I think there are a couple of things there. It depends on who the “we” are.
In the service where there's an identity network, the network never needs to see the protected information, right? Sure, it has to send it. It has to hold it temporarily until the receiver of the information picks it up, but the network doesn't need to see the personal information. So, yes, you can process data without having to decrypt it.
Really, the encryption happens at the provider. The receiver of the information should decrypt it.
The other thing is about data minimization. We also need to get to a point where I'm not sending my birthdate to say how old I am or that I'm the age of majority; I'm sending a validated, “Yes, this person is over 19.”
Those two things together can add the security we need from a data-minimizing point and reducing the exposure of personal information.