Money20/20: Digital Wallets – the future of public infrastructure?

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When you hear the word “wallet”, what do you think of?

For the majority of people, they would picture a traditional wallet that is used to store cash, credit and debit cards, alongside credentials such as a driving licence. However, as the world continues to evolve digitally, the term “wallet” is evolving.

Daniel Goldscheider, Founder of the Open Wallet Foundation (OWF) knows this better than anyone. 

The OWF is a consortium of companies and non-profit organisations collaborating to drive global adoption of open, secure and interoperable digital wallet solutions, as well as providing access to expertise and advice through its Government Advisory Council.

At a Money20/20 panel this week, Goldscheider took to the Exchange Stage with fellow panellists to check-in on how that evolution is coming along.

Joining Goldscheider is Paolo de Rosa, Digital Identity & Trust Services CTO at the European Commission, Pramod Varma, Chief Architect Aadhaar at Beckn Protocol and Kristina Yasuda, Identity Systems Architect at SPRIND.

The conversation begins by echoing sentiments of a shifting paradigm, where the concept of a wallet transcends physical confines to embrace the boundless possibilities of the digital realm.

Rosa lays out the three main components of the future digital wallet, he said:  “The first component is the digital identity with legal binding. The second one is data exchange and the third one is payments.”

Coupled with these three components is the idea that digital wallets can be used both in the public and private sector, an aspect that OWF has emphasised is important in its recent actions, such as launching the Open Wallet Forum in collaboration with the United Nations.

“The idea of bringing the public sector and the private sector together to make sure that we end up with wallets that become digital public infrastructure that act on your behalf,” explains Goldscheider.

Regulation?

Quickly into the panel, the discussion is opened up to the audience, with Goldscheider asking for questions.

Following this prompt, the majority of questions centred around regulation, unsurprisingly given the early stage that these digital wallets are in, with Yasuda pointing out that this technology is waiting on a “really ambitious chunk of regulation”.

Recently, the Digital Identity Regulation entered into force in May 2024, designed to address the challenges of digital identification within the European Union (EU). Under this regulation, every EU Member State is required to offer at least one EU Digital Identity Wallet to all citizens and residents by 2026.

Yasuda also comments on the standardisation process. She stated: “We’re definitely on the right road, but we need to take those standards to the finish line.”

She goes on to advocate for separating the standards conversation into two distinct timelines, distinguishing between short-term goals aimed at achieving pragmatic tech stacks and longer-term objectives, geared towards comprehensive standardisation. 

Yasuda highlighted the potential for innovation within digital wallets, pointing the audience to emerging use cases in the payment space that leverage standardised protocols to enhance privacy and security. 
Notably, she cites the integration of payment-specific transaction data with user credentials, a development that promises to streamline transactions and bolster user trust.

Why are digital wallets important?

User trust is what is at the heart of this technology, which Varma reiterates to the crowd gathered around the stage.

Varma said: “One of the very fundamental hypotheses that we have been pushing is that neither the state nor the private sector should control my data, my ID or my destiny.

“Wallets play a very key role in ensuring that I, as a user, am at the centre of my flaws, whether it’s financial flaws, or business flaws.”

Varma, a key player in Digital Public Infrastructure in India, released a paper in April, titled ‘The Future of Digital Public Infrastructure: A Thesis for Rapid Global Adoption’. The research underscores the importance of user empowerment in shaping a transparent and equitable digital future.

In Varma’s vision, he believes wallets transcend mere monetary transactions, extending to tokenize and transact all forms of assets. This user-centric approach serves as a cornerstone, ensuring seamless integration across private and public sectors.

Learning from past mistakes

As the panel nears its conclusion, the speakers discuss some of the biggest threats to reaching the best potential of digital wallets.

Within this dialogue, there’s a consensus that the dominance of iOS and Android ecosystems presents both opportunities and challenges for the digital wallet space. While these platforms offer extensive reach and integration capabilities, they also wield significant control over the user experience and ecosystem dynamics.

Yasuda commented: “We need to make sure any third party wallet can take advantage of the infrastructure at the same level of grace. So we don’t end up in a situation where people can only use half of their credentials, and there’s no choice.”

Another facet brought up by the audience is banks making digital wallets themselves. On this topic, Varma points to the example of the internet, stating that banks must trust the government and its ability to create innovative infrastructure to ensure a borderless, permissionless mechanism.

Summarising the future role of digital wallets, Rosa also offered a metaphor, stating that “this is an infrastructure”. He continued to explain, just like the government builds roads for you to build businesses and homes on, digital wallets will lay down the foundations for business to build and innovate on top of.