Digital Identity: market opportunities

Many of the official documents I’ve seen and the recent discussions I’ve had about Digital Identity — about current challenges and global opportunities — made me realise that two of the main aspects of Digital Identity, let’s call them person and persona, are often used interchangeably. This confuses things quite a bit.

The digital person

The first aspect — a person-focused Digital Identity — is usually built on top of national databases (e.g. population registers) and linked to official documents (e.g. national identity cards and passports). It is most often leveraged for high assurance use cases, such as state services, online banking, and regulated industries to verify that I am indeed who I say I am. Depending on the level of digitalisation and private-public cooperation in the country, it can be used by other private sector enterprises as well.

This type of identity includes more information than just the name and a personal identification number, of course. For every individual, the service provider collects additional information based on the nature of the register itself (e.g. one’s home address, vehicle registrations, etc.) and on one’s use of the services over time.

There are usually rather strict rules in place about how this information can be used, and by whom. The person who is the subject of this data has some or a lot (in the case of Estonia) of visibility and some control over the use of the data based on national or international regulations (e.g. GDPR), but traditionally (yet not necessarily preferably) they wouldn’t be called an ‘owner’ of this data and they would have very little control over the collection and storage procedures and rules for data that concerns them.

We can also make a distinction between a primary and a secondary data layer. The primary layer includes the information that is added or changed through strict procedures and is accessible as is — this includes my name, date of birth, home address, and such. The secondary layer includes calculated data — for instance, my credit rating. This information changes over time, there’s always an audit trail to verify and confirm as needed, and the data might not be shared even with authorised partners or the individual in question.

The digital persona

The second aspect — a persona-based Digital Identity — is more holistic, yet potentially more ephemeral, too. This is the type of identity that is used for e.g. social media. One individual can have different and potentially overlapping personas for different platforms or even on the same platform (although that is sometimes frowned upon by platform providers). This resembles ‘offline’ personas used within communities — that is, with your family, friends, and neighbours. We all have multiple personas.

Compared to the person-based digital identity, this is more about an impression rather than cold facts. Identity curation becomes much more important here and while building the avatar might take time, the individuals themselves have more control here (compared to e.g. ‘building your avatar’ for personal credit ratings).

The individual can link these personas (e.g. by choosing the same username) between platforms used for different types of content and interactions, thus creating a personal brand and creating a sense of continuity. Many of these platforms have a built-in identity verification system (the ‘blue check marks’) which links to the first identity aspect, but an individual’s overall control over their identity on any such platform is still weak. The visible (or primary) identity can be designed, but the invisible-to-the-individual (or secondary) identity cannot be designed through interactions in a straightforward manner, and it constitutes, in essence, the price one pays to use these platforms.

The market potential

The market for digital identity solutions is estimated to be in tens of billions USD, nearly $50B by mid-decade, yet I would posit that these calculations are mostly based on current and adjacent use cases and that the market potential is actually much higher than that. There are several types of Digital Identity services that have not yet been explored in a meaningful way — not because the smarts are not there, but because the right conditions are not there. Yet.

The potential is partially hidden in novel Digital Identity services that would replace current, ahem, digital versions of ‘traditional’ tasks (e.g. document signing) that are often unreliable, inconvenient, and insecure. Occasionally, even laughable. The potential is also hidden in responding to novel needs that are (temporarily) answered by make-believe solutions or that are yet to be answered at all. Lots of theatrics here at the moment.

Individual and enterprise requirements

It seems to me that when we discuss potential benefits from the novel and improved Digital Identity solutions, then from the individual’s point of view, we are talking about at least these requirements:

• Prove one’s identity online to be able to use online services
• Prove one’s identity when communicating and creating content online
• Curate more aspects of one’s visible online identity (the persona)
• Control more aspects of one’s invisible online identity
• Control and leverage the earning potential from the use of personal data

The enterprise view, on the other hand, covers at least these benefits:

• Decrease the number of identity theft cases
• Improve the security aspects of remote working arrangements
• Improve the customers’ perception of the company’s trustworthiness
• Attract more users by providing a more natural sense of belonging
• Invite more users to build richer profiles instead of fragmenting their online presence between rivalling platforms

Both aspects of Digital Identity have been covered as part of these objectives. As the common public narrative often makes a mess of the mix, there is an opportunity for a bold service provider (and perhaps a future market leader) to create a significantly improved and clarified narrative, redefine the market to match their strengths, and ensure customer needs are both met and anticipated.

Who’s the paying customer here?

Depending on the specifics of the improved/reimagined Digital Identity services, the potential paying customers include a combination of at least the following:

• Service providers
• Employers
• The state
• Individuals (for themselves)
• Individuals (for someone else)

Each of these segments requires differently packaged services and a different marketing approach, obviously. While all five segments have significant growth potential, it seems to me that the two I’ve marked in bold are the ones with perhaps the highest potential —currently largely unused and with an abundance of low-hanging fruit. I might be able to share some thinking in a follow-up post, but let me finish this one with a visual overview of some of the Digital Identity opportunities and challenges.