The Future of Digital Identity: Who Controls Your Online Data?

Today, around 66% of the world’s population has access to the Internet, contributing vast amounts of personal information daily. Yet, this data is often trapped within the walls of the platforms we use, leaving users with limited control and visibility. While these centralised systems offer convenience, they also come with significant risks: large data pools become prime targets for cyberattacks, and users are left vulnerable if these systems are breached. With that, individuals are rendered defenceless in a security breach; organisations with these large databases of information increase the attractiveness for cyberattacks. 

The rising wave of data breaches illustrates the fragility of these centralised setups: online fraud cases have risen by 708% in the last two years, with the amount of money involved increasing by 145%, according to a Reserve Bank of India report. Meanwhile, a recent study by Cloudflare indicated that 83% of Indian organisations experienced cybersecurity incidents in the past year, with nearly half suffering whopping financial losses of over $1 million. These numbers highlight a key issue: the overarching need for robust data protection of consumers’ data.

This growing threat to data protection has triggered a shift in consumer mindsets. Individuals are becoming more conscious of how their personal data is being collected, stored, and used. As a result, data privacy is no longer an afterthought but a central concern for many users, driving the implementation of stronger privacy regulations like India’s Digital Personal Data Protection Act (DPDPA). A recent report by PwC India titled Voice of the Consumer Survey 2024 revealed that 82% of Indian consumers prioritise data protection for trust and 76% of Indian consumers were concerned about privacy, data sharing on social media.

However, as these regulations evolve, they also present new challenges for businesses, which must remain compliant without compromising customer experience. This highlights the urgent need for a new approach to data management—one that equally prioritises user control, transparency, and security.

The Current State of Digital Identity Management

Today, our personal data is scattered across various platforms—social media accounts, online shopping profiles, fitness apps, and more—each governed by its own set of data protection standards. This centralised, siloed approach creates significant privacy and security risks. Centralised data storage, while convenient, has become a prime target for cybercriminals, with large repositories offering strong incentives for attacks. A single breach in a database housing millions of users' personal data can lead to far-reaching, devastating consequences.

Beyond the risks of cyberattacks, there is a deeper issue around the transparency of data use. Even with first-party data, where individuals have a direct relationship with the company, true privacy concerns still exist. Most consumers remain unaware of how their data will be used, even when they’ve given broad, blanket consent. For example, while consent may be granted for certain purposes, the potential for misuse or repurposing of this data still lingers. The problem is not limited to third-party data, which is often aggregated from multiple sources for marketing purposes, but extends to the data individuals share directly with businesses.

Across all types of data—whether first-party, second-party, or third-party—there are often issues with data being incomplete or outdated, which can lead to inaccurate information. This can have a direct impact on both businesses and individuals, especially in the context of personalisation, which is increasingly critical in today’s digital landscape. For instance, a new mother with twins might shift her preferences from general lifestyle products to infant care items. If a business continues to target her with irrelevant offerings based on outdated data, such as pre-pregnancy interests, it risks losing her engagement, and missing out on valuable revenue opportunities. Similarly, a diabetic patient might need to change dietary preferences, yet outdated health data could result in the promotion of unsuitable products.

These inaccuracies not only diminish the customer experience but also result in ineffective targeting. Businesses waste marketing efforts and risk damaging brand loyalty by presenting consumers with irrelevant offers. This disconnect can harm not only revenue, but also impact customer loyalty and brand affinity, as personalisation is key to building strong, long-lasting customer relationships. In today’s data-driven world, ensuring that data is accurate, timely, and handled with transparency is essential for both protecting privacy and optimising personalisation efforts.

Holistic Identity: The New Key to Managing Digital Identity

Holistic Identity (HI) represents a transformative approach to digital identity management, allowing individuals to regain full control over their fragmented data, otherwise stored in siloed platforms, by consolidating it into a personal data store. This reconstitution of data enables individuals to discover, collect, store, share, and monetise their data directly with businesses through a secure framework. By leveraging this framework, users ensure that all data-sharing is consent-first, giving them full visibility and control over how their data is shared, with whom, and for what purpose.

This is where the distinction between first-party and zero-party data becomes crucial. With first-party data, consent is often given at a high level, allowing companies broad usage rights. On the other hand, zero-party data operates on a more granular level, where users provide explicit, attribute-specific consent. This "consent-first, compliance always" approach offers a far more transparent relationship between businesses and users, ensuring that individuals have a clear understanding of how each piece of data they share will be used.

HI also incorporates the principles of Zero-Party Data (ZPD), where individuals willingly share specific, accurate data points about themselves in exchange for personalised services or offers. Unlike third-party data, which is often gathered indirectly and without transparency, ZPD is inherently more reliable because it is voluntarily provided by users with explicit consent.

At the core of Holistic Identity is decentralised infrastructure, which offers a stark contrast to traditional systems that store data centrally in siloed databases. Through decentralisation, users' information is no longer confined to a single repository, reducing the attractiveness and impact of potential data breaches on systems. For example, when the data is stored on the user’s device and not a centralised system, a cyberattack exposes far less information than an attack on a central database housing millions of records.

This shift reduces the risk of large-scale breaches, strengthens resilience, and minimises the treasure trove effect often associated with centralised databases, where a single successful breach can have catastrophic consequences. Decentralised systems distribute risk and provide a more secure, user-centric model of data management, empowering individuals to regain ownership of their digital identity.

Emerging solutions, such as personal data stores, consent-based mechanisms, and passwordless authentication enhance user experience without compromising on data protection or privacy. These solutions play a part in the data transaction without compromising their protection, privacy and user experience. Holistic Identity addresses the dual challenge of cybersecurity and data fragmentation, providing a more secure, transparent, and efficient way for individuals and businesses to collaborate in the digital world. It is a transformative shift that places control back in the hands of users, creating a trusted ecosystem where data ownership is reclaimed, and personal information is protected and respected. 

The Future of Digital Identity: The Vision of User-Centric Data Ownership

The future of digital identity hinges on a collective effort where governments, businesses, and individuals collaborate to reclaim data ownership and reshape the digital landscape. Regulatory frameworks, such as the DPDPA in India and GDPR in Europe, are emphasising the prioritisation of data privacy, and security. However, the realisation of a fully user-centric digital identity system requires more than just policy—it demands proactive participation and education at all levels.

For individuals, it means understanding and choosing their rights and learning how to navigate decentralised systems. For businesses, it involves embracing solutions like Holistic Identity that not only comply with data privacy regulations but also enhance customer trust and experience. Governments further play a crucial role in promoting inclusive policies that support these advancements while ensuring accessibility for all.

Reclaiming data ownership is not the responsibility of a single group; it’s a collective mission. By aligning efforts across stakeholders and committing to a future where individuals have full control over their digital identities, we can build a more secure, transparent, and equitable online world. This collaboration is key to unlocking the full potential of user-centric data management, paving the way for a digital ecosystem founded on trust, privacy, and data sovereignty.

Author-

Glenn Gore, Chief Executive Officer, Affinidi