In the evolving digital age, transforming traditional identification systems into secure, versatile, and interoperable electronic identities (eIDs) shapes the trajectory of government services, commerce, and user experiences. From the cities of Europe to the bustling metropolises of the United States, the significance of eIDs resonates universally. Here, we provide a snapshot of our recent Outside-In Report, an exploration of eIDs, including their ascent, potential applications, challenges, and promise for organizations seeking to enhance their operations and customer interactions.
Key insights include:
- Digital identity systems such as eIDs and Civil IDs redefine access to public and private services.
- The European market for eIDs and Civil IDs is experiencing rapid expansion, with projections indicating a rise to $4.9 billion by 2027. In 2023, an estimated Total Addressable Market (TAM) of $2.6 billion is expected, driven by a strong Compound Annual Growth Rate (CAGR) of 16.9%.
- Key factors driving this growth include establishing public-led partnerships and government initiatives focused on achieving interoperable credentials.
- The surge in digital transactions, in tandem with increased government participation and user data control demands, underscores the potential of eID solutions.
- The dominance of Big Tech companies presents a notable challenge, compelling eID vendors to distinguish themselves from identity wallets, ensure global compatibility and address interoperability.
The eID Revolution: From Local to Global
What started as a solution to streamline government services has transcended boundaries, being adopted across various sectors and geographical confines. A trailblazer in eID adoption, Europe boasts 28 active or in-development eID initiatives. Meanwhile, global counterparts in the United States, UAE, Australia, India, and Singapore are launching eID initiatives.
While the United States is still developing its digital identity infrastructure, several promising initiatives are gaining momentum at state and national levels, propelling the country toward a more secure and interoperable digital identity ecosystem. Notably, the National Institute of Standards and Technology (NIST) has introduced a framework for digital identity that encompasses guidelines for identity proofing, authentication, and implementing digital identity solutions.
Another significant undertaking in the U.S. involves using mobile driver’s licenses (mDLs) – digital versions of physical driver’s licenses that can be stored on mobile devices. Multiple states, including Arizona, Colorado, Delaware, and Louisiana, have initiated pilot programs for mDLs.
Driving Market Demand
As digital transactions continue to rise, the demand for reusable identities escalates, with eIDs offering heightened security for identity verification. Government-initiated eID programs fuel this demand, resulting in a surge of interest from eID vendors providing ubiquitous verified credentials that enhance security. As governments and eID Consortiums mature, partnership opportunities are unlocked, while the growing emphasis on data privacy motivates consumers to seek secure and controlled identity solutions.
The surge in digital-first transactions has increased the demand for secure and trustworthy identities. With digital transactions growing by 20% since 2020, consumers are increasingly concerned about data privacy and secure payment methods. Companies report a spike in fraud attacks, often attributed to digital transactions. Projections of 1.1 trillion global digital transactions by 2024 highlight the need for cost-effective security measures to verify payments. In response, eIDs provide a convenient and secure solution for re-authenticating identities, bolstering overall security.
Advancements in Governments and eID Consortiums
Government and eID Consortiums are making strides in advancing eID initiatives. Notable examples include eIDAS 2.0, a framework that expedites eID adoption and benefits European vendors with access to 28 available eID schemas. Emerging consortiums like the EUDI Wallet Consortium (EWS) and the Cloud Signature Consortium create promising vendor partnership opportunities. Furthermore, newly developed eID initiatives are gaining recognition from government officials, enhancing cross-border viability.
Addressing Data Privacy Awareness
Growing awareness of data privacy prompts consumers to seek control and security over their personal information. Around 88% of consumers prioritize security, enabling eID vendors to position their solutions as secure identity options. Consumers demand transparency in data usage, with 71% indicating abandoning brands that share their Personally Identifiable Information (PII) without consent. Consequently, privacy-preserving solutions are rising, catering to consumer needs for data control and enhanced security.
How it Works: eIDs and Identity Networks
The mechanics of Electronic Identification (eID) systems involve user registration with an eID vendor, who securely stores personal data in a central database. When accessing public or private services, users present their eID credentials. The vendor employs various authentication methods, including biometrics (facial recognition or fingerprints), to verify the authenticity of the presented eID credential. This process ensures the user’s identity, granting them access to the desired services. Additionally, the eID system permits credential reuse, streamlining subsequent authentications across different services.
Identity networks enhance eID systems by facilitating cross-border identity verification. These networks allow enterprises to onboard users from diverse nationalities, regardless of the specific eID system each user employs. Instead of relying solely on individual national eID initiatives, identity networks establish a broader framework where user identities are verified through a unified process. This enables users to access services participating enterprises provide using their native eID credentials, obviating the need to comply with each country’s eID standards. This streamlines international interactions for users and businesses across varied national identity systems.
eID Use Cases Across Industry Sectors
Emerging as a secure and convenient means of identification, eIDs transcend traditional government services, adapting to various sectors. Notable use cases encompass government services, financial services, healthcare, travel, and mobile access. As the private sector embraces eID solutions, opportunities arise for integrating eIDs across commercial use cases in finance, travel, healthcare, and related industries.
The primary eID application is within government services. eIDs offer secure access to government databases and services, such as tax filing, voting, and social security benefits. Adopting eIDs enables governments to reduce fraud, streamline processes, and enhance citizen experience.
The financial sector leverages eIDs for customer authentication, secure transactions, and streamlined Know Your Customer (KYC) processes. Financial institutions can utilize eIDs to ensure secure access to online banking, insurance, and investment services. eIDs can also facilitate e-signatures, providing customers with a secure, legally binding method to sign documents digitally.
Healthcare is another sector benefiting from eIDs, providing secure access to electronic health records, prescription services, and telemedicine. Utilizing eIDs, healthcare providers can ensure data privacy and security, reduce fraud and errors, and enhance patient care.
eIDs are also revolutionizing the travel industry, simplifying traveler identity verification, border control procedures, and the travel experience. For instance, mobile driver’s licenses (mDLs) are being employed to verify identities at airport security and boarding gates, enhancing convenience while maintaining high levels of security.
In telecommunications, eIDs authenticate users, enabling secure access to online payments and mobile banking services. This curbs fraud and ensures that only authorized users can access sensitive information.
As the private sector forges partnerships and integrates eID solutions, potential applications extend beyond the primary use cases mentioned above. For instance, eIDs could authenticate student identities and secure academic records in the education sector. Similarly, the retail industry could employ eIDs for secure online shopping and streamlined in-store checkout processes. The versatility of eIDs is expansive, with their adoption poised to grow as organizations recognize the breadth of their advantages.
Navigating Challenges and Opportunities Across Borders
While the potential of eIDs is immense, navigating associated challenges is pivotal for successful implementation. These challenges encompass international interoperability, the transition toward privatization, regulatory compliance, and the complex task of global scalability. The entry of tech giants into the eID realm intensifies competition, necessitating eID vendors to carve out distinct identities, cultivate international adaptability, and offer innovative solutions.
Collaboration with governmental entities, consortiums, and fellow eID providers is pivotal for unlocking cross-border utility. Such collaborations bolster the versatility and accessibility of eID solutions, creating seamless experiences that transcend industries and geographical boundaries.
While addressing consumer demands for data control, transparency, and privacy is fraught with trust and regulatory compliance challenges, it also offers prospects for enhanced user experiences, competitive differentiation, market expansion, and strategic partnerships. Effectively meeting these demands with consumer-centric solutions is instrumental to the success and adoption of eIDs.
A Future of Secure Interoperability
In a landscape where digital transactions have surged since 2020, the demand for secure, reusable identity solutions has reached unprecedented levels. Businesses, governments, and individuals are poised to reap the benefits of the transformative potential offered by eIDs. With a projected CAGR of 16.9%, the European eID and Civil ID market exemplify the escalating need for secure, interoperable, and universally recognized digital identities.
Embracing eIDs means embracing a future where streamlined processes, elevated security, and unparalleled convenience coalesce. Market dynamics are expected to favor vendors providing comprehensive solutions and features that cater to the entire consumer journey. The enduring triumph of eID initiatives hinges on their interoperability, user adoption, and the extent to which private sector investments and consolidation shape the landscape. Prioritizing eIDs positions businesses to navigate a new era of identity verification, customer experiences, and operational efficiency, thus ushering in a more secure and interconnected digital realm.
Excerpts from this blog post have been derived from Liminal’s Outside-in Report titled “eIDs and Civil IDs: The Landscape for eID Networks in Europe,” exclusively released in June 2023. The comprehensive report analyzes market opportunities, prevailing headwinds and tailwinds, and profiles of noteworthy eID and Civic ID vendors. The full report is available to Liminal Members via the Link Platform. If you’re not a member, please get in touch with us for more information.
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