Who will win the race for the digital ID?

In the past few years, there has been an exponential increase in interest in digital IDs. The search for a secure ecosystem was reinforced by the Covid-19 pandemic, as the government and companies migrated – and accelerated – their offer of products and services to the digital format.

The interest in having a reliable system that makes it possible to verify the end-user identity is common among private sector companies and the government, and the search for the establishment of a broad and effective system has created a new market. The potential size of this market, globally estimated between $133 and $533 billion by 2026, started a speedy race for the development of technologies capable of consolidating the future of identification.

Among the participants in this race, the public sector – represented by the federal government and smaller public bodies – and the private sector – represented by companies in the financial, insurance, health, telecommunications, big tech, among other industries- stand out.

To ensure leadership and competitive advantage, however, some key pillars must be established:

  • The total number of users: the sum of the initial number of users, its growth speed, and the ability to centralize services and functionality to ensure user retention and use.
  • Consumer trust: the sum of factors related to security and privacy perception, quality of the services provided, and reputation of the industry and the company.
  • Development and implementation of state-of-the-art technology: necessary to ensure user ID verification and prevent security incidents caused by leaks or cyber-attacks.

So far, the public sector has been at the forefront. There are over 40 ecosystems spread worldwide initiated by governments, in addition to several other initiatives that are being developed at a preliminary stage. However, although programs led by the public sector initially had high market viability due to adoption rates and access to public registration, they are reactive to the needs of the population and lack a relevant factor: trust.

Starting in 2024 – due to limitations that should appear in maintaining the initial growth of the public sector – the current scenario should undergo a change of leadership.

In recent studies and research – carried out by Liminal consultancy – we observed that the private sector will be responsible for exponential market growth and will consolidate more efficient and independent ecosystems. The more recent presence of big names from different industries in this race – particularly big tech companies, such as Google and Apple – should shake things up and bring new perspectives for operation.

The chart below shows the total addressable market (TAM) of initiatives in the digital ID market led by the public and private sectors by 2026.

But, in the end, who will lead the market?

“Most digital ID programs launched by governments were initially focused on providing public services online to citizens,” commented Marie-Sophie Bellot, Marketing Manager at IDEMIA. “But they progressively provided access to providers from the private sector.”

Although the private model has a greater market projection than the public one, their intersection will increase, and successful initiatives that guarantee the pillars mentioned above will require the participation and collaboration of both parties. Cooperation, however, will require significant decisions, massive investment, a clear definition of accountability, and trust between the parties.

Public-private partnerships – known as PPPs – will be responsible for establishing standards and regulations to facilitate this collaboration, creating a scenario that, for the government, will be able to reduce the costs of deployment and interoperability, in addition to reducing the existing barriers to standardizing a national system; whereas for the private sector, it will facilitate access to trusted information that can increase their ability to provide services that are relevant to consumers, enabling greater efficiency and scale.

In the end, we can conclude that the race for a digital ID is not focused on the competition, but on collaboration. The winner will not be the first to cross the finishing line, but those who cross it together.

Igor Moraes Gonçalves

Igor Moraes has been working in the digital identity and onboarding sector since 2018. He is currently a Partner at idwall and works as Business Developer Coordinator of MeuID, the first digital identity in Brazil. He holds a degree in Mechanical Engineering from UNICAMP, with an extension in innovation and technology from the Universidad de Granada (Spain). Learn more about it in the newsletter.