This paper, one of three case studies in a transatlantic research project exploring the connection between Information and Communication Technology interoperability and eInnovation, considers the current state and possible evolution of Digital Identity. While consumers would undoubtedly reap convenience benefits from an ubiquitous single sign-on (SSO) technology, the potential for privacy and security issues makes Digital ID a complex issue. The user-centric, federated, and centralized models of Digital ID each have their advantages and drawbacks. While a few companies have previously attempted to establish a single Digital ID standard that they would control, the failure of those efforts has led to a situation where most players in the industry seem to see interoperability as essential to build up the market in the face of frequent ambivalence from consumers, e-commerce merchants, and other potential users.
Broadly, Digital ID could enable a wide range of new Web-based applications, increasing consumers' flexibility and reducing transactions costs. However, having Digital ID be too ubiquitous could threaten the continued viability of anonymous speech in some contexts. It could also lead to more entities having greater access to personal data of consumers, raising the stakes of potential data breaches.
The paper concludes that the route to interoperability most likely to lead to innovation would include continued collaboration among industry players to settle on one or a few consolidated efforts. Except in special areas, governments can best play a peripheral role, encouraging coordination through soft regulatory approaches like bringing stakeholders together and using their market power as major data holders and users. If privacy and security issues are addressed (and current stakeholders seem acutely aware of them), Digital ID interoperability has the potential to be extremely generative, creating new markets and enabling interoperability among other applications and services. If, however, coordination breaks down among market leaders and rival technologies emerge, it seems likely that user adoption will remain low and the benefits will be limited
