I'm not from the US. The first time i had an american friend explain me the SSN thing, I thought they were crazy, for the exact same reasons.
It is idiotic, as you say.
Here in my third-world country there isn't any number or code that I need to keep secret and I need to hand over to other companies at the same time.
We do have an specific identifier. Each person has an ID card, with an ID number. The ID number is not secret at all and used for many things everywhere. By the way, we don't have anything like a "social security card". Even kids have this ID card, their parents can (and ought to) request one for each kid.
This ID number has nothing in common with your birthday or anything. It is mostly a sequential number.
All aggregations are done using this (unique) ID number. So financial companies submit payment data associated to your ID number. So later credit scores can be computed as well.
The difference with this ID number versus the SSN is that our ID number is not used as a password of any sort.
How do companies or government institutions check out if you are who you say you are? They can take a look at your ID card. And usually they do have fingerprint scanners and signature scanners to check against the government's central ID registry.
By the way, last year we issued the Electronic Id Card, this one has a security certificate (public-private key cryptography) associated with it, and each person chooses (and keeps secret) a password. This password never needs to be revealed to anyone. With this password one can do digital signatures of any document, etc.
Nowadays SSNs are generally issued at birth, particularly since the IRS wants one for each dependent listed on the tax return. I believe this has been the case for at least twenty or thirty years; certainly my card dates from when I was born.
> This ID number has nothing in common with your birthday or anything. It is mostly a sequential number.
If it's a sequential number requested near birth that would mean that most people with the same birthday have similar numbers, doesn't it?
In practice it is not requested near birth. It is sequential to the time you asked for an ID card, so people who asked for one in the same timeframe get a close number
That ID number is public and allows government & any companies/organisations you show it to immediately verify that they are dealing with a specific person, instead of having to spend time figuring out which specific person named "John Smith" they are dealing with. Having this number simply makes life more quicker and convinient. It also allows to remove any pointless duplications for cards.
For some examples: separate medical insurance card was discontinued, you can verify medical coverage by a simple number query. Same with drivers licences, they still exist in a separate physical forms for foreign trips, but but not inside the country. There is no separate libary cards, I don´t have to carry a separate card for my gym or various retailers.
I can verify myself online quickly and securely. I can digitally sign documents and contracts and email them. Honestly, I´m having hard time imagining my life without it. I´m aware that all proposals for national identification methods in the US have failed thanks to fears of "mark of the beast" and big brother, but it seems pretty silly to me. All that data already exists and can be cross referenced. Making average person waste more time and money by having such massive inefficiencies in the system seems rather silly in these times.
There is a big difference: that ID is being used as a username whereas our SSNs are (usually) used as passwords.
For online verification(banking, contracts, taxes, voting etc) you need both physical card and PIN at the same time.
Otherwise it works just as any other normal ID.
Some even have federated systems where you can later ask the financial institution to hand out a 2FA crypto token that you can use to identify yourself to other institutions over the Internet without ever showing up in person.