Aggregating digital wallets is a bad idea
In my physical wallet, my credit cards, driver’s license, health insurance card, public transit cards, vaccination card, and yearly pass to Joshua Tree are co-mingled. But what do these items really have in common? One ID card was issued by the California DMV, another ID card was issued by Santa. (I’m not kidding.) Some cards have personally identifiable data on them, others hold a balance for public transit or permit access to a national park free of charge until this summer. While the cards conform to a standard shape, what is on them and how I use them is very different. And yet, there are three separate industries racing to create “One (digital) wallet to rule them all.”
Payment companies see an opportunity to get into the digital identity space. Digital identity companies see an opportunity to aggregate your digital identities and identity data. And then you have cryptocurrencies, which have some transaction characteristics, but in my wallet, they resemble more a stock portfolio than a payment method or kind of identification. Does it make sense to integrate all these use cases into a single ‘wallet’?
The Payment Paradigm
In 2022, digital payments are fairly mature. I use Venmo, Zelle and Paypal to pay my handyman, for flowers at the farmers market, and to send friends cash. Credit cards are accepted on all these channels, plus I can physically use them. Depending on your hardware platform, you can activate a credit card to use on your phone for contactless payments. These are not different credit cards, they are the same credit card that I have ‘onboarded’ to each payment platform, or in other words, wallet. No matter what flavor of credit card you have, they interoperate with each other’s systems.
Crypto Wallet, Stock Market?
Crypto wallets are less about day to day transactions and more like stock portfolios since crypto prices fluctuate and we may want to buy or sell depending on the price.
Cryptocurrency is the other side of the same payments coin. Whereas traditional FinTech companies are traditionally risk averse and less likely to experiment, the crypto industry is all about experimentation down to challenging the basic philosophical beliefs of what money is. When the use case of using cryptocurrencies for daily transactions evaporated (at least in countries with a robust national currency) it shifted into a store of wealth assets – and attracted a lot of traditional money folks.
The crypto space is the newest entry to the scene (despite being around for over a decade) and the experimentation isn’t stopping anytime soon, despite KYC and other regulations. Does it make sense to integrate a volatile, experimental stock portfolio with the mature payment transaction industry? Especially since crypto wallet UI is practically nonexistent.
Digital Identity Data
Now what about digital identity? Despite digital identity’s necessity to do most anything on the internet, we don’t have any digitally native identification cards yet. A few of us may have a COVID credential QR code we keep in our images, and Apple just added the ability to add your vaccine card via QR code in iOS 15. But these are rare outliers.
One of the challenges with digital identity is that our identifying data comes from many places. Issuers of digital identity can be governments (as with driver’s licenses or voter registration), companies (health insurance, credit cards), and even our friends (my friend who gave me a license to Santa).
This is a very different situation from the payments paradigm where financial companies issue a credit card to buy something. Payment transactions is a narrower and specific use case, with companies controlling many touch points, from issuing credit cards to client-server digital transaction models.
Verified identity facilitates and smooths other kinds of transactions. We can be more relaxed and confident when we trust that someone is who they say they are – whether that be a person or a company. Verified data goes a long way to creating this kind of trust. But the square peg of data sharing can’t be fit into the round hole of payments, no matter how tempting it may look. And it doesn’t have to, because aggregation already exists in our accounting software, tax software, bank accounts and small business profit and losses statements.
While there are those who dream of One Wallet to rule them all, maybe that’s not the best metaphor.
It is not as sexy, and certainly an organization may have less control, but it may be better to figure out the interoperability rails necessary to support a diversity of consumer options for those who want different experiences. This is also good for the marketplace.
About the author
Heather Vescent is a digital identity industry thought leader and futurist with more than a decade of experience delivering strategic intelligence consulting to governments, corporations and entrepreneurs. Vescent’s research has been covered in the New York Times, CNN, American Banker, CNBC, Fox and the Atlantic. She is co-author of the The Secrets of Spies, The Cyber Attack Survival Manual and The Comprehensive Guide to Self Sovereign Identity.