Authentication & Security

Mobile Wallets Inch Closer to Reality


In the past few years, we have witnessed a large number of mobile wallets that have been introduced into the mainstream. Some have made a mark in the payments industry and some have lost their value. The challenge for current mobile wallet providers is to make these digital wallets an integral part of our daily lives. And that can only happen with a radical change in consumer behavior, which in turn is dependent on consumers’ inclination towards the digital versions of its contents, not just for payment cards but also ID and other cards which they require the most. A recent initiative in the state of Iowa shows that an impending era that heralds the need for certain daily necessities in digital form, especially wallets.

The Iowa Department of Transportation is going to pilot a new program on digital driver licenses. The program would see drivers storing license information on their smartphones without the need for using licenses in the form of plastic cards. A dedicated app, to be rolled out in 2015, would be provided to drivers. The police as well as airport officials would be accepting the digital license.

Although this may seem quite conventional compared to traditional licenses, there are some hurdles as well. The app will have to be highly secure in order to avoid identity theft. Moreover, law enforcement and merchants, especially those of tobacco and alcohol, will have to be made aware of the new system. Clearing these hurdles would ensure that the digital license would get official state approval.

Iowa is already one of 30 plus states that allow residents to show proof of insurance via smartphone. Iowa would now become the first state to adopt the digital driver license system. The Department of Transportation (DOT) in Iowa has already been looking to expanding the use of this technology. The license app would also be capable of providing traffic alerts to users and will also notify them about upcoming expiration date of the license.

In the initial phase of the pilot program, a group of state employees will be using the digital license as a test run. Based on this, the DOT will make future decisions on a wider rollout of the system involving residents. Security being a major concern, the app would be currently protected by a PIN number. A second layer of protection in the form of a fingerprint scanner or facial recognition software will also be implemented.

We are already witnessing the declining use of plastic cards thanks to the various digital wallet systems. A prominent example is Apple Pay which enables secure payment transactions. It uses a secure element and biometric sensor to shield raw credit card data. Considering the security breaches in the past, the new digital license app can take leverage learnings from Apple Pay in terms of security and usability.

The current initiative by the state of Iowa would be sign of things to come more broadly, specifically in the adoption of more such digital IDs. Moreover, we could witness a radical shift in consumer behavior in terms of reducing the use of plastic cards. As long as the consumer needs a traditional wallet to carry a plastic ID, there will always be some resistance to shifting to a digital wallet. So, this initiative by Iowa, if replicated by other states, would certainly benefit the payments system where startups and established players alike are working hard to replace plastic cards with digital versions.



MEDICI Team is a group of content writers, bloggers, journalists, researchers, and editors from the MEDICI who collaborate to create FinTech insights.

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