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Digital Identity (Digital ID): The Complete Guide

A complete guide to digital identity, digital ID's, how they work, and how they impact industries and businesses.
December 19, 2023

Identities are a complicated thing — a mix of features, demographics, likes, dislikes, experiences, and beliefs we embody as we move through the world. The aspects of our identity we choose to share may vary based on where we are, who we're with, or what role we need to play. Your employer knows parts of your identity that maybe even your closest friends never will, and vice versa. But everything from your social security number to your family demographics to your favorite restaurant is valuable information about what makes you, you — all proof points in your unique identity. 

The same is true of our digital identities, a mix of multifaceted and unique information that belongs to an individual and no one else. For example, a person's digital identity and interactivity with the world helps businesses and banks know who they're dealing with and deliver services once proof of identity is confirmed through reliable authentication. For organizations, the result is a better customer experience — and a higher level of trust. 

But why is digital identity so important? In the most simple terms, it's how you describe and prove who you are. This article will discuss exactly what makes up a digital identity and digital ID, how they work, and why it's such an important part of responsible digitization.

What are digital identity and digital ID?

Digital identity and digital ID are related but distinct concepts. Let's break it down. 

Digital identity: A digital identity is an identity adopted or claimed online by an individual, organization, or electronic device. This identity is the entire collection of information generated by a person's online activity, including usernames and passwords, birth date, social security, browsing and purchasing history, and more. Individual users may have more than one digital identity across multiple communities. In this broader sense, a digital identity is a version, or facet, of a person's social identity and, when not secure, can be used to uncover a person's civil or real-life identity. That's why, in terms of digital identity management, security and privacy are key concerns.

Digital ID: In day-to-day life, your ID could come in the form of a passport, license, or other printed credential. A digital ID is made up of all the identifiable factors of your digital identity — it's just a tangible electronic artifact that proves you are who you are and makes identification possible. A digital ID is a combination of passwords, PINs, security tokens, and other verifications authenticated remotely over digital channels. It can be issued by a government, or an organization, and needs a secure identification system to support it. 

How do digital IDs work? 

We've covered the basic definitions. But how do digital IDs work? 

More than a billion people worldwide have no way of proving who they are, making it difficult for them to access essential services like healthcare, education, voting, and more. A digital ID ensures a person can verify their identity to transact with the public and private sectors online. 

Think about it like this — when you order a drink at a bar or show up to a doctor's appointment, you use your driver's license or other valid ID to prove you are who you are. A digital ID proves who you are online. 

Digital IDs promise to promote economic value creation and more equitable digital participation by providing more access to goods and services through the digital economy. According to a McKinsey study, digital ID coverage can unlock economic value equivalent to three to 13 percent of GDP by 2030, with more than half potentially filling the pockets of individuals. The ability to streamline interactions and empower secured transactions are limitless with digital IDs — however, they don't come without risk or privacy concerns. 

Digital ID data privacy and ethics

Digital IDs can track digital traces of a person, including cell tower pings, transaction behaviors, online interactions, and more without an individual's consent. These digital identities can then be used to simply segment and provide more personalized experiences or divide and discriminate. Therefore, responsibility and ethics are critical pieces of digital ID adoption, and the onus is on businesses to ensure they’re appropriately dealing with customer data/digital ID’s.

The industries embracing digital identification

Industries like banking and financial services, retail, and travel embrace digital IDs to improve service and minimize fraud. In more contentious conversations, governments are considering digital IDs like vaccine passports. 

Here are some other digital ID use cases: 

Online gaming: Requiring gamers to prove their identity when creating online gaming and gambling accounts is a prime deterrent to illegal wagering. With eSports and competitive gaming on the rise, digital IDs are increasingly critical to preventing hackers from gaming the system. 

Real estate: Title agents and lenders can use digital IDs to facilitate income verification, remote online notarization, and online loan closings. With remote online notarization, a home loan signer can verify their identity and sign their loan document on a video call with a notary.

Alcohol: Delivery services like DoorDash make it easier for diners to verify their age online with a one-time ID upload to their app. Then, rather than checking physical ID's and entering details into an app, the courier simply refers to a blurred version of the ID with only the photo and birth date to visually check identity at drop off.

Finance and banking: Digital identity verification solutions can help banks, insurance companies, and other entities in the finance sector make opening an account and onboarding a new customer more seamless and secure.

Travel: Frequent flyers and travelers may soon be able to use a secure digital ID to check-in, check bags, and board flights rather than needing to present a physical passport or state ID.

Digital identity and Notarize

Digital and real life identities come to a crossroads with Notarize’s online notarization platform. Consumers in need of an online notarization (a confirmation of their real life identity) need to first verify themselves using their digital identity. For example, we use dynamic knowledge-based authentication (questions like “Which of these streets have you NEVER lived on?) and database-driven information to verify a person’s identity before they can get a document notarized.

Click here to learn more about how the Notarize platform confirms digital identities and how it can prevent fraudulent notarizations for your business.

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