Colleagues looking at digital identity solution on laptop
6 min

What is Digital Identity? Definition, Concerns, And Best Practices

With digital services now a part of daily life for businesses and consumers, online personas are becoming an extension of identity.

Just as physical assets, such as your passport or driving licence, need safeguarding, so do the elements of your digital identity.

But what exactly is digital identity, and how do we protect it?

Definition of Digital Identity

Digital identity refers to the online representation of an individual's personal information. It encompasses a wide range of data that identifies you as an individual and often serves as the basis for digital authentication, allowing users to prove that they are who they say they are in online environments.

As the digital world evolves, the true meaning of what digital identity is continues to grow with it, now touching everything from simple online interactions, such as social media and email communications, to more critical areas like online banking, e-commerce, and government services.

With many interactions now held online, the management and security of digital IDs have become paramount to protect personal data.

What Comprises A Digital Identity?

There are several key identifiers that make up a Digital ID, including:

  • Usernames, passwords, and email addresses - The most common identifiers for individuals on platforms.
  • Biometric data – Unique physical characteristics, such as fingerprints, facial scanning, and voice recognition.
  • Digital footprint - A trail left by online actions, including browsing history, purchases, and social media activity.

It's important to understand that your digital identity is not just composed of the information you intentionally share – it is also the data you unintentionally leave behind during your online activity.

Where Do We Use Digital Identity?

Although you may not realise it, digital ID is often applied and utilised in most areas of your everyday life, with some of the main areas including:

Online Banking and Finance: Within financial services, digital identity is critical, facilitating secure access to bank accounts, investment portfolios, and various other financial transactions. Users are often required to pass multi-factor authentication to complete financial tasks.

E-commerce: When shopping online, digital identity is integral to establishing trust between the vendor and the customer, enabling users to make online purchases securely. Digital ID can also help to create a personalised shopping experience, providing customers with saved shopping carts and tailored product recommendations.

Healthcare: The healthcare sector increasingly relies on digital identity for patient record management and appointment bookings. In response to COVID, patients can now more easily access their medical history and communicate with healthcare providers online, with digital ID and authentication ensuring that private healthcare information is kept secure.

Government Services: Governments worldwide are utilising Digital ID to make services more accessible and streamline everything from tax filing and voter registration to passport applications and social welfare benefits.

Travel: Digital identity is making travel more convenient and secure, with electronic passports, boarding passes, and digital driver's licences becoming increasingly common.

Education: Digital ID is becoming a key aspect of online learning platforms, student portals, and academic records, ensuring that students and educators can access resources and protect academic information.

Employment: Businesses can use digital identity verification during the hiring process to authenticate applicants' qualifications and backgrounds.

How Do We Use Digital Identity?

To understand how digital ID works in everyday life, let's walk through the process of opening a digital account.

1. Registration

When signing up for an online account, you are usually asked to submit personal information such as your name, email address, and phone number.

In more secure environments, different levels of identity proofing may be required. For example, a social media account may only require basic identifiers, while a financial service will expect document verification and scans of your passport or driver's licence.

2. Verification And Authentication

After registration, the system typically verifies the provided information to ensure its accuracy and authenticity. For instance, a verification link may be sent to the email address you provided.

Once verified, the user will then need to periodically authenticate themselves to gain access to services. The level of authentication can be divided into several types:

  • Single-factor authentication - This is the simplest form of authentication and involves only one layer, such as logging into an account with your username and password. It relies solely on something the user knows but is generally considered the least secure form of authentication due to the potential risks of password hacking or guessing.
  • Multi-factor authentication – This requires the user to provide two or more verification factors, usually a combination of something they know (password), something they have (mobile phone), or something they are (biometrics). Multi-factor is the recommended level of authentication – especially when dealing with sensitive data.

3. Authorisation

After successful authentication, the next stage is authorisation, which determines what resources a user is permitted to access or modify.

For example, role-based authorisation is used in many corporate settings, which allows users to be assigned specific permissions based on their position within the company, with an entry-level employee feasibly having a lower access level than a manager.

What Are The Risks And Challenges Of Digital Identity?

While digital ID is necessary for making online services more accessible and streamlined, there are risks to holding so much personal data online. These include:

1. Identity Theft And Fraud

One of the most significant risks of digital identity is the potential for identity theft. Cybercriminals use a variety of methods to trick or force you to part with personal data, such as phishing or malware attacks. If they successfully gain access to components of your digital ID, they can either sell the data or use it themselves to commit various types of fraud.

2. Data Breaches

With your digital ID now being regularly used across multiple different organisations, threat actors have begun to target companies that store large amounts of customer information. Businesses that fail to implement the appropriate security tools to protect user data are at greater risk of experiencing a breach, with IBM’s 2022 research stating that 83% of studied organisations had suffered more than one data breach.

3. Privacy Concerns

With digital IDs holding a host of useful information, businesses may use this data for purposes other than what you initially intended, such as targeted advertising or data analysis. Sometimes this data can be sold to third parties, raising concerns about how your digital identity is being used. While GDPR was put in place to prevent this from occurring, each year businesses are still fined for inappropriate use of data.

How To Protect Your Digital Identity

With digital risks increasing each year, ensuring your data is protected is paramount.

Strong passwords: Use strong, unique passwords for each of your online accounts. Utilise a mix of upper and lower-case letters, numbers, and special characters, or use the National Cyber Security Centre’s technique of three random words. Don’t use personal details such as names or birthdays.

Two-Factor Authentication (2FA): Enable 2FA wherever possible to add an extra layer of security, ensuring that even if threat actors get hold of your credentials, they are unable to access your accounts.  

Connection authenticity: Use secure and private Wi-Fi connections, avoiding using public Wi-Fi when accessing sensitive information. If necessary, consider using a VPN.

Security tools: Implement security software, such as firewalls, antivirus, and encrypted messaging solutions to protect your devices and communication channels against digital threats.

Awareness training: Remain up to date on digital threats, such as phishing and other social engineering. Don’t click on suspicious links or share information with unknown individuals.

Regular system updates: Keep your operating system, antivirus software, and other applications up to date.

Privacy Settings: Review and adjust the privacy settings on social media and other online accounts. Be cautious about what types of information you share openly online.

A Collective Effort

With the line between online and offline becoming increasingly blurry, safeguarding our digital identity is more crucial than ever.

To protect against the rising digital threats, a collective effort is needed, with organisations prioritising robust data security for their customers, along with individuals educating themselves and practising safe online habits to protect their own digital IDs.


Originally posted on 22 09 23
Last updated on December 21, 2023

Posted by: Sabrina McClune

Sabrina McClune is an expert researcher with an MA in Digital Marketing. She was a finalist in the Women In Tech Awards 2022. Sabrina has worked extensively with B2B technology companies conducting and compiling thorough academically driven research to produce online and offline media. She loves to read fantasy novels and collect special edition books.

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