Digital identity as payments infrastructure : Foundations, evolution, and research directions

Abstract

Digital identity has become a foundational layer of contemporary payments and e-commerce infrastructure, shaping how trust, authentication, personalisation and regulatory compliance are established between consumers, merchants, platforms and public authorities. As online transactions scale globally, diversify across channels and increase in economic value, identity systems increasingly influence platform competitiveness by affecting conversion rates, fraud losses, customer lifetime value and cross-border operability. This paper synthesises academic research, regulatory frameworks and selected industry evidence to trace the evolution of digital identity technologies, examine their economic and operational significance in payments and e-commerce, and identify persistent challenges related to privacy, interoperability, inclusion and artificial intelligence enabled fraud. Recent regulatory initiatives such as the EU’s Artificial Intelligence Act, the National Institute of Standards and Technology’s Artificial Intelligence Risk Management Framework, and the Organisation for Economic Co-operation and Development Council’s Recommendation on Artificial Intelligence signal a growing convergence between digital identity governance, AI risk management and data protection, expanding the scope of identity-related responsibilities for platforms and regulators. Drawing on socio-technical systems theory, trust–risk perspectives and transaction cost economics, this paper develops a comparative conceptual framework of identity models and proposes a structured research agenda focused on decentralised credentials, explainable and risk-based identity systems, privacy-preserving verification and cross-border identity integration. The paper contributes by consolidating fragmented literatures and articulating testable directions for future payments strategy and systems research. This article is also included in The Business & Management Collection which can be accessed at https://hstalks.com/business/.