Digital Identity and Payments: Synergies for Enhancing Public Services and Economic Opportunity
Billions of people globally do not have a digital identity that allows for simple and secure identification and authentication online.1 In an increasingly digitised global economy, this is an important gap to close because ready access to digital services can be a critical enabler of financial inclusion and economic development — even developed economies could see a gross domestic product (GDP) uplift from deploying digital identity systems.
By providing individuals with a verifiable means of proving who they are, digital identity systems can unlock access to essential services and economic opportunities for those in urban or remote communities. Governments can harness digital identity to deliver services more efficiently (while reducing frictions like fraud), and companies can leverage digital identity to comply with identity-related regulations more efficiently, improving their service to customers. The COVID-19 pandemic amplified the need for digital identity, particularly given the high volumes of benefits being disbursed to people and small businesses.
Some countries and regions are working on implementing systems that go beyond basic identification to offer enhanced functionality, security and user control. Trust is crucial for the adoption of all digital identity systems because it directly impacts users’ willingness to participate and share their personal information. Without trust, individuals may be reluctant to use the systems, fearing the potential misuse of their data and breaches of privacy. Trust can encourage citizens to engage with digital services, leading to higher adoption rates and more effective implementation of e-governance initiatives.
Partnership with the private sector is a key to success for digital identity systems, since the private sector can provide the useful and frequent use cases needed to help build trust in and adoption of the systems. Trust is built with high- quality user experiences, strong consent frameworks, and an expectation that digital identities and the associated data are protected at the highest security level. Governments will therefore need to consider their approach to using biometrics as a mechanism to validate identity attributes, the pros and cons of centralised vs. decentralised biometric storage design, and what data is required when and by whom.
Digital payments have expanded into many aspects of our lives over the past decade, assisted by notable improvements in convenience, availability and security. End-users who can easily authenticate their identity for financial transactions, especially when these transactions are either received from or made to governments, could be more likely to appreciate and adopt digital identity systems. When a government establishes a trust framework with appropriate legal obligations and protections that enable both the private and public sectors to rely on digital identity, these identity systems can enable more secure and inclusive Know Your Customer (KYC) processes, increasing accessibility to public or private sector services, potentially reducing identity theft and financial fraud risks.
Increased security and certainty around an individual’s identity can support expansion of commerce, simplification for stakeholders and greater inclusiveness. With a verified digital identity linked to a payment credential, users can authorise transactions quickly and securely. As payments support the uptake of digital identity, and digital identity further improves payments user experiences, security and efficiency, a virtuous cycle can be created.
The virtuous connection between payments and digital identity further emphasises the need for the public and private sectors to work in partnership. Governments should define the rules and regulations for digital identity and ensure legal equivalence and consistency to reinforce predictability and certainty for the private sector — and to protect individual rights in connection with digital identity. Governments also have a role to play in establishing standards by regulating for outcomes, citizen protection, consent, liability, certainty, etc. — and by allowing the private sector to implement the correct security attributes within existing frameworks for the specific commerce applications.
One of these collaborations involves the FIDO Alliance and passkeys — a type of cryptographic credential that eliminates the need for users to remember complex passwords when they log in to systems and applications. Visa is now integrating the use of secure biometrics-based authentication in payments through Visa Payment Passkeys™ — a technology based on the FIDO collaboration which works across all of an enduser’s payment credentials. At its core, the recently announced Visa Payment Passkeys™ Service binds an account credential with a device, enabling an end-user to use the same biometrics they use to unlock their device for payment authentication. Once this authentication is performed, the payee can use a secure payment credential, which is a tokenised card number identified uniquely to their device, creating an authenticated payee for transactions across the payment rails on which they are transacting.
It is possible to envision a parallel for digital identity — the same mobile device may also hold digital identity credentials that have been attested by identity providers and verification relying parties. Visa’s ongoing work on Payment Passkeys may help facilitate a mutually reinforcing relationship between payments and digital identity that could benefit all stakeholders and end-users. The public and private sectors can continue to work together to create trustworthy digital identity capabilities that offer end-users enhanced experiences across a wide variety of everyday use cases and public services — all while improving efficiency and stewardship of resources.
Visa stands ready to partner, collaborate and work with governments at any stage of their digital identity deployment journey. Visa brings global and local payments expertise, fraud and risk mitigation experience, secure data management knowledge, and a strong focus on reducing friction for all stakeholders. In an increasingly connected world, now is the time to design and deploy digital identity systems nationally that are recognised globally.
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