Digital Identity trends in India during 2023

Between the looming recession, new privacy regulations, and

an ever-adapting fraudster ecosystem, 2023 has a lot of
opportunities and challenges to offer the digital identity space.

The importance of digital security has grown along with the

development of digital identity and inclusiveness. Around, 3.63
million cybersecurity incidents were reported in India between
January 2019 and June 2022 highlighting the digital domain still
requires the deployment of some robust mechanisms to secure
digital identity.

Latest Juniper Research’s  Digital Identity research report provides

a comprehensive study of the growth of the digital identity market,
resulting changes in how national IDs are issued, the way identity is
authenticated and regulatory compliance around identity.

The number of digital identity apps in use will exceed 4.1 billion
globally by 2027; rising from 2.3 billion in 2023. This represents a
growth of 82% over the next four years. This increase will be driven
by the use of government-backed digital identities to replace
physical identity documents as a source of verification for third-
party apps, such as banking and financial services. This will be
critical, as businesses aim to reduce identity theft and meet
increasingly stringent KYC (Know Your Customer) regulations.
Report says:

 The market is moving away from reliance on passwords for

identity verification, with this being replaced by biometric
verification and MFA under a zero-trust model, where
identities are authenticated continuously. This approach is
more resistant to traditional hacking methods, such as
phishing, reducing the risk of data breaches.
 Zero trust will be delivered via SSO (Single Sign On), which
allows the user to access multiple accounts via a central,
secured system. Critical to SSO is the use of mobile
subscriber identity, with the number of mobile devices
using their mobile number for SSO being predicted to
reach 2 billion in 2027, up from 922 million in 2023.
Consumers are highly motivated by convenience, making a
streamlining of user experience significant for attracting
and retaining them. SSO can achieve this, whilst also
appealing to security-conscious users.

 The primary competition for dedicated digital identity apps

will come from digital wallets, which offer payment
functionality alongside a digital identity capability. For
instance, in some US states, digital driver’s licences held
within Apple Wallets are fully recognised. However, these
digital wallets will struggle to monetise identity in the
same way as they have payments, due to competition from
government-run schemes limiting adoption.

 Stakeholders will be looking for ways to optimize and

consolidate their ID solutions in 2023, focusing on how to
cover the most users for the least costThe value of digital
ID goes beyond fraud prevention—it’s key to promoting
growth as wellThe widespread adoption of real-time
payments could mean a big payday for fraudsters using
social engineering scams, and regulators are questioning
whether banks should have to foot the bill for swindled
accountholders
Listed below are some major digital identity trends which will
have a prominent impact in the year 2023:

e-KYC: 

Consumer identification and verification are crucial in the customer

due diligence process in digital financial services. New e-KYC
solutions are being made possible by developing technology,
biometric information, distributed ledgers, and artificial intelligence.
By utilising these technologies, e-KYC develops novel strategies that
are both more affordable and successful.

The use of Aadhar in India has played a major role in digital

inclusion and establishing digital identity. Further, the inclusion of
face-powered authentication currently subject to regulators’
approval will play a significant role in digital identity establishment
in the year 2023, as it is capable of capturing the live face of
individuals other than demographic and photographic information
which are generally used in the e-KYC process.

AML (Anti Money Laundering): 

Anti-Money Laundering (AML) solutions will be a key trend in the

digital realm from the year 2023. It enables financial institutions and
governmental bodies to track, examine, and report individuals’ data
and transactions in order to identify, stop, and report shady money-
laundering operations and enhance AML compliance. Further, the
organization’s readiness for AML compliance will strengthen by
deploying AML solutions leveraging advanced analytics, artificial
intelligence, and machine learning to predict potentially fraudulent
activity.

Digital KYC: 

One of the most essential tools for organisations and a big trend
that is on the rise in digital KYC verification. The year 2023 will see
increased acceptance of the assisted mode of digital verification,
also known as video-based verification, for digital onboarding. In
India, the government has initiated the process of video verification
through the amendment to the Prevention of Money Laundering
(PMLA) Act 2002. Further, RBI has legitimized the Video-Based
Customer Identification Process(VCIP) as a means to verify
customers, promoting the growth of video KYC authentication and
onboarding of individuals.

The other form of digital KYC methodology which will be one of the
key trends in the year 2023 is non-assisted KYC. The growth
of digital technology like Optical Character Recognition (OCR) and
the use of API are going to see major adoption within the financial
institutes to reduce fraud risk through real-time analysis and
validation of customer data and thus eliminating the time spent on
enhanced due diligence (EDD) which often slows down the process
of verification.

Forensic checks:

Identity documents are the most important source for verifying user
information, and all organisations have developed various
techniques for online consumer verification. The use of AI will
continue to aid in the data verification process in the year 2023. The
AI algorithm is constantly evolving and the fintech solution
providers with their latest technologies will play a crucial role in
aiding organisations to validate the authenticity of the uploaded
documents during the digital onboarding process.

The digital sphere is constantly evolving and with it, the threats also
evolve. The technologies of the past require upgradation and new
technological developments need to be taken into account to
counter the cyber threat and establish a secure identity which is
beneficial for individuals, organisations and governments. The
development of new digital trends can also be attributed to the
emergence of digital solution providers who have enabled
businesses to maintain an expanding number of identities in the
digital era through the deployment of their smart technologies.