Nov 08, 2024

8 min read

The Future of Digital Identity and Identity Verification in Latin America (2024)

Let’s take a closer look at how digital identity programs are evolving in Latin America.

Alyssa Abrams

Senior Content Manager

As Latin America continues to embrace the digital age, digital identity (ID) and identity verification systems are becoming essential for streamlining public services, enhancing security, and promoting financial inclusion. According to the Latin America Digital Transformation Report 2023 by Atlântico, Internet access in the region has surged from 43% to 78% over the past decade, surpassing China’s internet penetration rate, which increased from 42% to 74% in the same period. Adoption of financial technology services is also notable, with Argentina leading at 58%, followed by Brazil at 35% and Colombia at 32%. This trend reflects a broader digital transformation across various sectors. Almost each country in the region is taking unique steps toward modernizing identity systems, leveraging technologies such as biometrics and blockchain to enhance security and accessibility.

Let’s dive into the trends, challenges and the future of digital ID and verification in several Latin American countries.

Key trends in digital ID in LATAM

1. Adoption of digital public infrastructure (DPI):

Countries in Latin America are increasingly implementing digital public infrastructure to enhance service delivery and economic growth. For instance, Brazil has advanced its DPI through initiatives like the PIX payment platform and a Digital Transformation Strategy that emphasizes the development and implementation of digital identity systems. This strategy aims to improve service delivery across various sectors, including health and education. In Argentina, the province of Salta has launched a government online services portal that allows residents to use decentralized identity through blockchain technology. This initiative is part of a broader effort to create a public-private ecosystem for digital identity, facilitating cross-border services. Chile has made progress in enhancing access to beneficiary records through digital ID systems ClaveÚnica, which are integral to its social assistance programs.

2. Emphasis on Web3 identity solutions:

The region is exploring Web3 technologies, which promise privacy-preserving and tamper-resistant digital identities. Governments in cities such as Salta, Argentina, are pioneering decentralized identity systems that leverage blockchain technology to improve public service accessibility and trust. This shift towards decentralized identifiers is seen as a way to foster economic growth and enhance digital trust among citizens.

Suggested read: Web 3.0: The Future of Identity

3. Focus on financial inclusion:

Digital identity plays a crucial role in promoting financial inclusion, particularly in rural areas where traditional banking services are limited. By enabling secure identity verification, individuals can access banking services, loans, and digital payment systems, thereby stimulating economic activity in underserved communities.

4. Biometric technologies:

Biometric identification is becoming a standard practice for enhancing security in various sectors, including healthcare, voting and iGaming in Brazil. The integration of biometric data into national databases helps prevent fraud and ensures that individuals can securely access their medical records and participate in electoral processes.

Challenges in digital identity adoption

While the advancements in digital identity present numerous opportunities, they also come with challenges:

Regulatory frameworks: Many countries are still developing legal frameworks that support digital identity initiatives. For example, Brazil has made strides in this area but faces challenges related to the implementation of its General Data Protection Law.
Digital divide: In comparison with Europe and the US, a significant portion of the LATAM population remains without internet access or legal identification, which hampers the effectiveness of digital identity solutions. The Latin America Digital Transformation Report 2023 notes that, while internet penetration has improved significantly, substantial disparities in access still exist across different socio-economic groups and regions, as well as in comparison to certain countries. For example, Argentina and Chile have high internet penetration, but Bolivia and Paraguay do not.
Cultural acceptance: The maturity of digital identity solutions varies significantly across countries. While Brazil leads in adopting these technologies, other nations like Colombia and Peru are still catching up, necessitating tailored educational efforts to raise awareness about the benefits of digital identities.

Let’s take a closer look at how digital ID is being implemented and evolving in some large Latin American countries.

Mexico

Mexico is making strides toward implementing a more unified and secure digital identity system, a critical goal in a country where financial inclusion and digitalization are key to economic growth. One of the country’s major steps is the evolution of the CURP (Clave Única de Registro de Población), which is gradually turning into a robust digital identity tool. Efforts are underway to integrate biometrics and improve coordination between national registries and financial institutions. These improvements aim to combat fraud and reduce reliance on physical documents in financial services.

In the financial sector, Fintechs are playing a central role, using digital ID solutions to improve access to services like banking and payments.

Mexico’s regulatory body, the CNBV, has also intensified anti-money laundering (AML) regulations, requiring stronger identity verification for financial transactions, which pushes the digital ID framework further along. Overall, the country is moving toward a consolidated digital identity system that improves efficiency, security, and access to services.

Get compliance insights on Mexican jurisdiction with these guidelines, backed by relevant links to laws and regulations for easy reference.

Brazil

Brazil is leading the charge in Latin America with its blockchain-based national ID initiative. The Brazilian government introduced a new national identity card (Carteira de Identidade Nacional) in 2023, leveraging blockchain technology to ensure security and decentralization. This move is expected to transform how over 214 million Brazilians interact with public services, financial institutions, and digital platforms. The use of blockchain ensures that identity data is tamper-proof and accessible across different governmental agencies without the need for a central authority, enhancing trust and efficiency.

Brazil is also at the forefront of using biometrics for identity verification. Many Brazilian states have already started issuing digital IDs that can be accessed via mobile devices, using facial recognition and QR codes to validate identities. This system also integrates with Serpro, the government’s data processing service, enabling better fraud prevention and secure data management. The use of blockchain in this initiative is also a critical step toward mitigating identity theft and organized crime.

You can also check out these compliance guidelines for Brazil. Here, our team has summarized all the necessary tools, checks, data, and documents, backed up with links to relevant laws for your reference.

Argentina

Argentina has adopted a progressive stance on digital identity, particularly through Mi Argentina, the government’s official digital platform that allows citizens to access ID documents, including passports and driving licenses, from their mobile devices. The platform has played a key role in expanding digital inclusion by making services more accessible, particularly in urban areas like Buenos Aires.

Moreover, Argentina’s RENAPER, the equivalent of a Civil Registry, has been enhanced with the Sistema de Identidad Digital (SID). The SID is an innovative platform developed by the Argentine government that enables real-time remote identity validation. This system is integrated with RENAPER’s database and utilizes technologies such as biometrics and document scanning to authenticate users’ identities securely and efficiently.

Key Features of SID:

Remote identity validation: Users can validate their identity from any location with internet access, making it easier to access services that require identity verification.
Biometric authentication: The system employs biometric data, such as facial recognition, to enhance security during the authentication process.
Integration with services: SID enables seamless interactions with various public and private sector services, allowing users to perform transactions that previously required in-person verification.

In addition, Argentina is exploring blockchain as a potential solution for improving security in identity verification. Buenos Aires has started to integrate blockchain-based IDs into digital wallets, following in Brazil’s footsteps. However, the rollout of these initiatives in Argentina faces challenges, such as ensuring equitable access across all regions and balancing technological advancements with concerns around data privacy and cybersecurity.

You can also check out this report to learn about compliance guidelines for Argentina. Our team has summarized all the necessary tools, checks, data, and documents, backed up with links to relevant laws for your reference.

Colombia

Colombia is actively working to overhaul its identity verification systems to address fraud and enhance access to digital services. The country has integrated biometric verification into its national ID system to strengthen AML efforts and comply with international regulations. Colombia’s government is focusing on improving user experiences while safeguarding data privacy, particularly through biometric technologies that are increasingly used in both public and private sectors.

The adoption of digital ID in Colombia is also being driven by the financial industry, with banks and Fintechs pushing for better integration of digital ID tools for onboarding and verifying customers. This aligns with broader regional trends, where regulatory frameworks are evolving to support a more comprehensive approach to digital identity management, involving a combination of biometrics, data orchestration, and user experience improvements.

You can also check out this report to learn about the legal requirements for customer identification, verification, and due diligence measures in non-face-to-face business relations in Colombia.

Chile

Digital identity and ID verification in Chile are evolving rapidly, particularly through:

1) implementation of ClaveÚnica system, which serves as the primary digital identity platform for citizens, and

2) partnering with providers of augmented identity solutions to enhance digital ID services.

Launched in 2012, ClaveÚnica allows Chileans to authenticate their identity online using a username and password, complementing the physical ID card system. This system facilitates access to more than 1,600 public sector procedures, accounting for approximately 85% of total national procedures. In 2022, it had over 14 million active users. ClaveÚnica is designed to enable data authentication, allowing citizens to access state services and private organizations securely. It’s also used by banks to access tax records to assess the economic capacity of their clients.

The Chile government has also recently partnered with an identity solution to upgrade its national ID cards and passports. This identity solution is now responsible for providing the technology behind Chile’s new digital ID documents, including upgrading existing ID documents and introducing a new digital ID that employs advanced biometric technologies (face, fingerprint, and iris recognition) for user authentication.

Together, these initiatives contribute to Chile’s efforts in building a more secure and efficient digital identity ecosystem. Both systems complement each other in the broader scope of Chile’s digital transformation.

Check out these compliance guidelines for Chile. Here, our team has summarized all the necessary tools, checks, data, and documents, backed up with links to relevant laws for your reference.

Key considerations for online businesses entering LATAM

Digital identity is fast becoming the cornerstone of innovation in public services and financial inclusion in Latin America. While each country faces unique challenges, Chile, Mexico, Brazil, Argentina, and Colombia are all moving towards systems that prioritize security, accessibility, and fraud prevention through innovative technologies like biometrics and blockchain. As these nations continue to refine their digital ID frameworks, the future promises greater integration, efficiency, and trust across digital ecosystems.

All online businesses looking to enter and operate in the rapidly digitalizing Latin American market need to prioritize several key features to meet the region’s evolving needs:

1. Biometric authentication

Biometrics, such as facial recognition, fingerprint scanning, and voice identification, are essential due to their accuracy and ability to streamline onboarding processes. Given the rising importance of security in digital transactions, businesses should integrate strong biometric solutions to help combat identity fraud and support anti-money laundering (AML) efforts. For example, in countries like Brazil and Colombia, biometrics are already heavily utilized for secure identity verification.

2. Adaptability to local regulations

Latin American countries are tightening regulations on data privacy, AML, and Know Your Customer (KYC) processes, requiring identity verification providers to comply with local laws. Brazil’s General Data Protection Law (LGPD), similar to Europe’s GDPR, and Mexico’s focus on improving KYC processes for the financial sector are examples of regulatory frameworks that verification providers must navigate. Being adaptable and ensuring compliance with local regulations is key to successfully operating in these markets.

3. Fraud prevention and AI

Sophisticated fraud detection systems are crucial in a region where digital fraud is growing alongside digitalization. AI-powered solutions that can detect patterns of fraud, identify deep fakes, and provide continuous monitoring of user behavior will be essential for staying ahead of increasingly complex fraud schemes.

4. User-centric design

With growing digital adoption, it’s important to focus on user experience. Simplified processes, like frictionless onboarding and secure but easy-to-use identity management tools, can enhance adoption rates.

5. Multilingual support

Given the linguistic diversity in Latin America, including Spanish, Portuguese, and English in some Caribbean-influenced regions, businesses should ensure they offer multilingual support to cater to a broader audience.

6. Flexibility and simplicity

Online services should consider implementing non-documentary verification methods where regulations allow it. For example, non-documentary verification is compliant in most industries in Brazil. The Brazilian regulatory framework, particularly under the anti-money laundering laws, supports various identity verification methods, including non-documentary approaches. This flexibility is important for businesses seeking to streamline their customer onboarding processes while adhering to compliance requirements.

7. Blockchain and decentralization

Countries like Brazil are experimenting with blockchain technology for secure, decentralized identity systems. Businesses should consider integrating blockchain to ensure tamper-proof and secure data management, which appeals to governments and businesses alike, especially in fighting identity fraud and enhancing transparency.

8. Focus on financial Inclusion

Latin America has a large unbanked population. Solutions that work well in environments with limited internet access or devices—such as offline identity verification and mobile-first solutions—can help bridge the digital divide and improve access to banking, especially in rural areas.

Share this article