Business

Digitalising identities: Economic cost or a benefit? 

Would you believe it if I told you that Sri Lanka was very early in introducing a national identity card (NIC) – which it did in the early 1970s – to all of its citizens who were at least 16 years of age, compared to other countries like Ghana, Nigeria, Bangladesh, India, and Iran? Ironically, however, as one of the first countries that introduced it, Sri Lanka is far behind many developed countries in digitalising its NIC.

Over the past few years, the Sri Lankan Government has been promising the digitalisation of the NIC, which is yet to be witnessed. While crossing fingers with the hope that the digital NIC would not be another “free Wi-Fi to every Sri Lankan” project, Market Mine of The Sunday Morning Business is taking a look at Sri Lanka’s attempts to introduce the digital NIC and at ways it could benefit and impact the country’s economy. 

Before delving into the Sri Lankan Government’s numerous “attempts” and promises made in developing a digital NIC, it would be ideal to understand what a digital NIC is in the first place. As Thales Group, a French multinational company that designs and builds electrical systems, puts it, a digital NIC is “a set of validated digital attributes and credentials for the digital world, similar to a person’s identity for the real world. Usually issued or regulated by a national ID scheme, a digital identity serves to uniquely identify a person online or offline”.

These digital NICs include attributes such as a unique identity number, social security number, name, place, date of birth, citizenship, biometrics, and many more fields defined by the respective national law. Thales noted that with specific credentials, for example a unique ID number like in India, a mobile ID like in Finland or Estonia, or an eID card like in Germany, Italy, Spain, or Portugal, it can be used to authenticate its owner.

 

Digital NICs around the world: A brief look

 

The United Nations (UN) and World Bank (WB)’s ID4D initiative aims to provide everyone on the planet with a legal identity by 2030. ID4D directly supports countries to achieve Sustainable Development Target 16.9, which is: “By 2030, provide legal identity for all, including birth registration,” and also supports in making progress towards dozens of other targets such as poverty elimination, reduced inequalities, gender equality and women’s empowerment, safe and orderly migration, universal health coverage, and financial inclusion, among others.

According to Thales, at the ID2020 summit in May 2016 in New York, the UN initiated discussions around digital identity, blockchain, and cryptographic technologies, and its benefits for the underprivileged. Four hundred experts shared best practices and ideas on how to provide universal identity to all.

Soon after, the ID2020 Alliance was created. Based in New York, the NGO’s (nongovernmental organisation) main participants include Accenture, Microsoft, Gavi The Vaccine Alliance, The Rockefeller Foundation, and IDEO-ORG, Thales added. 

“Numerous new National eID programmes (including card and mobile-based schemes and unrelated to ID2020) were launched or initiated. Examples include new projects in Algeria, Belgium (mobile ID), Cameroon, Ecuador, Jordan, Kyrgyzstan, Italy, Iran, Japan, Senegal, Thailand, and Turkey; major announcements in Afghanistan,​ Denmark, the Netherlands, Bulgaria, the Maldives, Norway, Liberia, the Philippines (PhilSys ID), Poland, Jamaica, Zambia, and a pilot scheme in Myanmar. Some of these programmes now include biometrics, the majority in the form of fingerprints,” Thales noted. 

Furthermore, schemes such as the “GOV.UK Verify” initiative were started in 2016, and Australia too launched the first phase of its digital identity programme in August 2017. France also announced in early 2018 its national eID scheme for fall 2019. Canada is also progressing with its federal digital identity scheme named Pan-Canadian Trust Framework, piloted by the Digital ID Authentication Council of Canada  (DIACC), a non-profit organisation. A national proof of concept project for a unified login authentication service called Sign In Canada started in the fall of 2018. Aadhaar (India’s national eID scheme) crossed the one-billion users mark​ in 2016. At the end of 2018, 1.2 billion Indian residents got their Aadhaar ID (99% of adults), a digital identity that can be obtained based on their biometric and demographic data.​

 

Sri Lanka’s progress towards digitalised identities 

 

The digital ID project was reportedly proposed initially in 2012 when current President Gotabaya Rajapaksa was the Defence Secretary. However, the project did not take off. 

In 2015, the then Government announced plans to launch digital ID cards by early 2016, by prioritising it above all other development initiatives of the Budget. The authorisation to issue the cards was vested with the Department for Registration of Persons and the Information Communication Technology Agency (ICTA). That same year, the Cabinet of Ministers ratified the proposal to issue digital ID cards. However, the project is yet to get off the ground and the then Government attributed the delays to a lack of clarity as to the ownership of the project as of October 2018. 

On 18 October 2018, The Sunday Morning Business exclusively reported that the long-delayed Rs. 8 billion Digital Identity Card Project was set to commence by January 2019, with a pilot project to issue digital ID cards to social welfare beneficiaries, although problems persisted as to the ownership of the project.

Speaking to The Sunday Morning Business, then Minister of Telecommunication and Digital Infrastructure Harin Fernando at that point said he planned to launch the nationwide project in 2019, based on the success of the pilot.

“There is a bit of a clash regarding the exact ownership of the money allocated. The money has been allocated to the Digital Infrastructure Ministry, but the ownership of the card remains with the ID department (Department for Registration of Persons). That is where the law has now been reviewed. There are some changes we need to make and we are looking at different models,” Fernando had noted. But as you guessed, the project did not happen.

When the new Government came to power in November 2019, it firmly stated that the digital ID for all Sri Lankans is its top priority. The current President seems to have a keen interest in improving digital infrastructure, as he had also emphasised the implementation of the Data Protection Bill, which is still languishing due to unknown reasons. 

Then came the Covid-19 pandemic. Surprisingly, the Government did not make it an excuse to delay its plans, as the Cabinet of Ministers approved a proposal to implement the Sri Lanka Unique Digital Identity (SL-UDI) Framework and e-NIC Project. The proposal briefed that the Government would adopt a Unique Digital Identity Framework and a strategy to facilitate the said framework in order to achieve the “Smart Nation” goal, which is one of the 10 key goals of the national policy framework “Vistas of Prosperity and Splendour”. 

Furthermore, the proposal which was submitted by President Rajapaksa noted that the said programme has been given priority as a national-level programme. 

“The Unique Digital Identity Framework for Sri Lanka has been prepared together with the Information and Communication Technology Agency of Sri Lanka (ICTA) and the Department for the Registration of Persons, and implementation of the e-NIC project has been identified as one of the components to be implemented under the said project,” the proposal noted. 

The proposal, finalised by the Programme Preparation Committee, also sought approval of the Unique Digital Identity Framework for Sri Lanka, the appointment of a Presidential Task Force to provide the necessary guidance to establish the Unique Digital Identity Framework for Sri Lanka, vesting the responsibility of implementation of the Unique Digital Identity Framework Project with the ICTA, the implementation of the e-NIC Project together with the ICTA and the Department for the Registration of Persons, and making required amendments to the Registration of Persons Act No. 32 of 1968 to facilitate the implementation of Unique Digital Identity Framework and the e-NIC Project. The project was said to be completed by 31 December 2022 – again, fingers crossed. 

Meanwhile, in an interview with The Morning two weeks ago, ICTA Chief Executive Officer (CEO) Eng. Mahinda B. Herath stated that there are several national-level projects the ICTA is spearheading and the main project is the development of the Sri Lanka unique digital ID framework. That would function as the root for all other services in the country that require identification. He said that the Sri Lanka unique digital ID framework has already been developed and the implementation is currently being discussed and arranged.

“Biometrics would be taken for each person, and it would be related to a digital ID. Once it is implemented, it would serve as the source that feeds identity-related information to all other applications that require such data for unique identification purposes in the country, such as in the case of driving licenses. Therefore, this will be the source that would feed the digital identification data to all other services,” he added. 

Furthermore, commenting on how they would address concerns regarding privacy and individual rights with the implementation of this framework, he stated: “If you analyse the current situation, a person’s birth certificate would at least be in eight places, and it is available on paper. People are feeding their ID card information to various systems already. In this case, all the information that is taken would be secured and would be in one place in a national repository. This would be in a separate section of the government cloud, separately built for the digital ID framework. Even now, the identity card information of about six million people is available at the Department for Registration of Persons. What happens here is that data will be coupled with biometrics so that crimes like the forgery of ID cards would not happen.”

He added that the country already has a government cloud, and added that the circular on this framework states that all government systems should use the Lankan government cloud and network. He added that a separate area is being built for this purpose in the government cloud.

“This is a new project. Digital ID projects have been there previously. But in this new one, even the iris of the eye will also be scanned for biometric data. Once you give your identity details, you won’t have to carry documentation on most occasions. Depending on the application, there will be various levels of authentication. I believe that in Oman, there is no physical documentation needed at the airport – that is the ultimate stage of digital transformation we aim to achieve,” he added. 

 

Economic cost of adopting a digital ID

 

According to a World Bank report compiled on “Cost Categories for an ID system”, when countries are thinking of an investment in a new ID system, the spending is typically done across two phases: The initial “start-up” phase where the ID system is conceptualised, designed, developed, and rolled out nationwide; the subsequent “steady” state: When the system has reached a high level of coverage and the government incurs an annual operating cost to maintain the system. 

The report further noted that the capital and operating costs incurred by a country during the start-up phase and steady state of an ID system vary on a number of implementation options. Based on the study, the most high-impact cost components observed across the start-up phase of an ID system have been compiled and categorised into six core cost categories: human resources, ID credential, central IT infrastructure, enrolment IT infrastructure, physical establishments, and IEC (information, education, communication). These six categories remain the most pertinent even in countries with mature ID systems (i.e., ID systems effectively in the steady state), though the cost impact of one or two of these categories has at times significantly surpassed that of others. 

“While most of the components related to the ID credential, central IT infrastructure, and enrolment infrastructure categories are often sourced from global suppliers, the cost components pertaining to the human resources and physical establishments categories are very dependent on the local context…The costs incurred against the human resources category tend to be the biggest contributor across the countries studied, followed by the ID credential and central IT infrastructure (both central and enrolment IT software and IT hardware components) categories,” the report notes. 

The report concludes by emphasising that every country has certain characteristics that influence the cost structure; these are exogenous elements over which programme designers have no control. These country characteristics often determine the allocation of resources (e.g., skilled human resources, number and share of mobile enrolment units) deployed by a government in the ID programme. The impact of each individual country characteristic over each key cost category varies by country. These characteristics are often interlinked with the ID system design choices that a country decides to adopt.

However, as per the previous Government’s plan, the allocation made for the Digital ID project was approximately Rs. 8 billion. The cost might have changed at the moment but the Government is yet to disclose the new project cost. 

 

How would a digital NIC benefit Sri Lanka? 

 

As McKinsey & Company elaborates in depth, the digital ID is a key enabler for modernising public services such as those related to healthcare, welfare payments, certifications, and licenses. It boosts convenience for users, eliminates potential travel costs, and minimises waiting times by allowing remote online authentication. 

“From a government perspective, the technology enhances administrative efficiency – reducing paperwork, speeding up processing, and reducing the risk of identity fraud. Beyond public services, the digital ID can support citizen participation, for example through electronic voting,” McKinsey adds. 

Furthermore, the digital ID supports consumers and businesses through benefits that include streamlined registration and authentication processes, secure digital payments, and digital high-assurance contracting, for example through digital notary services, according to McKinsey. 

It further adds that the technology is particularly useful for industries that collect significant amounts of customer data, such as financial services. It can also be a key enabler of simplified know-your-customer solutions.

“The digital ID can substantially streamline relations between governments and the private sector in areas including corporate registrations, taxes, economic support, permits, and authorisations. By enabling online interactions, the technology can lead to significant cost savings. Further, it supports regulatory compliance, providing fraud-secure paths for activities such as age and background checks,” it added further. 

According to McKinsey, the digital ID can create economic value for countries primarily by enabling greater formalisation of economic flows, promoting higher inclusion of individuals in a range of services, and allowing incremental digitisation of sensitive interactions that require high levels of trust. Their analyses of Brazil, China, Ethiopia, India, Nigeria, the UK, and the US indicate that individual countries could unlock economic value equivalent to between 3-13% of GDP in 2030 from the implementation of digital ID programmes – which could also be possible in Sri Lanka. 

Even though Sri Lanka would incur a cost in the initial stages, implementation of the digital ID would be immensely beneficial for its economy and would help the country keep up with its Asian peers. According to the reports referred and research done in order to compile this article, the digital ID is no doubt one of the best investments a country could make. But, of course, it has to be implemented the right way, where citizens’ rights and privacy are protected. Sri Lanka shifting to adopt the digital ID, along with the implementation of its proposed Data Protection Bill, is definitely an economic benefit for the country.