Way back when the only technology people feared was a Y2K systems failure, digital identity schemes were hot. Liberty Alliance, Identrust (formerly with one “t”), Verisign and Entrust were darlings of the tech industry, and everyone was convinced that growth in ecommerce would soon drive consumers, businesses and governments to be interacting online through a fail-safe digital identity system. I was the product manager for an identity and encryption suite just prior to this time, and it got so ridiculous that at one point I fielded an RFP from the nation of Denmark to distribute a digital identity to every single citizen in their country! (And no, they didn’t offer to pay in aebleskivers) Yet digital identities never took off, and just a couple of years after the euphoria the FTC came out with their survey showing that identity crimes were around the $50B mark (Javelin now repeats an evolutionary version of this original study each year).

Don’t count the digital identity systems out, even though consumers, businesses and even criminals are online in record numbers and identity fraud remains persistent. Uber digital identity schemes are largely stuck in the IT labs today, but the proverbial weight of straw on the camel’s back is growing in the form of proprietary protection and assurance schemes. The steady growth of everything from Spam to EBay tells us that there’s a need for a single universal method of conveniently assuring everyone’s identity, and just as PayPal drafted off of EBay’s growth, digital identities could come into play through something as dramatic as the potential overnight success as Google Checkout (I’m just exampling, not predicting). Let’s not forget that PayPal had fouled out in two business models before becoming a sensation in their third, which shows that it’s all about being at the ready when you finally happen on the right market need and business model. The point here is that nearly every electronic thing we do would provide greater benefit if we had a simple universal system for assuring every other entity of our identity and the rights that go along with it.

Bottom line, universal digital identity systems will eventually take off on a mass level, but we just don’t know when. In the interim, we’ll catch glimpses of future growth that will materialize in marketing metrics such as loyalty, cross-selling and provisioning. Rachel Kim is finalizing a report on federated identities, which shows how companies such as Wells Fargo, Liberty Alliance, and Oracle are making plays in digital identities right now that could one day become defacto standards.