How digital ID is driving global business opportunities
As technology develops, the ability to interact with other people has expanded. In a village, everyone knows your name, but for a nation there is a need to validate and authenticate digital identities. Now, as interactions have become increasingly digital and global, digital ID is enabling remote assurance of a person’s identity for use in electronic transactions and evolving commerce and society.
Digital IDs provide entities with new and efficient ways to reach and serve their populations, especially the most disadvantaged. ID systems that have universal coverage also play an important role in improving government efficiency, accountability and transparency. Digital IDs also play a crucial part in accessing opportunities for enterprises, from validating who you are doing business with to understanding those who are helping you to create the business.
For an examination of how digital ID can reduce the identity gap, improve government operations and the opportunities for business expansion, MEDICI has published a white paper titled Digital ID: Driving Global Business Opportunities.
The identity gap and its impact
There are an estimated 1 billion people globally who lack any form of legally recognized identification. It’s difficult for these individuals to access government services and benefits, gain financial inclusion to use basic banking services and otherwise participate in the systematic institutions of a society.
These people are typically members of the most vulnerable groups, including people living in the world’s poorest regions (especially women), refugees, people with disabilities, and people living in rural and remote areas.
It is difficult for governments to deliver services to the right recipients when they don’t have IDs. These people are often invisible to food, clothing, shelter, health and educational initiatives that could dramatically improve their lives and the lives of their family members. Without proper tracking, the funds are potentially siphoned off, misspent or otherwise don’t get into the hands of intended recipients.
Without an ID, individuals are not able to apply for bank accounts. To deter money laundering, banks have compliance requirements to perform Know Your Customer (KYC) procedures, which involve verifying identity; no ID, no KYC and thus no bank account. A bank account represents the first step up the financial ladder, offering a safe way to save money and build up credit to finance a bigger purchase or business opportunity.
With digital ID, individuals have easier access to government subsidies, programs and other vital services. Opening a bank account becomes a lot easier and less time consuming. A digital ID enables users to access services and make purchases remotely through smartphones.
Impact of digital ID on corporates
With digital ID, micro, small, and medium enterprises (MSMEs) also benefit from easier access to credit and the ability to undertake digital transactions. According to a study by the International Finance Corporation, 40% of the roughly 140 million MSMEs in emerging economies lack full access to credit. The credit gap amounts to an estimated $718 billion. Financial inclusion through digital IDs can help MSMEs access cheaper credit more swiftly and handle their operations more effectively.
Through digital IDs, organizations can increase the level of trust by validating and onboarding their partners, vendors, customers and employees. MSMEs can better expand and tap into the global client base, and rural MSMEs have the opportunity to tap into distant business opportunities. It’s important to note that micro/small businesses are the engines of economies, critical for moving them forward. According to the International Council for Small Business (ICSB), formal and informal MSMEs account for more than 90% of all companies and, on average, 60–70% of total jobs.
Improving digital ID also has significant impacts on individuals and businesses in mature economies. Through an established digital ID infrastructure, people can receive better and more customized services from governments, financial services providers, and insurance companies because all their information aligns with their ID.
Global business requires a global ID solution
Managing a business was relatively simple a few years ago. Employees would be hired after reference checks and interviews, and clients and vendors would be onboarded through personal relationships. Technology changed all that — employees are hired remotely, and vendors and clients are based abroad. Hence, ID verification tools became vital to businesses.
The purpose of ID verification is to ensure that the right person or business gets properly registered. Some industries such as financial services or gaming require the use of verification tools to comply with Anti-Money Laundering and Know Your Customer regulations. Companies operating as online marketplaces or social networks use verification to ensure that people do not cheat others, misinterpret information, hide information or abuse the system. Any business with security requirements needs ID verification in all departments that have first touch-point with external stakeholders.
Now, with digital ID, businesses can more easily onboard new customers and partners. Through access to digital ID information, they are also able to offer personalized services to their customers, which enhances the overall customer experience. Digital ID has enabled businesses to globalize quickly. Using digital ID verification, a business can expand into new markets, increase their employee strength, and get new customers as well as lower the production cost of their products and services.
Discover the impact of digital ID and how implementing digital identity solutions can positively impact organizational effectiveness in a global institution.