Digital identification technology continues to advance, bringing both benefits and drawbacks. It’s undeniably advantageous to the world economy, with a recent study finding that national digital ID systems could induce GDP growth of up to 13 percent. Experiencing such gains comes with risks, however, as digital IDs have presented new and underexplored avenues for fraud.
More than 4.5 billion digital records in the United States were compromised during the first half of 2018 – 291 records every second – with only six social media breaches accounting for more than half of all at-risk data.
The Drawbacks of Complex Security
Digital IDs can be protected with common protocols, such as two-factor authentication (2FA), frequent password changes and detailed security questions. These measures might effectively thwart cybercriminals, but many customers are unwilling to jump through hoops to access their accounts.
A study by LastPass found that 59 percent of consumers used the same passwords for multiple accounts, despite the fact that 91 percent acknowledged that as a risk factor. Only 22 percent reported changing their login information following a security breach – down from 25 percent in 2016 – with most citing they were afraid they would forget their new passwords.
Though the study found that most consumers don’t utilize security methods past basic passwords, they still think businesses are responsible for keeping their digital identities safe. It may seem hypocritical for consumers to place such responsibility on corporations, despite not using the tools provided to them, but it’s important for firms to meet customers where they are. If they feel their needs are not being met, they are likely to take their business elsewhere.
AI Solutions for Balancing Security and Convenience
Effective solutions need to be secure enough to protect digital identities, while seamless enough that consumers will want to use them. One of the more widespread solutions to strike this balance is artificial intelligence (AI), which can analyze hundreds of variables to determine unusual patterns that may signal account takeovers (ATOs).
Platforms can use AI to define typical customer behaviors and detect anomalies that stray from the norm in real time. Abnormal transactions are scored on their likelihood of being fraudulent, and can be sent to human agents for further analysis. AI can also be used to analyze biometrics, such as facial scans. This is an especially popular authentication method in China, where the facial recognition market is expected to reach $9.6 billion by 2022.
Such systems have run into regulatory trouble in the U.S., with the U.S. Senate introducing legislation in March that prohibits corporations from sharing consumers’ biometric data without their consent. San Francisco took this rule a step further last month and banned all government use of facial recognition cameras.
Blockchain-Based Security Methods
Another method used to secure digital identities is blockchain, which has seen success in a number of applications, despite being relatively nascent. Microsoft is delving into the technology with its recently announced ION project, a blockchain-based digital identity system developed in collaboration with the Decentralized Identity Foundation. ION’s purpose is to provide consumers with more ownership over their digital identities, rather than surrendering control of their email addresses and usernames to identity providers.
Estonia’s government is also exploring blockchain options. The country was eager to adopt digital governmental services with the launch of an online tax payment service in 2000 and a national digital ID system in 2002. Blockchain technology was recently integrated into the latter, creating national ID cards that contain electronic tokens that can be used for online 2FA when combined with PINs.
Nasdaq trialed blockchain-based voting for Estonian shareholders last year to explore the viability of the technology for securing national elections, but industry experts are skeptical about its applications in this field.
“Blockchain technology is certainly more secure than the current antiquated black-box proprietary voting systems that are used throughout the United States,” James Scott, senior fellow at the Institute for Critical Infrastructure Technology, said in an interview. “[Blockchain detects errors] by attributing the transaction to the user or user identity across multiple ledgers. This cannot occur in eVoting, because it would directly identify voters and therefore invade their privacy and invalidate their right to vote.”
Players in the digital identity space are continuing to invest in new authentication methods that focus on securing users’ digital identities. The identity authentication and fraud solutions market is thus set to grow from $12 billion last year to $28 billion by the end of 2023. Such rapid growth in the space means striking the balance between authentication and convenience will hopefully be less of a challenge in the future.
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