People-Centric Digital Infrastructure, IDs and Data

Key recommendations of the Task Force for building digital infrastructure to support sustainable digital financing ecosystems are:

Provide affordable, accessible and available digital infrastructure to ensure universal coverage and access to the digital world. Digital payment infrastructure is critical for citizens to participate in digital financing and perform cheap, fast, reliable financial transactions. In particular this should target those currently excluded through lack of any technical access options, amounting to some 750 million people. However many more, around 3.3 billion people in 2018, have technical access but do not use the internet. This is a matter of cost versus value to the user, their capabilities, social norms and cultural barriers, which disproportionately affect women’s access to and use of mobile technology. The promotion of digital and financial inclusion for women and other excluded groups should be a specific policy objective.

Undertake legal reforms to enable digitalization of financial system. These include principles defining the legal nature of digital assets, the rules governing making of digital payments, digital assets taxation regimes and private law governing relations between commercial parties. While pursuing digital inclusion and innovation, regulations also have to provide consumer protection and protect cyber security. The Alliance for Financial Inclusion facilitates peer-learning to strengthen regulatory oversight and has published a practical framework for inclusive digital financial transformation. Rules that enable open, interoperable digital finance rails, through open APIs, can minimize friction on financial flows, prevent market fragmentation, reduce rent-taking, and ease the development and scaling up of digital financing innovations. In developing markets, payment infrastructure such as cash-in-cash-out networks may also extend the reach of digital financing.

Universally-available, reliable, secure, private, unique digital IDs are critical to enabling people to access digital finance. Core to enabling people to realize value from the internet is their ability to validate and share their identity and their data when they need to, and to keep it private when they don’t. Robust ID systems are critical to preventing identity theft and fraud, reducing transaction costs and improving ease of use and quality of service. Currently more than a billion people lack this basic enabler. Much is being done and has been achieved on digital ID. For example, multilateral and philanthropic institutions continue to refine characteristics of ‘good digital ID’ to avoid risks such as exclusion, fragmentation, discrimination, repressive surveillance, and fraud.

Key institutions working on digital identity:

Financial institutions that are already trusted data custodians and veteran risk managers are investigating how to expand access to digital identities through technology. The High Level Panel on Digital Cooperation highlighted human-centric digital IDs as a means for people to regain control over their personal data and share the data dividend.

Finally, data to inform individual, private and public financing decisions and enable innovative digital financing business models must be available. For finance to address SDG challenges requires access to personal, financial, socio-economic, and environmental data. Sex disaggregated data is particularly important. Data sharing mechanisms that enable safe, equitable, transparent, individual-controlled access to personal data are key to building trust, developing healthy data markets and ensuring that digital financing solutions can be developed and used by all. Advancing such mechanisms might require more coordination among a broader set of national and international regulators. Digital financing requires access to data that goes beyond personal data. Access to relevant, high-quality, accessible, usable financial, socio-economic, and environmental data is critical. Open or common data pools, such as the World Bank Sovereign ESG Data Portal and open data standards can facilitate access to data.

Overview of this Element

Element

Core Digital Foundations

Recommendation

Accelerated investment in citizen-centric digital foundations, that must include:

Universal, affordable, accessible connectivity
Universal, secure, private, portable digital IDs
Open interoperable payment and data networks that encourage innovation and reduce market concentration
Citizen-controlled, personal data, and access to decision-relevant SDG data

Next steps

Priority actions should include:

Accelerate existing investment programs in digital infrastructure, particularly leveraging COVID-19 stimulus-related learning and investments.
Converge on standards for a ‘good’ digital ID and relevant certification and safeguards.
Extend data governance discussions to a broader set of regulators, including financial, telecom and data regulators, competition and tax authorities and key market players.
Develop comprehensive data privacy and protection legal frameworks.
Develop a country-based index that provides visibility on, and supports systematic planning for, citizen-centric, inclusive and open market qualities of digital foundations.