability. Addressing these challenges is crucial for improving customer experiences in the digital identity space. Organisations and policymakers need to prioritise user-centric approaches, focusing on privacy-by-design principles, robust security measures, streamlined user experiences and interoperability standards.

What could the future look like?

While digital ID adoption has seen success in some regions, in others such as the United Kingdom, existing digital ID programmes have not yet captured all potential value. As the digital age continues, it is crucial to ensure your payments solution can provide secure yet frictionless ways for consumers to authenticate themselves online. At Nuvei, we customise merchants' payments performance via AI and machine learning, qualifying as much traffic as possible and understanding which flags to challenge.

Looking to the future, users are prioritising speed and convenience when making online payments, with mobile commerce reaching 80% of total ecommerce sales in some regions. The next evolution in mobile phone authentication could happen in the form of a token that permanently exists in mobiles, enabling constant authentication. This would allow users to prove their identity at any time, further streamlining the checkout process.

In the digital age, the demand for digital IDs is rapidly increasing. However, realising their full potential relies on organizations emphasising privacy, security, and user experience as essential pillars to create trust and deliver seamless, secure digital experiences.



About Vicky Bindra

Vicky Bindra has been the Chief Operations and Product Officer for Nuvei since November 2022. He is responsible for The Strategic Product function and the Operating Processes of the company, including Risk and Compliance. Vicky joined Nuvei from FIS, where he was responsible for the Strategic Product function across FIS, identifying and creating competitive products and propositions for merchants, banks, fintechs, insurance, and investment companies.  



About Nuvei

Nuvei (Nasdaq: NVEI) (TSX: NVEI) is the Canadian fintech company accelerating the business of clients around the world. Nuvei’s modular, flexible and scalable technology allows leading companies to accept next-gen payments, offer all payout options and benefit from card issuing, banking, risk and fraud management services. Connecting businesses to their customers in more than 200 markets, with local acquiring in 45+ markets, 150 currencies and more than 600 alternative payment methods, Nuvei provides the technology and insights for customers and partners to succeed locally and globally with one integration. For more information, visit www.nuvei.com 

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Keywords: digital identity, identity theft, identity verification, online fraud, fraud detection, identity fraud, biometrics, biometric authentication, merchants, artificial intelligence, machine learning, online security, cybersecurity, online authentication, two-factor authentication, multi-factor authentication, PSD2, 3-D Secure, SCA, API
Categories: Fraud & Financial Crime
Companies: Nuvei
Countries: World
This article is part of category

Fraud & Financial Crime


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