By Frederic Ho, Vice President of Asia Pacific, Jumio Corporation
While Asia has been developing national digital IDs for some time now, the race has just picked up speed.
The Philippines, for instance, has begun to see significant progress in laying the foundations for digital IDs. Earlier in May, it was announced that the government has identified three major uses of the Philippine Identification System (PhilSys) program: ensuring efficient and effective distribution of emergency subsidies; strengthening financial inclusion; and facilitating efficient vaccine distribution for the general population. Considering these benefits, the President has given a directive to accelerate the implementation of PhilSys, with aims to register 50-70 million individuals by end-2021.
These developments aren’t just limited to the Philippines. Other countries, such as Singapore and Indonesia, are now in the midst of rolling out facial verification in their national identity scheme and are tapping on the technology to improve social aid disbursement.
But why are digital IDs getting so popular? They make sure everyone has a way of verifying their identity to transact with the public and private sectors online. This simple feature has profound implications for every country’s digital transformation journey, as well as its development goals.
More than a billion people around the world have no formal way of proving who they are. This is especially true in the Philippines, where it can be challenging for many citizens to secure basic government services. This can include access to public healthcare, education, voting services, and benefit programs. Digital identity will make these services more accessible while improving quality-of-life for locals.
In the private sector, having the means to verify customers’ identity during online transactions, by way of national digital identity, helps improve the user experience while lowering the risk of online fraud and identity theft, which saw a spike in the Philippines due to the pandemic. This is especially important in sectors such as banking and financial services, retail, and travel. While the world is more familiar with physical IDs (which may then be linked to online government records), these continue to be inferior today, as they can be easily manipulated or purchased illegally. With movement restriction orders impeding businesses’ ability to verify customer identities face-to-face, a reliable national digital ID program also ensures services can still continue online, and in a much quicker and safer way.
Building strong enrolment levels
A national digital ID system is certainly the first step in building a digitally inclusive society. For this to be effective, having a high citizen enrolment is key to ensure that everyone has access to the same government services and experience the same level of simplicity and security when they are signing up for services or transacting online.
Furthermore, Filipinos living in rural areas are typically excluded from the financial system due to the inaccessibility of physical bank branches. A national digital ID system provides a means to verify citizens digitally and thus opens up the option to disburse support without a physical branch. This accessibility is important in driving financial inclusion in the country.
Opening and maintaining a bank account with nothing more than just your national digital ID enables everyone — including those in rural areas — to be included in the financial system. It can also help open up online lending options (including micro-financing), which would allow access to loans that will help small businesses.
Getting everyone on board
Achieving high sign-up, however, is a challenging hurdle that governments face when rolling out a national digital ID system. This is further exacerbated in rural regions where there could be a large number of undocumented citizens.
One way to get around this problem is reducing the friction points for enrolment. For example, designing inclusive and flexible documentation requirements, while ensuring that enrolment points are accessible to all layers and segments of the population.
Another approach involves partnering with central banks. This allows governments to access users’ information, which is then enrolled into a national digital identity initiative. However, these methods demand significant capital investment. In addition, central bank databases may not contain a full collection of citizen records and are vulnerable to hacks if they are not properly architected.
A new method to push past these hurdles lies in the use of the citizen’s own smartphone. The Philippines is a rapidly growing smartphone market — registering an impressive 33% year-on-year growth in the third quarter of 2020. Leveraging the biometric identification technology that is already available on these devices is one of the most effective, convenient, and secure ways of capturing facial biometric data and supporting documents, helping as many citizens to be enrolled in a national digital ID initiative as possible.
It’s all about control (and cost)
What about businesses wanting to incorporate a national digital ID system in their verification process? For upcoming digital banks in the Philippines, for instance, leveraging a national digital ID (along with a corroborating selfie to confirm their identity) is important in ensuring that the new account onboarding process is as secure and efficient as possible, even for banks with no physical presence on the ground. With 71% of the total adult population in the country being unbanked, it will also be a game-changer for more than 51.2 million citizens.
This can have a significant business impact. The verification stage is typically when new customers tend to drop out of the onboarding process. A recent survey by Signicat reveals that 2 out of 3 people who begin an online application do not complete it because the process is too time-consuming, onerous, or clunky. Making sure that the new account onboarding process is easy and intuitive to complete is crucial to converting prospects into customers.
For some, this may be the simple issue of evaluating how the technology can fit into their existing business processes and system operations. Or being able to fall back on other technologies when the national system is down for maintenance.
For others, it is often the challenges that result from false positives (when fraudsters manage to create a new online account) or false rejection (when legitimate customers are kept out) rates. In these cases, businesses have to look into the technologies underlying the national digital ID system, as well as the threat landscape in their market to understand the regularity and likelihood of such occurrences. Then, leaders can assess whether they are comfortable with any potential losses or missed revenue caused by the system. After all, any costs incurred from a national digital ID framework would likely be borne by the company and not the government.
Another key consideration is scalability. Depending on where the business is in its life cycle, expansion beyond borders may be a priority that cannot be efficiently and cost-effectively supported by different local ID systems. Companies looking to expand beyond the Philippines may then choose verification services with global coverage, which can scale with the business. To complement this, national digital ID systems — such as PhilSys — may also be leveraged when expanding within a key market for maximum local reach.
The role of national digital identities has risen in prominence over the past year. There is much to be gained for businesses in the Philippines that want to tap into national digital ID systems, including a better user experience, streamlined operations, heightened security, reduced fraud, and cost-efficiency. However, it is worth taking a step back to clearly identify the business needs and objectives for adopting digital ID systems and decide if the macroenvironment of the country they operate in can deliver a solution that is both resilient and agile in supporting current and future business growth.
Jumio is an online mobile payments and identity verification company that provides card and ID scanning and validation products for mobile and web transactions.