Digital Economy Dispatch #123 -- The Quest for a Digital Identity
19th March 2023
I find myself in the middle of a recurring nightmare. All around me people are asking me questions I can’t answer. Who am I? What am I doing here? Is what I am saying true? Can I prove who I am? As I spin around the questions get louder and angrier. And none of the answers I provide seems to satisfy them. Each one seems to result in more questions. Until I scream out loud, running as fast as I can into the distance.
I come to my senses in a heavy sweat and I am sitting in the car parked outside an anonymous looking office more than 15 miles from home on the edge of town. In one hand I have a printed form containing some of my personal details, educational accomplishments, and current employer. In the other hand I have my passport, a statement from my utility company from last year, and a current council tax bill. I look around the buildings outside until I see a small silver wall plaque containing the two words: “Notary Public”.
I need to find someone who will stamp my piece of paper to confirm that they have seen me in person and watched me sign my name. Not just anyone. But a Notary Public who has been appointed (by the Archbishop of Canterbury, no less) to do so. After preliminary discussions, my name and details are written with great fanfare in a large leather-bound book. An impressive looking red seal is added to the front of the document and embossed by being placed in a large press. And I hand over my payment. It’s me. And I can prove it.
Is It Me, Or Is It You?
This seems like a lot of effort. And certainly, it is quite an experience. Yet producing this notarised document is the only way that a state authority in the United States will accept that I am who I say I am.
The problem, of course, is that we struggle to know what is true and what is false. Yes, it is March 2023. Digital transformation is in full flight. More and more of our every day tasks are being digitized, automated, and managed using the power of computers. However, even as we discuss the possibilities of quantum computing, and debate the disruptive force of AI, we face an important challenge. How do we tell fact from fiction?
A Small Digression
Establishing truth and validating agreements has always been difficult. It was for this reason that authority over disputes was a privileged role. In the UK, the appointment of a Notary Public dates back to the 13th century. In those times, with very low literacy rates and the dominance of the church, notaries were typically clerks or members of the clergy who were responsible for keeping records and documents, and who had the authority to authenticate legal documents and administer oaths. No doubt it was also another way of maintaining power and control over the local population on behalf of the church and state.
Naturally, the role of the notary evolved to include the authentication of international documents, such as contracts, deeds, and powers of attorney. This was particularly important in the age of maritime trade and exploration, when notaries were often called upon to verify documents related to shipping and cargos. In volatile times, disputes about trade deals were common leading to significant financial losses and contributing to the development of the insurance industry. Notaries placed a key role in bringing some order to these efforts.
To this day, in the UK notaries are appointed by the Archbishop of Canterbury, who is the Primate of All England and the head of the Church of England. Notaries are regulated by the Faculty Office of the Archbishop of Canterbury, which sets standards for education, training, and professional conduct. There are currently almost 800 notaries in England and Wales.
For all forms of online interactions, one of the most significant issues facing the digital economy is the fundamental need to be able to verify the truth, accuracy, and provenance of what is shared digitally. Misinformation online, whether intentional or not, is the cause of significant concern. Rapidly circulating false information on social media channels may range from satire and parody, to dangerous conspiracy theories. Much of it is benign and easily dismissed. However, more harmful approaches are enhanced by many forms of complex falsification schemes and deep fakes using advanced AI to generate realistic images, documents, and sounds.
These problems do not look to be getting any easier. Recent advances such as ChatGPT are able to generate large amounts of text quickly by synthesizing huge libraries of existing data. Unfortunately, much of what is created can be manipulated, or biased toward answers that are plausible but wrong. Now everyone has access to powerful tools creating endless streams of truths, half-truths, and lies. Vast amounts of AI-generated answers may be about to swamp online channels and may exacerbate problems already in danger of overwhelming us.
I Am What I Am
One of many of the issues being raised is digital identity and the need to verify certain attributes of an individual. Identity management is critical for digital systems to be able to provide trusted ways to verify, manage, and share information. Yet, for many people, this is the Achilles’ heel for just about all major online systems today.
It is a complex, multi-layered issue for organizations to grapple with. Something we have agonized over for some time. It is perhaps best understood in the context of banks and other financial institutions where the rollout of online banking systems and efforts to introduce regulations to “Know Your Customer (KYC)” have been important to offer more personalized service, and to reduce fraud and money laundering. Much of the focus has been on mechanisms to secure passwords and other information from a customer so that the bank knows it is dealing with that customer and no-one else. Meanwhile, by using techniques such as multi factor authentication (MFA), customers gain confidence that the bank is doing all it can to prevent unauthorised access and to protect personal data
However, this mechanistic view of digital identity is only one piece of the puzzle. A broader perspective is to consider digital identity as a valuable asset in its own right. This has many practical implications. For example, consider a recent study from McKinsey. They created a framework to understand the potential economic impact of a well-managed digital identity scheme in 7 major economies. It is estimated that almost one billion people globally lack any form of legally recognized identification. They looked at nearly 100 ways in which digital identities can be used and concluded that full digital identity coverage could create economic value equivalent to between 3 and 13 percent of GDP in Brazil, China, Ethiopia, India, Nigeria, the United Kingdom, and the United States.
Taking this one step further, we can also see digital identity completely up-ending our view of what we understand about money and its role in society. My reference point is Dave Birch’s excellent book provocatively titled “Identity is the New Money”. Written almost a decade ago, it explores the intersection of identity and money in the digital age. Dave argued that as identity becomes increasingly important in the world of commerce, traditional forms of money are being supplemented and even replaced by new forms of digital identity-based currency. In that book he made the case that we must change our understanding of what digital identity is, and reformulate technical, business, and social strategies for the digital economy.
In large part, Dave has been proved right. As can be seen in frequent announcements of the impact of cryptocurrencies, plans for central bank digital currencies, and questions about the future role of the banking sector, digital identity issues are at the heart of the debate about what services we want and how they can be effectively provided in an online world increasingly overwhelmed by digital doubt.
It has led some to state that the future of banking may lie more as vehicles for trust management than as financial institutions. Using their extensive data sets and knowledge of customers, identifying and authenticating individuals may be their main future value. Banks as the new Notary Public. There’s a bizarre turn of events.
Love not Money
Digital transformation is creating opportunities for many and changing our view of the world. Yet, we are struggling with a fundamental challenge that seems to be getting harder: How do we tell fact from fiction online? Something we all now face in the digital era. And new generative AI tools may well be making this even more difficult. These concerns can be seen in how we still use manual methods that go back several centuries to prove identity. Advancing the role of digital identity in establishing trust may be one of the most important steps forward today.