Digital Identity and Payments: Synergies for Public Services — Visa 2025

Why Digital Identity Payments Matter for Public Services

Digital identity payments represent one of the most consequential intersections in modern public infrastructure. When governments can verify who someone is and route funds to them securely — all through a single digital framework — the efficiency gains ripple across every layer of public service delivery. According to Visa’s 2025 Government Solutions whitepaper, this convergence is no longer theoretical: it is actively reshaping how nations design their welfare systems, healthcare platforms, and economic inclusion programs.

The scale of the challenge is staggering. As of February 2023, the World Bank estimates that 850 million people globally still lack official identification. Without a verified identity, these individuals cannot access banking, healthcare, education, or social protection benefits. In an increasingly digitised global economy, this identity gap translates directly into economic exclusion. Digital identity payments close this gap by giving individuals a verifiable means of proving who they are while simultaneously connecting them to financial services.

The COVID-19 pandemic amplified this urgency dramatically. Governments worldwide needed to disburse emergency benefits to millions of people and small businesses at unprecedented speed. Those with robust digital identity infrastructure — like India’s Aadhaar-linked payment system — could reach beneficiaries within days. Those without faced months of delays, rampant fraud, and administrative bottlenecks. As organizations focused on AI-driven financial inclusion continue to demonstrate, the infrastructure that connects identity to payments is foundational to equitable economic participation.

The Economic Case: GDP Impact of Digital Identity Systems

The economic argument for digital identity payments is backed by rigorous research. The McKinsey Global Institute studied the economic benefits of digital identity before the pandemic and found that widespread adoption could unlock economic value equivalent to 3 to 13 percent of GDP by 2030, depending on a country’s starting point and implementation approach. Developing economies stand to gain the most — an average of 6 percent of GDP — while mature economies could still see approximately 3 percent uplift.

These figures became even more compelling after 2020. Two years after its initial estimate, McKinsey found that “the potential economic gain from building robust digital financial infrastructure is about 20 percent greater now than it was before the pandemic.” This recalibration reflects the accelerated shift toward digital services during lockdowns and the growing recognition that identity-linked payment systems are critical national infrastructure — not optional enhancements.

The cost of inaction is equally telling. In 2023, the U.S. Financial Crimes Enforcement Network (FinCEN) observed that $212 billion in transactions flagged in 2021 Suspicious Activity Reports were tied to some form of breakdown in the identity verification process. This staggering figure illustrates how identity gaps do not just exclude individuals from services — they create systemic vulnerabilities that cost entire economies billions in fraud, compliance overhead, and lost trust.

For public services specifically, digital identity payments reduce the friction that plagues traditional disbursement systems. When a government knows exactly who a beneficiary is and can route funds directly to their verified payment credential, the administrative cost per transaction drops substantially. Middlemen are eliminated, ghost beneficiaries disappear, and funds reach intended recipients faster. Nations exploring blockchain-based credential verification are discovering similar efficiency gains in adjacent domains.

How Digital Identity and Payments Create a Virtuous Cycle

One of the most powerful insights from Visa’s 2025 research is the concept of a virtuous cycle between digital identity and payments. These two systems do not merely coexist — they actively reinforce each other’s adoption and value.

Payments drive digital identity adoption by offering a clear and immediate value proposition. Payments are part of everyday life, and they already involve authentication processes that digital identity enhances. The frequency of payment transactions creates numerous daily opportunities for users to interact with biometric authentication, building comfort and familiarity. When a consumer uses their fingerprint to authorize a purchase, they are simultaneously building trust in the biometric verification process that underpins broader digital identity systems.

In the other direction, digital identity improves payments by enabling more efficient verification, increased security, greater user confidence, and tailored service offerings. When a financial institution can verify a customer’s identity through a trusted digital framework, the Know Your Customer (KYC) process becomes faster and less expensive. Fraud detection improves because identity signals are stronger. And customers receive better service because their verified attributes enable personalized offerings.

This virtuous cycle accelerates growth for both domains. As digital identity systems become more widespread through their use in payments, they become more valuable for other applications — healthcare access, education enrollment, tax filing, and government benefit distribution. Simultaneously, as digital identity systems improve and gain trust, they make digital payments even more secure and efficient, attracting more users and merchants into the digital economy.

Many governments are now exploring central bank digital currencies (CBDCs), and digital identity will be essential to these new forms of public money. Digital IDs provide the secure, efficient means of verifying users needed for proper KYC and Anti-Money Laundering (AML) compliance in CBDC ecosystems. The payment-identity nexus is not a future possibility — it is the architecture of tomorrow’s public financial infrastructure.

Biometric Authentication in Digital Identity Payments

Biometric authentication sits at the heart of modern digital identity payments, but its implementation requires careful consideration of security, privacy, and fairness. Visa’s whitepaper distinguishes between two fundamentally different uses of biometrics: verification (1-to-1 matching) and identification (1-to-N matching), each carrying distinct risk profiles.

In verification mode, a user’s biometric — such as a fingerprint or facial scan — is compared against a single stored template, typically on their own device. This is the model used by Apple’s Face ID and Touch ID, where biometric data never leaves the phone. The security implications are favorable: the biometric template stays local, reducing breach exposure, and the comparison is fast and accurate because it involves only one match.

Identification mode is more complex. Here, a biometric is compared against a database of many templates — potentially millions — to determine who someone is rather than confirming they are who they claim to be. This requires centralized storage, introduces transportation and encryption challenges, and raises significant privacy concerns. Visa notes that with current technology, a false positive rate of just 1 percent across a million individuals means 10,000 people wrongly identified.

The bias dimension adds another layer of complexity. Several biometric solutions perform differently across demographics. Fingerprint recognition, for example, is less accurate for children under 12 and adults over 70 because their fingerprints are less defined or still evolving. Facial recognition systems trained on biased datasets can produce variable accuracy across ethnic groups. Visa proactively monitors and mitigates bias through multilayered governance structures for the models and algorithms feeding into biometric solutions.

For digital identity payments in public services, the preferred approach is device-based biometric verification combined with tokenized payment credentials. This keeps sensitive data local while still enabling strong authentication. The user unlocks their device with a biometric, which then releases a secure payment token — no centralized biometric database needed, no mass surveillance risk introduced.

Visa Payment Passkeys: Bridging Digital Identity and Commerce

Visa Payment Passkeys represent a concrete implementation of how digital identity payments can work in practice. Built on the FIDO Alliance’s passkey standards, these cryptographic credentials eliminate the need for passwords and provide stronger protection against phishing and credential stuffing attacks.

At their core, Visa Payment Passkeys bind an account credential to a specific device. An end-user authenticates using the same biometrics they use to unlock their phone — a fingerprint or facial scan. Once authenticated, the user gains access to a secure payment credential: a tokenized card number uniquely tied to that device. The system proves two things simultaneously: (1) you are who you say you are, and (2) you are authorizing a payment on the enrolled device.

The digital identity parallel is compelling. The same mobile device holding Visa Payment Passkeys can also store digital identity credentials attested by identity providers. A citizen could unlock their phone with a fingerprint, authenticate their identity for a government service, and authorize a payment — all through the same trusted biometric process. This unified experience is precisely what drives adoption: when identity verification feels as natural as unlocking a phone, resistance evaporates.

Visa’s reach amplifies the potential impact. The Visa Direct network already helps partners move money to over 8.5 billion endpoints — cards, accounts, and digital wallets — across more than 190 countries. When digital identity credentials and payment passkeys converge on this network, the infrastructure for global digital identity payments in public services is already largely in place.

Visa is also working with organizations like the OpenID Foundation, the EU Digital Identity Wallet Consortium, and the W3C to support specifications for verifiable credentials. Standards like OID4VC (OpenID for Verifiable Credentials) and OID4VP (OpenID for Verifiable Presentations) will enable interoperable credential presentation across platforms, ensuring that digital identity payments work across borders and systems.

The EU Digital Identity Wallet and eIDAS 2.0

The European Union’s eIDAS 2.0 regulation represents the most ambitious digital identity payments mandate currently in development. Updated in 2024 from its original 2014 framework, eIDAS 2.0 introduces European Digital Identity Wallets that align with self-sovereign identity principles, giving users control over their personal data while enabling cross-border interoperability.

The timeline is aggressive: EU member states must ensure their citizens and businesses can access an EU Digital Identity wallet by the end of 2026, while the private sector must support these wallets by the end of 2027. These wallets must operate at the highest assurance level (Level of Assurance High), meeting the stringent requirements for bank account opening, health services, and payment authentication.

Payments are considered a core use case for driving wallet adoption. The logic mirrors the virtuous cycle Visa describes: by making wallets useful for everyday financial transactions, citizens will adopt them more readily, which then creates a larger user base for government services, healthcare access, and other identity-dependent applications. Visa currently serves as the domain expert for payments in the EU Digital Identity Wallet Consortium, defining how wallets integrate with both e-commerce and in-person payment authentication.

The technical standards underpinning these wallets — including OIDC4VC, ISO 18013-5, and FIDO passkeys — are designed for interoperability across industries and borders. A French citizen could use their EU DI wallet to verify their identity at a German hospital, open a bank account in Spain, or authenticate an online payment from any member state. This cross-border utility transforms digital identity from a national convenience into continental infrastructure. Researchers studying digital transformation in the public sector view eIDAS 2.0 as a defining regulatory moment.

Country Case Studies: Digital ID Public Services in Action

The theoretical benefits of digital identity payments come alive in real-world implementations. Visa’s whitepaper highlights several countries that have pioneered different approaches, each offering lessons for others on their digital identity journey.

India’s Aadhaar: Scale and Integration

India’s Aadhaar system is perhaps the world’s most significant digital identity deployment. Starting as a unique identification number for welfare distribution, it has expanded into tax filing, healthcare, financial services, and countless other domains. Aadhaar demonstrates how a foundational ID system, when linked to payment infrastructure (through the India Stack and UPI), can transform an entire economy. Direct benefit transfers using Aadhaar-linked bank accounts have saved the Indian government billions of dollars in leakage and fraud.

Ukraine’s Diia: Mobile-First in Crisis

Ukraine’s Diia digital identity system, launched in 2020, represents a mobile-first approach born of necessity. The Diia app transforms smartphones into digital wallets for 14 official document types — passports, driver’s licenses, vehicle registration, and more. Citizens access over 70 government services through the app, from tax filing to property registration. Critically, all digital documents in Diia now carry the same legal force as their physical counterparts. The system uses smartphone cameras for document scanning and facial recognition for identity verification, requiring no additional hardware.

Belgium’s itsme: Public-Private Partnership

Belgium’s itsme® app exemplifies successful public-private partnership in digital identity. Launched in 2017, it allows users to prove their identity, sign documents, and securely log into services using their smartphone. The app supports both public sector uses (government services, tax filing) and private sector applications (banking, insurance claims, online gaming). This dual utility drives high adoption rates because citizens use the same trusted identity tool across all domains of their digital life.

Bhutan’s NDI: Unified from the Start

Bhutan’s National Digital Identity was designed from the outset to provide a unified and integrated user interface for both public and private services. Rather than starting with one sector and expanding, Bhutan aimed to resolve fragmentation by connecting government, individuals, and the private sector in a single digital identity framework from day one. This approach reduces the friction that often accompanies phased deployments and builds user trust through consistency.

Trust Frameworks and Digital Identity Payments Partnerships

Trust is the single most critical factor determining whether digital identity payments systems succeed or fail. Without trust, individuals will not share their personal information, businesses will not invest in integration, and governments will not achieve the adoption rates needed for meaningful impact. Visa’s research emphasizes that trust must be built deliberately through high-quality user experiences, strong consent frameworks, and an expectation that digital identities and associated data are protected at the highest security level.

The private sector plays an essential role in building this trust. Decades of investment in secure digital payments have created a foundation of consumer confidence that digital identity systems can leverage. When a user already trusts their payment app to handle financial transactions securely, extending that trust to identity verification on the same platform is a natural progression. This is why partnership between public and private sectors is consistently identified as a key success factor.

Governments, for their part, must create the legal and regulatory frameworks that enable trust. This means ensuring legal equivalence between digital and physical identity documents, establishing clear liability frameworks, protecting citizens’ rights around data use and consent, and regulating for outcomes rather than prescribing specific technologies. The National Institute of Standards and Technology (NIST) provides guidance on identity management frameworks that many countries reference in their deployments.

Standards organizations play a bridging role. Visa works with ISO, W3C, EMVCo, FIDO, and the OpenID Foundation to develop technologies ensuring that identity and payment systems can interoperate. The OpenWallet Foundation, a Linux Foundation initiative where Visa chairs the board, develops open-source components enabling secure, interoperable, and privacy-preserving digital wallets. Open standards create a platform for innovation and a promise of interoperability — essential ingredients for trust at scale.

Building Inclusive Digital Identity Payments Infrastructure

Inclusivity must be a design principle, not an afterthought, when building digital identity payments infrastructure for public services. The World Bank’s ID4D initiative has long emphasized that digital identity systems must serve the most vulnerable populations — those in remote communities, those with disabilities, those with limited digital literacy, and those who have historically been excluded from formal systems.

Mobile capabilities have fundamentally shifted the landscape. In many developing regions, populations skipped desktop computers entirely to become mobile-first. Over 80 percent of e-commerce is now mobile commerce, and this trend continues accelerating. For digital identity payments, this means the smartphone becomes the primary interface — and systems must be designed accordingly, with intuitive interfaces, minimal data requirements, and offline capabilities where connectivity is unreliable.

Accessibility extends beyond technology to include language support, cultural considerations, and design for users with disabilities. A digital identity payments system that works only in the dominant language, or that requires precise fingerprint scans from elderly users whose prints have degraded, fails the inclusivity test. The best implementations — like Ukraine’s Diia and India’s Aadhaar — accommodate diverse user needs through multiple authentication options and multi-language support.

Financial inclusion is perhaps the most direct benefit of inclusive digital identity payments. The Bill & Melinda Gates Foundation and the United Nations Development Programme have both cited digital identity as an essential tool to fight poverty, precisely because it enables access to banking, insurance, credit, and government transfers for populations previously locked out of formal financial systems.

The Future of Digital Identity Payments for Government Services

The convergence of digital identity and payments is accelerating, driven by technology maturation, regulatory momentum, and the inescapable lessons of the pandemic. Several trends will shape the next phase of digital identity payments for public services.

Artificial intelligence will have a considerable impact on digital identity systems. AI has already transformed biometric matching, fraud detection, and risk assessment, and its influence will deepen as models become more sophisticated. Countries are developing explicit AI strategies that intersect with their digital transformation objectives, creating new possibilities for adaptive, intelligent identity verification systems.

Cross-border interoperability will become a priority. As more countries deploy digital identity systems, the ability to verify identities across borders will determine whether digital identity becomes a global infrastructure or remains a patchwork of national silos. The EU’s eIDAS 2.0 provides a template for regional interoperability, and the standards work being done by Visa and its partners through ISO, FIDO, and the OpenWallet Foundation is laying groundwork for broader global frameworks.

The role of digital wallets will expand beyond payments and identity to encompass health records, educational credentials, professional licenses, and other verified attributes. A single wallet on a citizen’s phone could hold their identity, payment credentials, vaccination records, driver’s license, and university degree — all cryptographically verified and selectively disclosable based on context. This is the self-sovereign identity future that eIDAS 2.0 envisions and that technologies like Visa Payment Passkeys enable.

As Visa states in its concluding guidance: “In an increasingly connected world, now is the time to design and deploy digital identity systems nationally that are recognised globally.” For governments, the message is clear. Digital identity payments are not a technology choice — they are an infrastructure imperative. The nations that build this infrastructure well will deliver better public services, achieve greater financial inclusion, and unlock significant economic value for their citizens. Those that delay will find themselves managing ever-growing identity gaps, fraud costs, and exclusion — challenges that only become harder to solve with time.