Understanding the Value of Digital Wallets

Historically, people have used physical wallets to hold essential personal items. Having an ID, payment method, and keys readily accessible is a necessary part of our daily lives. Twenty-five years ago, you had to buy and collect physical tickets at the box office, physically carry or copy house keys, and keep a physical credit or debit card with you for transactions. 

The world has come a long way in a very short time.  

With the emergence of things like QR codes, verifiable credentials, and NFTs, the contents once stored in physical wallets (like almost everything else) are quickly becoming digitized, which means we’re generating more data than ever before (~150GB per day). 

This wealth of information can be used across all verticals to personalize services, products, or experiences that mutually benefit both individuals and organizations. The challenge, however, is storing these credentials in a readily accessible, shareable, and secure way. 

The solution? Digital Wallets.

Digital wallets are already prevalent in the payments industry, and are used for managing daily interactions like boarding a plane, attending a concert, or unlocking your car door. Generally speaking, however, you can put anything in a digital wallet that you benefit from having readily accessible. 

Types of Digital Wallets 

The contents of digital wallets can be classified into two main categories: 

If payments are the first thing that come to mind when hearing “digital wallets,” you’re not alone. According to the FIS Global Payments report, digital wallets now make up over 49% of e-commerce transactions and over 32% of point of sale transactions, making them the leader in both categories. The standards associated with payment services and the regulation surrounding the payments industry have enabled digital payment wallets to achieve interoperability and widespread adoption.

Mobile wallets serve as a simple stand-in for their physical counterparts, creating an easy “carry-all” for cards. But it’s the substitution of a physical credit card with a digital payment wallet that opens up the path for even more robust use cases. Large amounts of data about individuals exist without physical equivalents, stored inside siloed databases. When managed and stored correctly to allow for interoperability, this data can unlock new value for organizations and consumers alike. 

The widespread adoption and popularity of payment wallets has seeded this potential and also led to the development of other forms of digital wallets. For example, governments around the world are implementing data wallets to manage their digital identity programs. Retailers are implementing data wallets to manage loyalty programs. Various services across industries are implementing one-off wallets or applications for different purposes (AI Wallets, proof of vaccination, airline tickets, digital insurance cards, car keys, smart home management wallets, etc.). 

Today’s Key Challenges & Opportunities 

The challenge today is that wallets are typically associated with a single company, government, or purpose. This leaves individuals doing the work — having to remember which wallet has their airline tickets, their proof of vaccination, or opens their car, for example. Additionally, it significantly hinders how organizations can use and derive value from their wallet offerings.

Wouldn’t it make sense to standardize these efforts?

Unfortunately, most data wallets use bespoke infrastructure and data formats. As a result there is limited data interoperability across data wallets, no universal standard level of security or privacy, no standard user flows, and no simple way to get additional value out of data wallets. Nobody is winning in this scenario.

Organizations are struggling to unlock the value of data wallets because existing wallets are most often too specialized. Most wallets contain very specific kinds of data or perform just one function. This current structure seems like a waste: Using organizational resources to only provide one piece of value limits the potential of this emerging technology. Most organizations are constantly searching for new ways to engage their customers and streamline flows via partnerships, collaborations, and new services. The data in existing wallets should be securely shareable by users and reusable across services, rather than requiring a new wallet to be created for every new offering.

We all want to avoid a scenario where consumers are stuck juggling dozens of wallets that don’t talk to one another as it leads to discontent and lack of engagement with the organization. More so, it creates fractured ecosystems with subpar experiences that limit the relationships and value for both users and organizations. 

The Future of Digital Wallets for Individuals & Organizations

“The digital wallet could become the most important tool ever for asserting control and engendering trust in our digital lives.” - Linux Open Wallet Foundation

Google, Apple, and a few other organizations have attempted to create a “wallet of wallets” that holds general purpose information. However, these technologies are based on proprietary platforms. They lack advanced integration and general interoperability, which means this system prevents the reuse of data in the wallet and limits the value both individuals and organizations can get from it. 

To level up existing data wallet infrastructure and unlock its full value, we must standardize the underlying protocols, data models, and interfaces. Why? Standardization enables interoperability and data sharing across wallets and applications that allows for additional value and services. Additionally, standardized infrastructure allows for portable and privacy-preserving wallets that can be used across devices and applications. This new structure unlocks a value exchange between individuals and organizations.

Imagine a world where individuals receive better, personalized services, products, or experiences using their personal wallet data:

• Personal AI agents can use wallet data to recommend a restaurant, book a reservation, and inform the restaurant of any dietary restrictions you have. 
• AI can recommend a dream vacation within budget and incorporate activities you’ll love.
• No more filling out forms because all of the details needed can be read from a wallet with your permission.
• You can book an airline ticket, share your frequent flyer number, your passport details, and pay all with one click.
• You can go to a doctor’s office and provide your medical history, insurance, and emergency contacts, all in one effortless action.

Now, imagine a world where organizations offer more valuable services and have better relationships with individuals by accessing user-curated wallet data:

• Curated, consumer-provided data that allows for hyper-individualized experiences
• Real-time notifications and updates when important user data changes
• Seamless data sharing with business or third-party partners via native user consent 
• No more scraping, copying, and reconciling data across applications thanks to an interoperable data standard
• Ongoing compliance with existing and emerging regulations due to fine-grained access controls for users
• Easily support any user-facing consumer wallet application (E.g., Google or Apple) with a unified store by utilizing open standards

Solid and Digital Wallets

We’re not as far away from this world as it may seem. When the web first began, it looked a lot like the data wallet landscape does today. Web browsers did not follow any standards and were generally incompatible, making it difficult to build services because there were no guarantees that the same applications would be supported from platform to platform. Eventually, these browsers conformed to universal standards and paved the way for the web we all use today. 

The good news? There is already technology to enable and support this new paradigm around data management and online interactions. Solid, invented by Sir Tim Berners-Lee, is a standard incubated in the W3C for seamlessly managing and sharing data safely across applications. Data wallets are now being built on top of Solid infrastructure, much like web browsers were built on top of HTTP, HTML, and CSS. The Solid protocol is laying the foundation for interoperable data wallets and secure data sharing with applications across various industries and use cases.

Digital wallets are quickly becoming the gateway to an individual's digital life and the interface used for sharing data with services on the web. By moving towards standardization and making existing wallets compatible using technology like Solid, we can ensure a promising future of the web that mutually benefits individuals and organizations alike.  

Interested in how Inrupt helps global enterprises and governments implement Solid-based platforms? Reach out today to learn more.

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