I've blogged several times about the advantages of the Estonian e-government. I'd be remiss if I didn't acknowledge the downsides. Estonia may well have great security, but India, which has its own similar innovative e-government initiative going, has run into problems with its Aadhaar database, according to this report from Marginal Revolution.
The bottom line is that by using a centralized data system you increase the incentives for hackers to try to access it and the potential damage from such access.
There's no free lunch.