Let’s Talk About Digital Wallets

One of the areas I’ve been researching recently is the concept of a digital wallet. At a conference a few weeks ago, someone said, “Digital wallets are great! Everyone understands the concept because we all have physical wallets, and digital wallets just move that concept online.” Hmmm. Let’s just say I have concerns.

What’s a Wallet?

There are actually a few ways to describe digital wallets. As an analog to something you put in your pocket is one. As a cryptographically sealed digital container is another. Some describe it as a specialized financial app, and others push those boundaries to say it’s a thing that can hold any digital or digitized credential, from your driver’s license to your graduation diploma. It’s almost like the definition of art: you know it when you see it, but there’s no one definition for it.

In the world of technology, that’s a problem. I admit, I have a strong bias in favor of expecting technical things to have formally developed technical standards. These standards describe precisely how technology works and how it can interoperate with whatever will need to use that technology. And yet, no formal standard exists that answers the question, “what’s a wallet?”

Here at the close of 2022, two tech giants are driving the de facto definition of a wallet: Google and Apple. But others are working in the field, especially in Europe. The European Union has committed to the position, “Every EU citizen and resident in the Union will be able to use a personal digital wallet.” One of the advantages the EU has over other jurisdictions is that they can require that each member state accept the digital wallet technology from any other member state. It doesn’t matter how they implement it, as long as others can use it as well. This requirement opens the door for significant innovation and is an example of the idea, “let the market decide.” Of course, when it’s left to the market, sometimes it’s the best marketing department that wins, not the best technology. It also takes us a step down the path of some deployments “winning” and others “losing.” For those that have “lost,” there may be significant costs in re-writing and re-deploying their technology to match the “winning” side.

Wallet Standards (Or Lack Thereof)

It would be much easier if we had clearer technical and policy guidelines early in the game. I say both technical and policy because this is an area where it is impossible to separate the two. Digital wallets will hold government-issued credentials, like driver’s licenses, as well as credentials from heavily-regulated industries like finance. There must be legal protections in place to protect people’s data. There must also be in place common technical standards to make sure that wallets have all the same safety features (post-quantum cryptography, ftw!) and can be portable when someone changes devices and operating systems.

Most of the standards work I’ve observed so far have focused more on credentials–the thing being stored in the wallet–than the wallet itself. Making sure that digital credentials can be used safely, giving the individual full agency over what information is shared and what isn’t, is enormously important. Though even there, I worry. It’s incredibly difficult to develop a technology that does everything for everyone in a way that all people can intuitively understand. Different cultures, different age groups, different economic status… These criteria are just a few things that influence the concept of “intuitive tech.” I also worry about people who don’t have access to the technology at all: if the world is moving to wholly depend on active Internet connections and ownership of smart mobile devices, we are at risk of leaving so many behind. That’s not healthy for society.

Wrap Up

So, digital wallets are definitely something we can expect to see more of in the future. But until they are properly standardized and regulation around the world defines their use, don’t get too comfortable with their adoption. If you’re just a regular person wanting life to be simpler, go ahead and use your favorite app, but make sure you still have the most critical physical credentials (like your driver’s license or a credit card) at hand for when you need them. If you’re in tech, make sure you allow for a backup plan if the wallet and associated credentials aren’t available.

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