In days gone-by, when you transacted with someone, you probably knew them, or at least it was face to face. And, because you already knew who they were or had a face-to-face interaction, it was much easier for you to trust them, or make a risk assessment on sight. Note, trust works both ways, the buyer needs to trust the seller and the seller needs to trust the buyer.
Nowadays, people access eCommerce sites and online marketplaces through mobile devices, which means trust is administered differently. Some big brands are able to leverage their reputation to earn consumers’ trust, however, what about the less-known brands or a micro-merchant located half-way around the world? Additionally, how can micro-merchants trust customers they are selling to online? It’s a two-way street and trust needs to be enabled in order for the transaction to be completed.
Trust is the crucial element that enables commerce to flow; after all, why buy or sell if you aren’t getting your part of the deal? Therefore, building trust, ensuring safe and secure transactions is key to economic growth. For mobile and eCommerce to grow, the trust framework must be solid and inclusive.
So the question is, how do you create trust on the internet?
The answer harks back to the way it used to, knowing who you are doing business with. Now, that identification process is done digitally, or digital identity verification. Digital identities are not simply about eCommerce, rather they deliver efficiencies across economic and social activities saving enormous amounts of time and money for everyone.
We are not talking theory here, we are talking measurable impact. Consider a 2016 report by Australia Post and The Boston Consulting Group (BCG), which considered economic opportunities of the Australian digital identity ecosystem. They calculated the “economic value an accepted digital identity” in Australia is AU$11 billion a year.
For fun, let’s extrapolate those numbers to some other markets. For the US, all things being equal, that translates to US$112.8 billion. For Europe, it works out to €150 billion. Whichever you cut it, those are huge numbers.
The Value of Digital Identity
Let’s delve deeper into the numbers and see how improving digital identity results in significant economic impacts.
Reducing customer service costs
Currently, many services rely on customers physically visiting an office to receive services from a representative. This labor-intensive process is slow and cumbersome for both the customer and staff. Think of the classic slow bureaucracy, the motor vehicle department, where the cliché is long lineups, surly staff and all-around unpleasant experience.
If digital identity was in place, the need to go in for a renewal is negated. People could save hours of their valuable time and staff could focus on other issues. Efficient self-service could save AU$2 billion per year.
Reducing the cost of fraud
Weak identity systems makes it easier for various types of identity fraud, as well as enabling other serious and organized crimes. Implementing advanced digital identity systems can save AU$2 billion on the cost of fraud. This is not surprising, as one US study by CSIdentity found that the cost of identity fraud to US businesses is in excess of $50 billion a year.
Improving customer experience
Friction in the customer onboarding process leads to lost sales; a recent Barilliance study found that “75 percent of US customers abandoned their online shopping cart during Black Friday @Barilliance” 75 percent of US customers abandoned their online shopping cart during Black Friday. While there are numerous reasons for cart abandonment, an effective digital identity system alleviates three of the biggest reasons. According to a ClickZ study on reasons for abandonments during checkout, 37 percent object to creating an account to make a purchase, 28 percent objected to long or complicated checkout processes, and 19 percent didn’t trust the site with their credit card.
Seamless transactions with better security can add AU$4 billion per year to the Australian economy (or extrapolating, US$40 billion to the US).
Saving consumers time
There’s an additional AU$3 billion in opportunity cost lost by consumers on time spent filling forms and otherwise managing their identity. Ask anyone who has recently applied for a passport or other official document and they’ll tell you how archaic paper processes are in today’s mobile-first world. Contrast that with Estonia, a country with digital identity and where opening a business takes approximately 18 minutes, and filing taxes, contributions and other business records can also be done entirely online.
While the move to digital identity promises significant economic gains, there are other intangible benefits that are also extremely valuable. As our lives become more digital, there’s the burden of managing multiple online accounts securely.
Cameron Gough, Australia Post’s general manager of Digital ID and Digital Delivery Centre, notes “consumers typically have more than 40 accounts and log-ins with service providers, eCommerce retailers and membership organizations.”
This complexity is the exact opposite of the promise of digital commerce and services, increasing friction and frustration, rather than making life easier. It seems that many elements of a digital society have been introduced, without the key element of digital identity.
However, with national eID schemes such as in Estonia (and other countries) and commercial providers such as Trulioo enabling globalization of digital identity, it’s just a matter of time before the new and improved trust framework delivers its gifts for businesses, consumers and society in general.
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