Digital Identity Systems and Their Role in Driving Economic Participation in Underbanked Regions

Abstract

The barriers toward the economy for underbanked communities are made much deeper due to their access to formal financial services. In recent years, mobile infrastructure and blockchain technology have opened new corners for the establishment of digital identity systems that show promise enabling secure and verifiable identity for greater access to finance. This study contrasts the systems through very rigorous casework in India and Uganda, and a technical comparison of mobile-based concurrent mobile and blockchain-enabled self-sovereign identity (SSI) frameworks. Observations from survey data supplement them by indicating trends on user adoption and challenges. Results indicate that digital identities give an additional entry into financial services anywhere between 20 to 30 percent for the under banked. Although they are the most affected by resistance posed by tried and tested issues such as low digital literacy, lack of infrastructural facilities, trust deficit among consumers, and so on. A hybrid digital identity framework with Zero-Knowledge Proofs (ZKPs) is thus proposed, which combines the widely accepted benefits of mobile systems with the enhanced privacy and data protection features offered by the blockchain technology. The model is constructed based on affordability, interoperability, and user agency; thus, it is scalable and inclusive to the economic realities faced by sub-Saharan Africa and South Asia.