Key findings
- Adoption of digital ID systems has grown rapidly in recent years. However, this momentum creates the risk of fragmentation; divergent governance models, standards, and trust frameworks can make systems siloed and incompatible.
- For interoperability to work in practice, digital ID systems require both technical and regulatory alignment. Countries such as Kazakhstan and Sweden serve as notable examples, where public-private partnership and multi-sector integration have driven interoperability.
- Interoperability also relies on a strong foundation of trust, privacy, and security. Without these safeguards, the advantages of interconnected systems can be undermined.
Identification is a critical enabler for access to essential services and full participation in society. In our increasingly digital world, digital identity has emerged as a key opportunity to transform how people access everyday resources. Drawing on new research from Nextrade Group, this blog explores how interoperable digital IDs, supported by strong infrastructure and public trust, can unlock seamless, secure, and instant access to a wide range of services.
Roughly 850 million people globally lack any official proof of identity, and many more only have physical documents that cannot be used for online services.¹ Digital identity—a digital representation of a person or organization made up of verifiable attributes that can be authenticated through online channels—helps people access social benefits, open financial accounts, and make digital payments, all of which are core capabilities for inclusion and participation in the modern economy. Digital IDs can be issued by governments or private entities and are designed for either broad, everyday use or for specific purposes such as healthcare, education, or payments.
Implemented well and at scale, digital ID can unlock substantial economic value for both individuals and institutions while reducing friction throughout the digital economy. The McKinsey Global Institute estimates that enhanced digital ID systems could save financial institutions up to $1.6 trillion globally through lower onboarding and payroll-fraud losses.² Digital ID also has the capacity to improve security of e-commerce payments. According to 2023 VisaNet data, fraud rates with biometric authentication were approximately 50 percent lower than with SMS one-time passcodes.³
Recognizing the great potential of digital IDs, over 150 countries now use digital ID systems.⁴ Yet, this momentum creates the risk of fragmentation. Divergent governance models, standards, and trust frameworks can make systems siloed and incompatible. Conversely, interoperability in digital ID systems can expand access to services and economic opportunities, with even greater benefits when they function across borders. New research from Nextrade Group—Supporting Digital Transformation and Economic Growth Through Interoperable Digital Identity—addresses gaps in understanding the extent of interoperability, enabled use cases, and related economic benefits.⁵
Understanding digital ID interoperability
The Nextrade Group report highlights that interoperable digital IDs are not just a technological upgrade but a cornerstone of modern digital economies. Their success depends on an integrated approach, where infrastructure, affordability, legal safeguards, and citizen engagement come together to create a trusted, secure, and inclusive digital identity ecosystem.
Nextrade explains that for interoperability to work in practice, digital ID systems require both technical and regulatory alignment. Technical interoperability ensures that ID platforms can integrate with diverse systems and service providers, while regulatory interoperability harmonizes legal frameworks, such as Know Your Customer (KYC) and Anti-Money Laundering (AML) requirements, across jurisdictions. When these elements are in place, a digital ID can act as a universal key, unlocking services in banking, healthcare, education, travel, and e-commerce. This capability also fosters public-private partnerships, as seen in countries where private sector innovation has been layered on top of interoperable government ID systems to create new applications and services.
However, Nextrade also emphasizes that interoperability must be built on a strong foundation of trust, privacy, and security. Without these safeguards, the advantages of interconnected systems can be undermined, illustrated by the high-profile data breach in 2024 by hacking group USDoD who allegedly stole personal records for 2.9 billion people from the United States, United Kingdom, and Canada.⁶ Successful interoperable systems incorporate robust authentication protocols, user consent mechanisms, and transparent governance structures. They also benefit from enabling legal and regulatory frameworks, as emphasized by the report for the G20 Digital Economy Task Force, which include data protection laws, cybersecurity measures, and supportive digital infrastructure.⁷
Ultimately, interoperability transforms a digital ID from a single-purpose identification tool into a powerful enabler of digital economies. For example, by linking identity verification seamlessly with digital payments, governments and businesses can accelerate adoption, increase user familiarity with secure online interactions, and unlock new economic value. Interoperable systems empower individuals to control their personal data while gaining frictionless access to services, making them a cornerstone of inclusive, efficient, and innovative digital societies.
Examining digital ID interoperability landscape
Leveraging the University College London Institute for Innovation and Public Purpose’s DPI Mapping project, Nextrade Group categorized the features of digital ID systems globally to assess interoperability.⁸ Out of the 18 features, four are used as proxies for interoperability: 1) enables at least two uses cases, 2) can be used by at least one external entity, 3) allows KYC packet collection, and 4) makes user authentication possible through government portal. Nextrade found that only a very small proportion of digital ID systems have all four features of an interoperable ID. Interestingly, the number of interoperability features of digital ID systems is highest in regions where ID features in general are most numerous.
Kazakhstan is a notable example among countries that rank among the highest for interoperable digital ID systems. Kazakhstan’s model is a strong example of public-private sector partnership, utilizing biometrics to unify digital access to both e-government and financial services, including making payments or opening a bank account. The government also collaborates with private banks to allow government services to be integrated within banking super apps, enabling government payments through these apps. Recent legislation in Kazakhstan has made digital documents equal to physical ones, permitting citizens to use their digital IDs on banking apps.
Another example of strong digital ID interoperability is Sweden’s BankID, a private-sector built digital identity endorsed as an official ID by the government and one of the most widely used digital IDs globally. With adoption by 94 percent of Swedes with smartphones, BankID shows how private sector innovation can achieve broad adoption when it is secure, trusted, and integrated into everyday financial and government transactions. Multi-sector integration grants users access to banking and financial services, telecommunications, government portals, and digital document signing. BankID has also been integrated into Swish, Sweden’s real-time payment system. Recent upgrades have included adding business verification features to reduce fraud and a QR-code-based digital ID card for in-person verification at government agencies.
Interoperable digital IDs create significant economic and social benefits by enabling multiple use cases, reducing manual process, fostering inclusion in the formal economy, and improving efficiency for individuals and businesses. Successful examples such as Kazakhstan and Sweden show that linking IDs with digital payment accelerates adoption, as frequent, trusted transactions build user confidence in the system.
Considerations to optimize interoperable digital ID systems
For interoperable digital IDs to achieve widespread adoption and sustained trust, policymakers must ensure that these systems are built on strong foundations. Robust design features, combined with an enabling policy and regulatory framework, are essential to protect user privacy, ensure cybersecurity, secure user content, and safeguard data rights across use cases. Nextrade notes that policymakers should embed the core attributes of good ID systems—digitization, legal protection, transparency, and effective governance—into the design of interoperable digital ID systems. Equally important is the development of a supportive ecosystem that has the following attributes: 1) enabling infrastructure, such as high mobile penetration and reliable broadband connectivity, 2) government support systems, such as government-to-person digital payments to drive adoption, and 3) conducive legal and regulatory frameworks, including strong data privacy, consumer protection, and cybersecurity rules. Additionally, fostering public-private partnerships can be key to allowing private sector innovation to enhance public services. Nextrade also notes that integrating digital payments with digital ID systems can drive usage and trust, as each transaction strengthens users’ confidence in and affinity for online services and authentication.
By combining technological robustness with policy readiness, governments can create trustworthy, widely used interoperable digital ID systems that unlock economic growth, improve service delivery, and promote financial and social inclusion.
Footnotes:
- World Bank Group. (n.d.). ID4D Global Dataset.
- White, O., Madgavkar, A., Manyika, J., Mahajan, D., Bughin, J., McCarthy, M., & Sperling, O. (2019, April 17). Digital identification: A key to inclusive growth. McKinsey Global Institute.
- Visa Inc. (n.d.). Visa Payment Passkey—a modern authentication solution.
- Women’s World Banking. (2025, July 21). Prioritizing digital ID and inclusive payments to unlock economic growth for all.
- Suominen, K. (2025, June). Supporting digital transformation and economic growth through interoperable digital identity. Nextrade Group.
- Snider, M. (2024, August 17). Social security number hack: National Public Data confirms data breach. USA TODAY.
- OECD. (2021, August). G20 collection of digital identity practices: Report for the G20 Digital Economy Task Force, Trieste, Italy. OECD Publishing.
- Eaves, D., & Rao, K. (2025). Digital Public Infrastructure: A framework for conceptualisation and measurement. UCL Institute for Innovation and Public Purpose.