Why the gig economy needs to adopt digital IDs

We’ve all experienced the same frustration when you’re in a jam and need help immediately. One day it might be a handyman to install much-needed shelves in your home office, or on another it’s a freelance copy editor to proof and tidy up a last-minute critical presentation.

But then it doesn’t really work out. The handyman is moonlighting and sends someone else who can’t do the job, and the copy editor who said she had experience working for top publications turns out to be green, leaving you doing CPR on the presentation just moments before you’re expected to talk. Trust is lost.

But what if there was a way for you to really know who you were hiring? What if the gig economy had a form of ID?

Digital ID could be a solution to the gig economy’s marketplace problems. Unlike a paper-based IDs such as most driver’s licenses and passports, a digital ID can be authenticated remotely over digital channels. That means platforms like Uber, Task Rabbit, and Fiverr could verify their drivers, handymen, and independent workers with one click—and both you and the platform could trust them.

With between 20% to 30% of the working population in the US engaged in the gig economy in some way, that’s a lot of people digital ID could help. Whether they’re part-time rideshare drivers or freelance translators, providing formal recognition of their business acumen and facilitating efficient contracting would make everyone’s lives easier—both customer and service provider.

Digital ID could also help gig workers manage their “back office.” Many say a common difficulty is in managing taxes, hours worked, and benefits. Let’s say you drive for Uber, Lyft, and your local ride-share app. Having a singular identity across employers, rather than a different user account for every platform, could potentially enable better and more efficient experiences when filing taxes—or even allow portable benefits schemes that are geared toward gig workers.

A digital ID could help people find gigs that are best suited to them, too. Imagine for a moment a talent platform that uses your digital ID to access your resume and your micro-credentials. Now that it recognizes you’re a verified worker, it can help connect you with verified jobs. That means you could find your next gig faster—and your future contractor knows exactly who you are and how you’ve performed on previous platforms.

But it’s not just the gig economy that digital ID could help: Anyone working for a company or in the public service could benefit from a digital ID. It could make onboarding far easier by avoiding the hassle and time wasted filling out all those forms over and over again. It can also keep track of your credentials and work experience and make it readily available to anyone you wanted to share that information with, such as a prospective employer. (Pesky resume templates, be gone!)

All of that is pretty valuable. At the McKinsey Global Institute, we studied “good” digital ID and quantified the benefits to individuals, businesses, and governments around the world.

Good digital ID requires the following four attributes: it can be verified and authenticated to a high degree of assurance, it is unique, it is established with individual consent, and it protects user privacy and ensures control over personal data. When carefully designed, we found that good digital ID can enable people to participate more fully in the economy and society as consumers, workers, and citizens, benefitting themselves as well as the companies and government agencies they interact with.

And the benefits add up. We found among emerging economies, the average country could achieve economic value equivalent to 6% of GDP in 2030, while in mature economies, the average country could achieve economic value equivalent to roughly 3%—both assuming high levels of adoption with supporting digital infrastructure.

Beyond providing value to users, digital ID could be a great opportunity for issuers. While paper-based IDs like a passport tend to be issued by the government, a digital ID could be issued by an enterprising start up or coalition of organizations.

This is already happening in some parts of the world. Look at Sweden, for instance. In 2003, a number of large banks issued the first Bank ID, an electronic ID for use by the public, government, and companies to facilitate banking and financial transactions. Today, 8 million people use Bank ID for online and mobile banking as well as e-trade and tax declarations.

And there are others. Secure Key Concierge in Canada allows people to use their banking credentials to authenticate online transactions, while Mobile Connect is a global service that allows users to confirm their identity and authorize online transactions. Or in Estonia, where more than 90% of people have a state-issued digital ID, the government has partnered with the Finnish fintech firm Holbi to enable people who hold their e-residency digital ID to create a bank account without having to step foot in a branch.

Yes, digital ID does pose risks, similar to those present in any digital technology with large-scale, population-level usage: system failure and personal data theft, for instance. Guarding against these requires thoughtful design choices for registration and authentication systems, sound governance and contingency planning, and regulations to protect privacy. Given that more than 1 billion people around the world—in India, Estonia, and elsewhere—already have digital ID, it might not be too long before some version is available in the United States.

So next time you’re in a jam, just remember: soon the perfect driver, handyman, or freelance copy editor may only be a click away, verified and authenticated by digital ID.