66% of Americans expect to have a Digital Identity Wallet by 2023
- Digital Identity Wallets can cut down on KYC/AML costs and are quickly becoming a part of consumers’ expectations.
- Let’s review the model this new form of identity verification will take and the ethos that should guide its development.

As Early Warning Services, the parent company of Zelle, gears up to launch its own bank-backed wallet, the industry is looking at the technology in a new way. This transition may be about more than just going digital with payments -- it foretells the importance of digital identities.
Digital identities can help financial institutions fulfill KYC requirements and build better online experiences. But managing multiple digital identity credentials can be a tough task. This is where Digital Identity Wallets come in. A single wallet can hold multiple verification credentials for an individual or organization and help avoid reliance on passwords.
Banking on Digital Identity Wallets
Unlike offline channels, verifying identity in the digital space is an issue of trust – and one that can be incredibly difficult to resolve for FIs as well as governing bodies. In fact, data by Gartner shows that 30% of all national governments will enable Digital Identity Wallets for mobile phones by 2024.
Also inclined towards the emerging technology, more than 66% of Americans expect to have a digital wallet this year. 54% of consumer say they would prefer to get their wallets from banks, followed by smartphone manufacturers.


Over 66% of Americans expect to have a Digital Identity Wallet by 2023, and 54% of consumers in all age groups prefer to use a Digital Wallet issued by a bank. Ease of use and loyalty options within preferred stores have emerged as the primary value-added features customers expect to see in their Digital Identity Wallets.
The Expert Group’s survey data shows that 66% of banks have already started issuing Digital Identity Wallets or will do so in the future. Through these wallets, banks can use credentials issued by other banks, third parties as well as governing bodies. If the digital identities for the wallets are managed by an Identity Provider (IDP), additional costs may be levied on banks for verification processes.
Value Proposition
As far as banks are concerned, however, third-party information like customers’ personal information, KYC info, creditworthiness and fraud profiles may be worth the extra cost. As the chart below shows, KYC info surfaces as the most valuable bit of information for this process. This may be directly related to the complexities of current KYC processes.

In case banks don’t plan to develop and offer Digital Identity Wallets, they can instead develop their own credentials that can be shared with third-party wallets. This would allow banks to continue to serve as the broker of “trust” and “verified identities” without the hassle of developing in-house solutions.
There can be downsides to this approach, as well. For example, partnering with third-party wallets will significantly reduce the room banks have to build their own customer experiences and brand image, leaving them with fewer ways to differentiate themselves.
If banks decide to issue credentials, partnering with multiple Wallet providers can help with distribution and availability across channels. The biggest question here will be which information banks are comfortable sharing with their (to-be) partners. As the chart below shows, KYC information reigns supreme here.

What will the Digital Identity Wallet model look like?
For digital wallets, models can be simplified to have two main entities: the Relying Party (RP) and the Identity Provider (IDP). In this case, the RP pays a certain transaction fee that is shared by IDPs, allowing network operators to recover the investment, operational and governance costs of the system. While models vary, it is unlikely that end-consumers will have to pay any costs for this process.


There are a few things that need hammering out before Digital Identity Wallets can go mainstream. For example, most survey respondents see the identity network operating model to be a marriage of public and private infrastructures. However, others would prefer separate models that have interoperability at every level of the stack. Notably, no survey respondents show confidence in a completely public infrastructure.
The ethos to build upon
Digital Identity Wallets should be built responsibly and with clearly identified guiding principles in mind. The picture below summarizes these concerns.

Due to the sensitive nature of this technology, it is important that human-centered design is at the heart of emerging applications and products. Unless this is made a priority, new products may fail to connect with less digitally-savvy customers and may even limit wide adoption.
Similarly, because of the proximity this technology has with people’s identity and personally Identifiable Information (PII), it is important that each data point is collected after strict considerations of consent and privacy are made. These tenets also follow from data minimization, which can ensure that only the requisite data is shared and stored, reducing the risk of abuse or misuse of data.