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Customer Futures Perspective: A new ‘open loop’ digital identity ecosystem is now inevitable
It's now finally possible to build digital identity on the customer’s side. Where it works for all for us, not just business.
Hi everyone, thanks for coming back to Customer Futures. Each week I unpack the fundamental shifts around Personal AI, digital customer relationships and customer engagement.
This is the PERSPECTIVE edition, a regular take on the future of digital customer relationships.
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PERSPECTIVE: A new ‘open loop’ digital identity ecosystem is now inevitable
This is the third post in a series about making digital identity more human.
In the first post I pointed out that paper identity credentials that have been so useful, for so long, because they meet our human requirements. From accessibility and flexibility, to privacy.
In the second post I said that today’s digital identity solutions are really ‘closed-loop’. They do a poor job of meeting these human requirements. And are failing to scale and be trusted as a result.
In this final post, we’ll explore what an alternative ‘open-loop’ identity solution might mean. And why new and vast opportunities become possible.
First, let’s recap why digital identity today isn’t working.
Our current ‘closed-loop’ approaches to digital identity are:
Designed for the organisations, not people. Customers have to use different identities at every different business to meet their needs, not ours.
Fragmented and exclusive. They are clumsy and frustrating to use.
Missing out on huge value. All our personal data is currently locked up inside different businesses, unable to be shared or to unlock new opportunities.
Useless across contexts. We have to manage hundreds of accounts, usernames and passwords precisely because each company demands we use their solution - our digital identities are not portable.
Privacy-eroding. Digital identity platforms are neither private nor secure. (And in the rare case they are both, the user experience is terrible.)
Narrow by design. Our digital IDs are brittle and inflexible, needing specific datasets and flows to work.
So what’s the alternative?
Let’s look at how an ‘open-loop’ approach could help fix the mess.
1. From organisation-centric… back to customer-centric
What if digital identity solutions could mirror how paper credentials work?
In an open-loop digital identity system, the identity owner (that’s us - the end user, the individual, the customer) personally holds their digital credentials. Probably on their device.
They can share the right personal information when needed, just like we use our purses and wallets to carry around paper and plastic ID documents.
Organisations will still have the ability - their right as the ‘issuers’ - to revoke a customer’s digital credentials. But the individual – as the holder – looks after them.
And because our IDs become digital, we can also back them up. And easily replace them when they are lost or stolen.
2. From fragmented… back to accessible
It’s one of the great paradoxes facing those building new digital identity solutions.
By definition, they will exclude communities without connectivity or smartphones, and those without the skills or confidence to use them.
But making digital identity more accessible will benefit everyone.
Customers should be able to hold their own digital data. In a secure digital wallet stored on their device (or on their behalf).
As a result, digital ID becomes much more accessible. Individuals can easily share what’s needed with a simple tap or the scan of a QR code.
By interacting with customers this way, businesses can get rid of the complicated forms. The clumsy login flows. And they can reimagine today’s awful 17-step, multi-scroll registration experiences.
Digital identity won’t just become easy to use, secure and private. It can become open - like the internet itself. It can work for everyone, everywhere.
Now let’s go one step further.
If accessibility means for ‘everyone, everywhere’, then it’s logical that this same identity infrastructure should work for any identity, right?
What works for people should also work for organisations (think businesses, procurement and supply chains) and things (think connected devices, lorries and offices).
Why would we use different identity infrastructure for people and pets, for buildings and bulbs, for companies and cars?
Portable digital ID - held in a digital wallet - can help a taxi driver in Bangladesh easily prove her address to open a bank account.
It can help a smart meter easily share its consumption data with different businesses.
And it can help me easily share my dog’s medical records with the vet.
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3. From closed… back to varied
An open-loop identity system will share the same characteristics as paper credentials.
Data can be shared instantly and easily, with anyone, anywhere, and at any time.
We can create verifiable digital versions of our personal information. Organisations can ‘issue’ them to customers, who hold and store them. And customers can then share what they need, when they need it.
Some interesting and exciting new things become possible:
Radical new cost reduction: When I can instantly provide details about my last three jobs, my employer no longer needs vast back office processes for identity and reputation checks.
New business efficiencies: When the farm can instantly prove it holds a valid animal welfare certification, everyone along the supply chain no longer needs stacks of paper and can conduct fewer physical visits.
New revenues: When a customer can instantly provide her contact details and registration information, the website no longer needs the online forms, and can offer near-instant checkout (meaning fewer abandoned sales).
New business models: when I move home, I can instantly update my contact details across all the businesses I want to let know. It will be way more cost effective for them to subscribe to me and my data, rather than let my customer profile waste and decay in their CRM systems.
This last point alone has the potential to transform Customer Relationship Management forever. Because this won’t just be a new wave of technical innovation. It will be commercial innovation too. More on that in the coming posts.
4. From specific contexts... back to identity portability
With closed-loop identity systems, we can only use our digital credentials in certain pre-approved and ‘hard-coded’ places. Our data is unsharable. Unusable elsewhere.
But with open-loop systems our identity credentials can be moved around as needed. Shared across different contexts. Used over and over again in different situations.
Not just where I received them in the first place.
With portable digital identity, I can present a proof of my address for a mortgage application without needing my utility provider involved.
I can present child benefit entitlements without needing the local council involved.
And I can present my car’s digital service log to the garage without needing my car’s manufacturer to approve the data transfer.
It’s this scalability and flexibility that sets open-loop identity ecosystems apart from the digital identity walled gardens we have today.
It doesn’t mean they can be used anywhere. It just means we have the flexibility and opportunity to do so if we need to.
Of course, for all this we’ll need business, legal and technical rules. To understand what data sources we can trust. Which customer wallets we can rely on. And to ensure we’re meeting the regulations.
These will be new ‘acceptance networks’. Human governance, not just technical freedom.
Computers need code. Rules to follow. Boundaries to check. But that doesn’t mean the need to be completely closed-loop systems like we have today.
Let’s call them ‘managed networks’.
With the right acceptance networks, trust lists, and managed customer data sources, we can make today’s crappy digital life smoother, more private and more flexible.
And less closed.
5. From tracked… back to private
For an open-loop digital identity ecosystem to function — and to be sustainable— customers will need to trust it.
We’ll need new levels of transparency. And customer control over personal data.
Study after study tells us that people do not want to be tracked by 3rd parties when they interact digitally. Yet customers put up with it today because they have no choice (more on this ‘privacy paradox’ another time).
By putting the customer back in the centre of their digital lives with digital wallets and portable digital ID, they can see their own personal information. They can take it with them. They share what’s needed.
And they can keep things private if needed.
More trust means more data. And more data means more value. It’s just business sense.
6. From inflexible… back to limitless
Closed-loop identity systems are designed to restrict the sharing of data.
And it’s understandable. We don’t want to be spraying personal information around. So we lock it down. One use case, one identity.
But with open-loop identity we get flexibility to present credentials in new combinations — just like we do with paper today.
When an organisation needs us to present two different sets of credentials from two different sources? Well that’s now one tap.
For the first time in the digital world, we can begin to create a limitless number of combinations and identity permutations.
Employee + age + loyalty info? One tap.
Residency + disability entitlement? One tap.
KYC score + student status? One tap.
No more heavy and complex integrations across different IT systems and companies. Now, the customer becomes the API.
From open-loop to managed networks
So it’s time to get back to customer-centric identity. To accessible identity. To varied identity. Where our personal data is portable, private and limitless.
But that future, that open-loop digital identity, is going to need a whole bunch of things to be true.
First off, it’s going to need common and open digital identity standards and infrastructure. OK, but what does that even mean?
It’s time to get specific.
It means Personal AI to help us make sense of all the data we control. Helping us share - and audit - the right data with the right groups at the right time.
It means new managed identity networks. Setting rules around customer data sharing, business workflows and industry-specific regulations. We’ll need to set up sector-based and geographical acceptance networks and governance frameworks.
It means new trust lists. Which ‘issuers’ we can rely on. Which digital wallets have been approved for specific use cases. Which organisations can ask for what. We can turn to groups like the Open Wallet Foundation and the Trust Over IP Foundation for models and examples.
It’s a tall order for sure. But we now have the pieces.
Given the latest pioneering - and now readily available - capabilities emerging around digital identity wallets, reusable ID, verifiable credentials and managed identity networks, I’m optimisic.
Because of the prize.
To finally meet our human requirements. Where anyone can participate. Rather than put up with a massive computer - and company - in the middle. Deciding who gets to join and what all the data means.
Will the idea of open-loop digital identity become as transformational as the printing press? Maybe.
As impactful as the Internet? Certainly.
But I’m betting that it’ll become as indispensably useful and as remarkably scalable as paper.
Today’s digital identity solutions are doomed if they can’t design for people. If they don’t put the people they serve, first.
Because digital identity must start on the customer’s side.
And like the breakout of an open internet was inevitable, so too will an ‘open loop’ digital identity ecosystem become inevitable. The economic benefits are too great to ignore.
And that means a bright new customer future.
Where digital identity works for all of us, not just business.
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