Why it’s time for telcos to tackle digital identity
Digital identity is a requirement for the next wave of business disruption. With the UN calling for the creation of a legal ID for all people by 2030 as part of its Sustainable Development goals, and the European Union working to make sure every EU citizen and resident has access to a digital ID wallet, it’s no surprise that governments around the world are beginning to make digital identity a priority. And businesses may soon be required to follow suit to integrate with state-level programs.
Unfortunately, our biggest technological ambitions, from personalization to the metaverse, are being held back by old models of identity. This issue is significant for Communications Services Providers (CSPs), with over three quarters (76%) of respondents in our 2023 Tech Vision Report stating that authentication issues are negatively impacting their business performance (for example through abandoned transactions, customer frustration or fraud).
The physical-digital convergence will only be sparked when people and things have an identity that can traverse both sides. But progress is finally being made, with emerging forms of foundational ID breaking down the walls that divide enterprises and people’s physical and digital lives.
Challenges for digital identity
Over the past 20 years organizations have significantly invested in their IAM (Identity and Access Management) capabilities to allow employees to do their job safely, along with ensuring their partners can consume business services, and consumers digital services.
Although progress is being made, there are still quite a few challenges that lie ahead. IAM solutions can be complex, often taking months or even years to roll out and the costs can be substantial. Organizations often lack the appetite to make further investments to implement new IAM solutions and tools. This challenge can and is being overcome, however. Essential standards for authentication such as the Open ID Connect Protocol (OIDC) have recently been updated for the issuance and verification of verifiable credentials. This is important because almost every leading IAM software vendor supports these standards and will update their software to support the enhanced version. This will allow organizations to utilize Digital Identity capabilities using their existing IAM investments.
We also need to look at where verifiable credentials are coming from. We have seen conglomerates form in specific industries and cross industries to have shared credentials, but these are still isolated from others. One way to help tackle this challenge would be by leveraging the concepts of e-passports and e-government issued credentials. This emerging technology takes advantage of existing cryptography standards to safely identify a user. Combining these verifiable credentials into an identity wallet controlled and managed by users is critical.
Emerging core identities
As we’re reimagining the relationship between our physical and digital worlds, we want to avoid past mistakes, chief among them that the internet wasn’t designed with protecting digital identity in mind. However, leading innovators are creating a base layer of identity and forging solutions that will become our new on-ramp to the web.
One approach gaining popularity in the telecommunications space has been to create decentralised, or distributed platforms. These efforts, sometimes known as Self-Sovereign Identity (SSI), are based on blockchain and distributed ledger technology; validation relies on consensus mechanisms from multiple parties.
The advantages to distributed approaches are enhanced safety, security, and trust – but the nature of decentralisation makes things harder to build for purpose. Usability, interoperability, and fears over account recovery are challenges that can hurt adoption.
Preferences for standardized digital identities vary, with 87% of CSPs reporting that their organizations' preferred strategy leans toward centralized, while 62% favor partnership-led (62%) solutions.
The telco opportunity
Telco vendors will be able to contribute to solving this challenge – especially in the world of decentralized identity and getting into newer areas like trusted identity and access management. This could range from e-signatures to identifications in the metaverse. Our research also identified that 93% of CSPs are innovating around digital identity via tokenization. This is the process of taking a “thing” (physical, digital, unique or not) and creating an associated digital asset, often stored on a blockchain.
In addition, telcos may find they can play a key role in supporting enterprises to navigate current challenges around cookies and data collection. Following privacy changes by Apple and Google, organizations may no longer have access to the third-party data they currently rely on, and they will be forced to think about identity and data differently. And while many consumers will be happy to see an end to third-party cookies, enterprises will understandably be nervous to lose their understanding of who customers are.
However, telcos have the scale, connectivity, and trust of their customers to consensually collect (and legally maintain) their data. This is not about telcos monetizing the data itself, but working together as an industry to create new business models that will help companies to stay compliant with regulations, while enjoying high customer consent rates.
Not only will innovation in this space enable telcos to help other organizations navigate this transition away from third-party cookies, but it will also help to protect their own marketing efforts. In fact, over four in five (83%) CSPs agree that changes constricting third-party tracking data are impacting their organization's customer engagement, which will ultimately have an impact on overall business performance. Innovation and planning to get ahead of these changes should be a top focus area for CSPs.
Finally, telco vendors can also play a role in helping to solve the challenges presented by digital identity and IAM because they have the network data available to validate identity. Now they are providing these services to banks, but there certainly is a broader opportunity to work with other businesses and organizations.
The final word
The ability to reliably identify people and things in a trusted and secure manner will be key to break down past shortcomings of digital identity and will enable CSPs to ask new questions. Furthermore, by providing digital identity solutions, CSPs will have the opportunity to generate new revenue streams and future-proof their businesses.
Those that rise to the challenge of shaping the future of digital identity will gain a significant advantage in the years ahead. They will build stronger relationships with their customers and partners and unlock new opportunities for growth. But perhaps most importantly, they will also contribute to building a safer and world – across both our physical and digital worlds.
