Extending full digital ID coverage could unlock economic value equivalent to 3 to 13 percent of GDP in 2030, a study has suggested.
TheNewsGuru (TNG) reports the study, conducted by the McKinsey Global Institute (MGI), focused on seven diverse economies: Brazil, China, Ethiopia, India, Nigeria, the United Kingdom, and the United States.
The study found that “Digital ID is a foundational set of enabling technologies that can be pivotal in a wide range of digital interactions between individuals and institutions.
“Digital ID technologies are also akin to “dual use” technologies that can be employed both to benefit society and for undesirable purposes by governments and other institutions, as well as individual actors.
“Our research focuses on how “good” use of digital ID can create value and societal benefit, while being clear-eyed about the possibility of misuse and associated risks and challenges, and the need to mitigate them.
“Digital ID enables individuals to unlock value and benefit as they interact with firms, governments, and other individuals in six roles: as consumers, workers, microenterprises, taxpayers and beneficiaries, civically engaged individuals, and owners. Individuals benefit most as consumers from wider access to services, and as taxpayers and beneficiaries from time saved interacting with government.
“For example, digital ID could contribute to providing access to financial services for the 1.7 billion-plus individuals who are currently financially excluded, according to the World Bank ID4D Findex survey, and could help save about 110 billion hours through streamlined e-government services, including social protection and direct benefit transfers.
“For institutions, gains could come from higher productivity, cost savings, and fraud reduction; for example, improving customer registration could reduce onboarding costs by up to 90 percent, and reducing payroll fraud could save up to $1.6 trillion globally.
“In our seven focus countries, extending full digital ID coverage could unlock economic value equivalent to 3 to 13 percent of GDP in 2030 – if the digital ID program enables multiple high-value use cases and attains high levels of usage.
“The potential varies by country based on the portion of the economy with bottlenecks that digital ID can address as well as the scope for improvement in formalization, inclusion, and digitization over current levels.
“Our estimates include the full value from use cases of digital ID, assuming high levels of adoption by 2030, the necessary digital infrastructure and ecosystems to enable usage, and complementary investments required”.
According to the study, “For emerging economies, while the share of the economy that digital ID can address tends to be modest, scope for improvement can be sizable, leading to average potential per-country benefit of roughly 6 percent of GDP in 2030, based on our modeling. Much of this value can be captured through digital ID with authentication alone.
“For mature economies, many processes are already digital, so the potential for improvement is more limited and largely requires digital ID programs that enable additional data-sharing features. Average per-country benefit of 3 percent could be possible, assuming high usage rates”.
The right digital ID technology, designed with the right principles and enforced with the right policies, can protect individuals from the risk of abuse and enable the safe inclusion of billions in the digital economy.
As the landscape evolves, more work will be needed to understand the opportunities and commensurate challenges and to comprehend how stakeholders can respond.