Live Five 2025 – The Year of the Digital Wallet
Each year we review the conversations we are having with our clients to pick out key emerging themes that will be important in the following year. This year we have had so many conversations about digital wallets that we have decided to devote our Live 5 for 2025 to the topic of wallets. So here are our top 5 considerations for digital wallets:
1. The Regulatory Battle: The role of the platforms
Globally, Apple, Google and Samsung dominate the mobile device landscape (except in specific markets such as China). This gives them control over the secure elements that are fundamental to securing digital wallets. They have the ability to limit the scope of non-platform wallets by restricting or charging for access to those important technological capabilities. The platforms want to play higher up the technology stack as well and they have the opportunity to take control, with the promise of greater security, privacy and convenience.
While tension is already evident in many different jurisdictions, it is clear that the platform has a core role to play. We will see how this plays out over time, but it is clear that there is also a role for regulators to play. This is already happening in Europe around eIDAS 2.0 and also under competition law in Australia. Regulators are actively shaping the future of the wallet landscape.
It is worth recognising that, while Apple and Google appear to be in competition, Google provides Apple with search capabilities on Safari. The threat in the US to break up Google, due to its dominant position in the market, could have wide-ranging repercussions.
2. The Social Need: More than payments
Mobile payment wallets have been available for well over a decade and are increasingly widely accepted. Indeed, in the UK, wallets account for around 50% of contactless payments, up from nearer 20% a few years ago. Now there is significant interest in using digital wallets for purposes beyond payments. There are many reasons for this, including widespread adoption of smartphones and the mainstreaming of digital documentation, especially during the COVID crisis.
Of particular interest are the use cases, that like payments, must be built on a base of strong cryptography and key management. Digital identity is top of the list. Building on a core of strong identity, there is scope for wallets to be adopted in a range of related fields. These include applications for physical items, such as cars, where the use of secure credentials is imperative. It will also include digital services where there is a high risk of fraud (such as financial services) or where privacy is essential (such as healthcare). The EU recognises this and so is mandating the use of EUDI wallets across a wide range of sectors, where other forms of identity verification are used today. Secure digital wallets with proper cryptographic key management are going to be at the center of the future digital world, being the primary tool that individuals and businesses use to access services and secure transactions.
3. The Commercial Imperative: Intelligent wallets
As the convergence between wallet technology and artificial intelligence progresses, opportunities for customisation and bespoke customer experiences will increase. This has the potential to be positive for both the individual and the service provider. Each of us could have one or more digital agents, to manage our transactions, or at least the most repetitive ones. While this is perhaps most obviously relevant to the consumer environment, it could also play a major role in business-to-business transactions.
This would have several benefits: convenience, customer experience, traceability, efficiency, quality of service, cost, speed of response and the ability to tailor services to each customer’s individual needs and expectations. In an environment where standardised offerings have historically resulted in poor customer service, this could be a major improvement. In addition to these benefits, such an offering would provide adaptability to changes in the market, as customer experience and perception changes over time. At a simple level this is already taking place amongst the Fintechs – sweeping of money between accounts based on capabilities provided under the UK Open Banking regulations. It can be expected to become more widely adopted, as both individuals and institutions experience the benefit over the next few years. Clarity will be required over the terms of engagement, with selections made up front and adaptive changes over time, underpinned by a strong consent regime.
4. The Technical Choices: Interoperability is key
There is a strong drive towards interoperability globally. At present wallets tend to be provided for a specific context (such as payments), geographical areas (such as the EU or a particular US state) or even for a particular organisation (such as an individual brand or affiliate network). There is a desire within the industry to create a more joined-up ecosystem, to support integration across domains and between jurisdictions. Interoperability is a challenging goal, as it requires technical, regulatory and commercial elements all to be aligned.
On the technical front, technical standards have played an essential role in building interoperable payment wallets, with Global Platform providing a framework for the underlying secure element technology and EMVCo defining how card-based payments transactions work.
Technical standards are emerging in the identity space (from ISO, W3C and Open Identity Foundation) which are helping to shape the identity wallet ecosystem. Amongst others the major global players such as Apple clearly see the benefit of aligning with these technical standards, as a way to ensure they maintain their reach. Maturity can take a long time to achieve however – decades in the case of the payment card market. Over time, islands of development will be joined up through mergers and joint endeavours. En route to maturity, the market must also keep pace with the latest technological developments to remain relevant to its user base.
5. The Compelling Use Cases: Low Hanging Fruit
Digital wallets already provide great utility in payments – for both in-person and online transactions. Nowhere is this more obvious than public transportation. Waving a mobile at a subway gate and then being guaranteed the card is selected and the best fare applied, has proven to be a compelling solution in many cities allowing residents and visitors alike to travel with confidence and ease. Digital wallets are starting to play a role in air travel too. In the US, the TSA has adjusted its rules to allow mobile driver’s licences, held in digital wallets, to be used as a travel document for domestic travel.
We have often talked about a future when you can leave your physical wallet at home, carrying everything you need in digital form accessible via a mobile device. Putting payments credentials into the wallet gets you part of the way there. When non-payment credentials – like your driver’s licence, car keys and work pass – are held in the same wallet that vision starts to become a reality.
Perhaps the most pressing issue in the online world is authenticity. Scams occur because it is trivial for fraudsters to present false information using fake identities. A key feature of digital wallets is the ability to create digital signatures. Combined with trusted identity credentials, digital signatures are an effective way to mitigate identity-related fraud. They are equally relevant to consumer and business transactions. And that’s the point. Digital wallets are not just for people. They are for people, organisations and things – we should be aiming for a digital world where every end point is secured so that every transaction can be trusted. We are long way from that today but during 2025 we expect a lot of energy and focus to be on working towards that vision.
