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Payments and identity converging in digital wallets

Payments and identity converging in digital wallets
 

Digital wallets tend to be designed primarily for digital IDs or online payments, but as the applications are related, applying wallets designed for one use to the other is a growing trend. The trend has some observers excited over the prospect that the advantages each capability provides to the other will spur the kind of adoption and scaling that digital wallet advocates have long been seeking.

A white paper published by the EUDI Wallet Consortium (EWC) in late-2024 outlines the complexity of extending digital identity wallets to payments.

Digital wallets can provide “a new defensive line against exploding payment fraud,” make customer authentication easier and more trusted, and enable the delegation of payments to other people, or soon, AI agents, Customer Futures argues.

A blog post published by Fime shortly after the EWC’s white paper argues that in addition to the strong customer authentication benefits, the ability for people to share other attributes through digital identity wallets are a major advantage. Age assurance is one example of a process that can be carried out without requiring a dedicated step. EUDI Wallets and the digital euro could make cross-border payments more secure and efficient, Fime says.

“Undoubtedly, the digital identity wallet will become a pivotal part of our daily activities, reshaping how we manage payments and interact online,” the post says. “While our exploration has focused on the European Union’s progress and regulatory framework, it serves primarily as an illustrative case. Similar digital identity advancements are unfolding across the globe.”

Mattr CPO Luke McIntyre notes in an article on his company’s site that “The payments and identity sectors have long operated as critical, yet distinct, pillars of digital interactions,” but argues their shared foundations and mutual benefits could potentially unlocking trillions of dollars in value.

The Identity and Payments Summit being hosted by the Secure Technology Alliance next month in San Diego will bring together stakeholders from both sides of the digital wallet ecosystem, McIntyre notes, “to deepen the dialogue” and move towards “a future where payments and identity systems work hand in hand to redefine digital trust.”

Apple’s angle

Apple Pay popularized the smartphone as a secure transactional device, but Apple Wallet’s primary use case will soon be sharing Apple ID, David Birch writes in his latest newsletter.

Digital wallets are already involved in nearly a third of global point-of-sale transactions, and half of those online, he says.

Birch worked as a consultant on efforts by banks and telcos to create global mobile payment infrastructure, so he knew they would not be able to reach an agreement on who’s in charge, leaving the field open for Apple. Despite its gains, however, 9 in 10 iPhone users who could use Apple Pay currently do not.

The proliferation of mobile driver’s licenses (mDLs) in the U.S. and elsewhere aligns neatly with Apple’s vision for using digital wallets beyond payments, and even patents Apple holds for keyless car unlocking.

Apple’s digital wallet, therefore, may soon be more of a replacement for the ID cards held in physical wallets, and the car keys held in another pocket or a purse, than for payment cards.

The EWC, meanwhile, continues to work on enabling payments with a pair of requests for comments on payment wallet attestation and payment data confirmation.

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