First, digital wallets came for paper cash, credit cards and the leather billfold.
Now, as they become more prevalent across end-users’ daily lives, gaining traction as a convenient and secure way to store and use things like event tickets, transit cards and loyalty programs, a new dimension of their utility is beginning to emerge: digital IDs.
However, the digital ID ecosystem is still in its infancy, with several hurdles to overcome before digital IDs can replace physical ones entirely.
“When it comes to being able to digitize and save these IDs, and of course to use them, the first and most critical thing to establish are sound and complete standards,” Alan Stapelberg, group product manager at Google Wallet, told PYMNTS.
“Being able to use your digital identity requires the interaction of two parties, and standards help the interoperability between these devices, particularly when these devices are not built or provided by the same party,” Stapelberg said.
He highlighted Google’s recent efforts in this area, including the recent integration of California driver’s licenses. These milestones represent significant steps forward in the broader adoption of digital IDs.
Read more: What’s in Gen Z’s Mobile Wallet?
Still, recent PYMNTS Intelligence data shows that while some people are using digital wallets to store IDs, not many (about 8%) are actively using them.
In order to spur greater usage, Stapelberg reemphasized the importance of standards like ISO 18013-5, which Google Wallet currently uses to convey IDs to TSA readers. These standards enable various parties to develop solutions that work together seamlessly, regardless of the devices involved.
He added that Google has been active in working with standards bodies like the ISO and the World Wide Web Consortium (W3C) to support the development and adoption of these programs. As digital IDs become more common, the need for such collaboration across the industry will only grow.
Another significant challenge is the supply-and-demand dynamic inherent in the adoption of digital IDs.
On the supply side, trusted issuers like state DMVs and government agencies need to digitize and provide these IDs. On the demand side, users need compelling reasons to adopt and use digital IDs, which requires creating use cases that offer convenience, flexibility and enhanced security.
“Once you have an ID, you need to be able to establish parties that can accept them,” Stapelberg said.
Currently, Google Wallet is live with digital IDs in five U.S. states, including California. Stapelberg pointed out that digital IDs offer several advantages over physical IDs, particularly in terms of privacy and security. For instance, digital IDs allow for selective disclosure, meaning that only the necessary information is shared with other parties. This feature is particularly beneficial in scenarios like purchasing alcohol, where only proof of age is required, rather than the entire set of personal information typically found on a driver’s license.
“Standards have done a great job to bring in and build a privacy centric narrative into the design and solution of IDs,” Stapelberg said.
He added that government-issued digital IDs in Google Wallet are encrypted end-to-end, ensuring that personal information remains private and secure, even if a user’s phone is lost or stolen. This level of security makes digital IDs not only a viable alternative but potentially a safer option than physical IDs.
See also: Digital Wallets Beyond Financial Transactions: A Global Perspective
Scaling the adoption of digital IDs presents several challenges, similar to those faced during the early days of contactless payments. While online acceptance of digital IDs is expected to be more rapid, in-person use cases will take longer to develop due to the need for hardware upgrades, staff education and potential legislative changes.
Interoperability is another fundamental aspect of digital ID adoption. As Stapelberg explained, identity is a global use case, and digital IDs must be able to function across borders just as physical IDs do today. This requires collaboration among various stakeholders to build solutions that are universally accessible and interoperable.
Google’s approach has been to ensure that its digital ID solutions are available on a wide range of devices, from high-end smartphones to more moderately priced ones. This inclusivity is essential for making digital IDs accessible to everyone, regardless of their economic status or the devices they use.
Stapelberg also expressed optimism around 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.
He noted that digital IDs could simplify these processes by allowing users to reuse verified IDs stored in their digital wallets, reducing friction and increasing trust between users and merchants.
Looking ahead, the future possibilities of digital wallets are difficult to overstate.
“Digital wallets started with a focus on payments but have become much more than that today … we’re looking at ways to give people a completely, truly, digital wallet and make these experiences even better,” Stapelberg said.
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