Digital wallets, once primarily used for contactless payments, are evolving into comprehensive digital companions. They are becoming more prevalent in our daily lives as a convenient and secure way to store and use things like event tickets, transit cards, and loyalty programs. However, a new horizon is emerging for digital wallets: digital IDs.
The Promise and Challenges of Digital IDs
The digital ID ecosystem is still nascent. While digital wallets are being used to store IDs, only about 8% of people are actively using them. Several hurdles must be overcome before digital IDs can fully replace physical ones.
Establishing Sound Standards
The first critical step is establishing sound and complete standards. Alan Stapelberg, group product manager at Google Wallet, emphasizes that the use of digital IDs necessitates interaction between two parties, and standards are vital for ensuring interoperability between devices, especially when they are not built or provided by the same party.
Driving Adoption and Usage
To promote greater usage, Stapelberg highlights the importance of standards like ISO 18013-5, currently employed by Google Wallet to communicate IDs to TSA readers. These standards allow various parties to develop solutions that work seamlessly together, irrespective of the devices involved. Google has been actively collaborating with standards bodies like the ISO and the World Wide Web Consortium (W3C) to support the development and adoption of these programs.
Balancing Supply and Demand
Another significant challenge is the supply-and-demand dynamic. On the supply side, trusted issuers like state DMVs and government agencies need to digitize and provide these IDs. On the demand side, compelling use cases that offer convenience, flexibility, and enhanced security are needed to encourage user adoption.
Privacy and Security Advantages
Digital IDs offer several benefits over physical IDs, especially in terms of privacy and security. They allow for selective disclosure, meaning only the necessary information is shared. Government-issued digital IDs in Google Wallet are encrypted end-to-end, ensuring personal information remains private and secure, even if a phone is lost or stolen.
The Future of Digital Wallets and Digital IDs
Scaling the adoption of digital IDs will require overcoming challenges similar to those faced during the early days of contactless payments. While online acceptance is expected to be faster, in-person use cases will take longer due to the need for hardware upgrades, staff education, and potential legislative changes. Interoperability is also crucial. As identity is a global use case, digital IDs must function across borders, requiring collaboration among stakeholders to build universally accessible and interoperable solutions.
Google’s Vision for Digital IDs
Google’s approach is to ensure that its digital ID solutions are available on a wide range of devices, making them accessible to everyone. Stapelberg is also optimistic about the potential of digital IDs to streamline processes in the financial sector, particularly in areas like customer onboarding, know your customer (KYC) requirements, and fraud prevention.
The digital ID shift is set to transform digital wallets beyond payments and passes, creating a new dimension of utility and convenience. However, collaboration and innovation across the industry will be essential to overcome the challenges and realize the full potential of digital IDs.
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