The Value of Our Digital Identity

By John RoseOlaf Rehse, and Björn Röber

Increasingly, we are living double lives. There is our physical, everyday existence.  And there is our digital identity, the sum of all the digitally available information about us. As this information grows in volume and variety, the picture of us that it creates is becoming surprisingly complete. And valuable.

For organizations, the opportunities digital identity presents are enormous. Applications that leverage personal data can boost efficiency, help focus research and marketing efforts, and spur the creation of personalized products and services that, in turn, spur revenues. For consumers, the benefits are compelling, too: faster service, lower prices, and products better suited to their needs, to name a few.

But realizing the full potential of our digital identity is not a given. The picture of us that it provides is becoming not only fuller, but also more accurate and more traceable. People are worried about loss of privacy and the improper use of their personal information. Companies fear the backlash that could result if they approach digital identity in the wrong way. In an increasingly digital society, personal data have become a new form of currency. The challenge is to establish the trust that keeps this information flowing.

The Value of Our Digital Identity, a new report by The Boston Consulting Group in the Liberty Global Policy Series, takes a unique approach to understanding this new phenomenon. It quantifies, for the first time, the current and potential economic value of digital identity. It also explores—through research involving more than 3,000 individuals—the value that consumers place on their personal information and how they make decisions about whether or not to share it. Building on these findings, the report presents a new paradigm for unlocking the full value of digital identity in a sustainable, consumer-centered way.

The report shows that the value created through digital identity can indeed be massive: €1 trillion in Europe by 2020, or roughly 8 percent of the combined GDP of the EU-27. For European businesses and governments, the use of of personal data will deliver an annual benefit of €330 billion by 2020—bringing growth to an otherwise stagnant economy. For individuals, the value will be more than twice as large: €670 billion. Much of that will be due to online services such as Facebook and Google that can be offered free of charge—thanks to business models that monetize personal data—yet are highly valued by consumers.

Digital identity is relevant not just to Web 2.0 companies but to the economy as a whole. As the report details, the six major trends in the application of digital identity—in process automation, user enablement, personalization, enhanced delivery, personal data-driven R&D, and secondary monetization—are relevant to all industries. In fact, it is the public sector and health care that are expected to profit the most, realizing 40 percent of the total organizational benefit. Accordingly, the report takes a sector-by-sector approach to examining how personal data are being used and to quantifying the value potential of these applications.

Quantified, too, is the risk: two-thirds of digital identity’s total value potential stands to be lost if stakeholders fail to establish a trusted flow of personal data. It is therefore essential to understand not just how consumers view their personal data but what factors they weigh—and how they weigh them—when deciding whether to share their information. To this end, survey respondents were presented with scenarios and questions that focused in on their attitudes—and their actual behavior—regarding the sharing of data.

The survey found that most consumers are concerned about how their personal data are used: 88 percent consider at least one industry to be a threat to their privacy when they are online. But far fewer (30 percent) have a relatively comprehensive understanding of which sectors are collecting and using their information. And fewer still are in control of their digital identity; just 10 percent of respondents have ever taken six or more out of eight common privacy-protecting measures, such as changing their privacy settings in a social network or opting out of certain data uses.

Concern, the research showed, doesn’t necessarily result in a decreased willingness to share. But awareness does. Individuals with a higher than average awareness of how their data are used require 26 percent more benefit in return for sharing their data. Meanwhile, consumers who are able to manage their privacy are up to 52 percent more willing to share information than those who aren’t.

Trust varies by sector, too. Consumers are on average 30 percent more willing to share data with e-commerce companies, cable operators, and automobile manufacturers than with Web 2.0 communities.

Given proper privacy controls and sufficient benefits, the survey found, most consumers are willing to share their personal data. To ensure that the flow of personal information continues, organizations therefore need to make the benefits clear to consumers. They also need to embrace responsibility, transparency, and user control.

The report also looks at the relationship between digital identity and public policy. Privacy concerns have made personal data a hot topic among legislators but also a challenging one. Policy makers need to ensure adequate privacy safeguards but maintain a flexible approach—one that will encourage new data applications and allow consumers to make informed choices about whether, and how, they generate value from their digital identity.