Digital Identity – The Magic Bullet for Inclusion & Legal Identity

For the past 22 years, citizens in the Baltic country called Estonia have been using digital ID for almost everything, from banking to starting a business to managing health appointments, voting, signing contracts, shopping and paying their bills apart from others. About 99 % of people in the 1.3-million-strong country have one.

Closer to Bhutan, India in 2009, initiated a biometric identification system called ‘Aadhaar’ to provide identification to 1.3 billion people. This was required as there were multiple forms of identity leading to duplication of data, fraud, and inefficient targeting of beneficiaries under various social welfare schemes. As part of informal economy, semi-skilled and unskilled workers were often excluded from mainstream social security programmes for want of a legal proof of identity, and in 2010, it was estimated that two in three Indians did not have a bank account. Today, there are about 1.31 billion Indians with Aadhaar, which covers nearly 99.7% of adult population.  Aadhaar-based identity verification has benefited the people, beginning from financial inclusion, obtaining subsidies and other welfare schemes. Thailand’s national ID system enabled the country to expand health insurance coverage from 71% to 95% in less than two years.

Peru has achieved near universal ID and as a result brought in USD 45 million of annual revenue for the government. Nigeria implemented a digital ID system for civil servants that enabled it to remove about 60,000 ghost workers.

There are more stories of the kind and Bhutan was not just watching.

On February 21, 2023, GovTech, in partnership with Druk Holding & Investments (DHI), launched Bhutan NDI, the country’s new National Digital Identity system, on the auspicious occasion of the birth anniversary of His Majesty The King. His Royal Highness the Gyalsey was honored as the first digital citizen of the nation during the launch event.

In the forthcoming session of the National Assembly, one of the bills that would be deliberated is the National Digital Identity Bill.

One of the most important aspects of this technological revolution is the impact it can have on achievement of the Sustainable Development Goals (SDGs), especially the ambitious target that all people will be able to obtain a “legal identity” by 2030 (SDG 16.9). Additionally, the world has also witnessed that DI has and can play a huge role in others SDGs too, such as, poverty and hunger eradication through efficient targeting of beneficiaries (Goals 1 and 2), empowerment of women through greater inclusion (Goal 5), and building effective, accountable and inclusive institutions by increasing transparency in governance (Goal 16).

The question on the minds of most Bhutanese, especially the illiterate, would be what the NDI is and how citizens of Bhutan would benefit. 

According to DHI Chief Executive Officer (CEO), Ujjwal Deep Dahal, while the Internet was not built with a true identity layer, a centrally controlled digital identity now exists worldwide, providing a unique digital identity to any individual or any entity in the cyber space. “On the premise that a trustworthy and immutable identity of individuals and, largely, for any entity in the Internet is of paramount importance, Bhutan developed its National Digital Identity (NDI),” DHI’s CEO said. 

He added that the NDI would provide every Bhutanese citizen and all visitors to the country the platform in the Internet (cyber space) through one’s smart phone, to uniquely identify oneself and authenticate one’s identity (equivalent to being physically present) to any service provider. This means that an individual can take, for example, a loan from a bank remotely (without visiting the bank), through his/her smartphone, and that the bank would have trusted documents, signatures and identity of the person over the Internet to meet its requirements.

Therefore, with the NDI app in one’s smart phone, and integration of systems by national service providers, all government services, financial services, and any other applications can be obtained.

Underlining that the uses and opportunities of the digital identity are boundless, DHI’s CEO said that for Bhutan, a nationally adopted digital identity platform, implemented in stages, will enable numerous digital applications and services. “An individual with a digital identity can sign into multiple services online, like banking services, G2C services, land transactions, taxation etc,” he added. 

Citing examples, he mentioned benefits in E-Government Services that would range from passport renewal, land transactions, driving license payment and all G2C services (viz. land taxes to city services, etc) including tax payment to medical service. In the financial Services, benefits would be seen from applications in account opening, loan applications and all KYC functions. All aspects of e-commerce transactions (buying and selling), tourism, instant retail checkouts, travel passports etc can be done.

When asked about the impact of DI to achieve the SDGs, Dahal stated that technology has now become imminent for multiple purposes. “DI would definitely (and it continues to do so) play a colossal role in providing ‘legal identity’ to millions of people all around the world, as it would help in achieving the other SDGs,” he said. 

He further said that a key focus for the NDI is inclusion and DHI are working with several international organizations to understand what technologies can be implemented to ensure people with no access to the internet, or a smart device or physically or mentally not capable of using a digital identity, can still have a NDI and enjoy the benefits of digital banking and online transacting. “There is still a lot of research and development required in this space but by working with ID2020, KaiOS, ID4Africa, and others, our Bhutan NDI will be leading the world in helping billions of people potentially get a digital identity and be capable of transacting securely in the Web3 environment,” he said, adding that there are other challenges, too.

“Digital divide, access to smart phones and internet services are some challenges, and we are already working on these aspects,” Dahal said. 

Meanwhile, studies by McKinsey Global Institutes state that Digital ID can unlock value by promoting inclusion, formalization, and digitization and that it represents a path to rapid inclusion by helping provide access to critical government and economic services that people may currently be denied, including financial services, government benefits, and labor markets. Digital ID helps individuals meet Know Your Customer (KYC) requirements and enables remote customer registration for financial services.

From several other benefits, it will improve access to financial services and facilitate increased extension of credit to both individuals and micro, small, and medium-size enterprises (MSMEs). It is also stated that the five largest sources of value for institutions—in both government and the private sector— are cost savings, reduced fraud, increased sales of goods and services, improved labor productivity, and higher tax revenue.

“Countries implementing digital ID could unlock value equivalent to 3 to 13 percent of GDP by 2030,” the study underlines.

Ugyen Tenzin from Thimphu