The Rise of Digital Identity Wallets

3 June 2025

The Rise of Digital Identity Wallets

3 June 2025

What Is a Digital Identity? Why It's Becoming Essential

Imagine a world where you never forgot your passport or driving license. Where you don’t need to prove your address using a water bill or bring medical documents to hospitals. This is a world where everyone has their own government-approved digital identity - and will become reality sooner than we think.

If you’ve ever used your fingerprint to open a banking app or scanned your passport into an app to prove who you are, you’ve created and used a digital identity.

But what exactly is a digital ID? And why are governments around the world racing to roll out digital identity wallets?

This blog explores what a digital identity is, how it works, and why having both digital identity verification and authentication are key to making sure these new systems remain secure, private, and trusted.

What is a Digital Identity?

A digital identity is a digital version of you. It usually lives inside a mobile app or wallet. Think of it like Apple Wallet or Google Wallet - but instead of storing boarding passes or payment cards, it holds verified information about who you are - your name, age, nationality, or even your medical records or university degree.

Once verified, these credentials can be shared with third parties to prove your identity, eligibility, or other personal attributes. For example, you could use your wallet to:

Prove your age when buying alcohol.
Log in to a government portal (no more passwords!).
Access health records at a hospital without needing to carry documents.

So when we ask “what is digital identity?”, the answer is simple: it’s a way to prove who you are online, securely and easily.

In many countries, these digital identities are being stored and managed through digital identity wallets - apps designed to hold and protect your verified digital credentials.

What Does a Digital Identity Wallet Look Like?

Think of it like an Apple, Google, or Samsung Wallet, but instead of storing payment cards, it stores your digital credentials.

Here’s what it might contain:

A verified copy of your ID or passport.
Proof of address, such as a utility bill or rental contract.
A digital driving license.
Your COVID vaccination status or other health records.
A university diploma or education certificate.
A verified bank account or IBAN.
Employment history or proof of income.
Professional licenses or certifications (e.g. medical or legal).
Travel visas or immigration status.

Each of these items is verified when added to the wallet. Then, when needed, they can be selectively shared with apps, services, or websites that ask for them.

As of the time of writing, the majority of governments worldwide are accelerating their efforts to build national digital identity systems. On the African continent, Nigeria recently introduced NINAuth, a digital identity verification platform designed to support e-government services. Guinea has also begun rolling out biometric voter registration in preparation for its upcoming elections. Somalia is developing multiple digital ID initiatives in parallel to modernize its national identity infrastructure.

Meanwhile in Asia, Laos has launched a new digital identity system with support from Vietnam, aiming to simplify access to essential public services. In other regions, progress continues to pick up pace. New Zealand has introduced a mobile digital ID app to make verification easier for both citizens and visitors. And in the U.S., California has started piloting digital ID platforms to expand secure digital access to public services across the state.

The European Digital Identity Wallet (EUDI Wallet)

In Europe, digital identity is about to become even more widespread.

Under eIDAS 2.0, the updated EU regulation on digital identity, all EU member states must provide a European Digital Identity Wallet (EUDI Wallet) by late 2026. This wallet will act as a secure, standardized way for EU citizens and residents to verify their identity across all 27 EU countries.

The EUDI Wallet isn’t just for accessing government services. It’s designed to work with private companies too. That means banks, telecom providers, online marketplaces, and other services must accept it as a valid form of identification.

Key Changes Introduced by eIDAS 2.0:

Mandatory Wallets: Member states are now required to issue a wallet that meets the new EU standards.
Cross-Border Recognition: A wallet from Spain must be accepted in Germany, and vice versa.
Private Sector Use: Banks, insurance providers, telecoms, and e-commerce companies must accept these wallets for identity verification.
Open to Private Providers: The regulation opens the door for private companies to offer compliant wallets, which increases competition and innovation.

In short, EU citizens will have a free, secure digital identity they can use across borders and industries.

On top of this, other countries are moving fast too.

Singapore’s Singpass is used by over 3.5 million people for accessing both public and private services. India’s Aadhaar is one of the largest digital identity systems in the world, with more than a billion users. Australia’s myGovID and Canada’s DIACC framework are also examples of national-level efforts to create secure and interoperable identity wallets.

In each case, the goal is the same: make identity verification faster, safer, and easier for users.

Digital Identity: The Two Key Steps

Setting up and using a digital identity involves two distinct processes: identity verification and identity authentication.

1. Digital Identity Verification: Creating Your Identity

This is where your digital identity is first created.

Typically, you open the identity wallet app and follow a few simple steps. You scan your passport or ID card and then take a selfie. The app checks that the document is real and compares it to your face to make sure it belongs to you. This process is usually powered by a combination of machine learning and human review.

Once verified, the identity app stores this information securely and marks the identity as "trusted." Apps, banks, and other services will rely on this verified status instead of doing the checks themselves.

But here’s the challenge: once your identity is verified, how do apps know it’s really you using the wallet later?

2. Digital Identity Authentication: Proving It’s Still You

After the wallet is set up, you'll use it for different things - logging into services, updating personal details, authorizing payments, or even recovering access if you get a new phone. This is where digital identity authentication comes in.

Each of these actions requires authentication - proving that the person using the wallet is the same one who originally created it.

Currently, there’s no standard way to authenticate users of a digital wallet. Different apps and countries use different methods:

SMS One-Time Passwords (OTPs) – Verifies device ownership, but easy to phish.
Authenticator apps – Adds a layer of security but not always user-friendly.
Re-enrollment – Repeating the ID scan and selfie process, which can be frustrating.
Call center verification – Expensive, slow, and vulnerable to social engineering.

The Role of Biometric Face Matching in Digital Identity Wallets

The best way to authenticate a digital identity is through face matching. This means comparing the face of the person trying to log in to the face that was captured during the initial verification.

But face matching alone isn’t enough. You also need to confirm that the device being used is the same one originally registered. This adds a second layer of protection - what’s known as multi-factor authentication - combining inherence (your face) and possession (your device).

For a more detailed explanation of the different types of multi-factor authentication, check out our dedicated blog: Multi-Factor Authentication: Beyond Passwords, OTPs, and FaceID.

This makes account takeover fraud significantly harder. Even if a criminal has your phone, they can’t log in without your face. And even if they have a photo of your face, they need your phone.

Why Wallets Must Prioritise Verification

and

Authentication

Let’s say your wallet is protected by FaceID. Someone steals your phone and knows your PIN. Either via shoulder-surfing, or even a family member. They could reset FaceID and take over your wallet.

Imagine losing your phone and someone else gaining access to your digital wallet. If all that protects it is an SMS code, given they have the phone in the first place they might be able to make payments, change your address, or access your private data - without you ever knowing.

Many wallets check who you are when you enroll - but not afterward. That’s a problem.

True digital identity requires continuous identity assurance. Every important action in the wallet - updating personal details, accessing sensitive data, making a payment - should trigger a biometric check that checks if the real user is still in control.

Conclusion: We Need Identity Authentication, Not Just Identity Verification

Digital identity wallets are revolutionizing how we access services - but the work doesn’t stop at onboarding.

To keep digital identities secure, we need more than just strong digital identity verification. We need ongoing, reliable ways to prove that the person using a wallet today is the same person who created it.

That means using strong authentication methods that combine inherence and possession—your face and your phone. It means moving beyond passwords, OTPs, and FaceID. And it means building systems that are secure, private, and easy to use.

This is how Keyless operates. If you’d like to learn more or see it in action, we’d be happy to send you a custom demo based on your use cases. Just fill in the form and receive our demo to your inbox the next day.

The Rise of Digital Identity Wallets

3 June 2025

The Rise of Digital Identity Wallets

3 June 2025

What Is a Digital Identity? Why It's Becoming Essential

What is a Digital Identity?

What Does a Digital Identity Wallet Look Like?

The European Digital Identity Wallet (EUDI Wallet)

Key Changes Introduced by eIDAS 2.0:

Digital Identity: The Two Key Steps

1. Digital Identity Verification: Creating Your Identity

2. Digital Identity Authentication: Proving It’s Still You

The Role of Biometric Face Matching in Digital Identity Wallets

Why Wallets Must Prioritise Verification

and

Authentication

Conclusion: We Need Identity Authentication, Not Just Identity Verification

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Cloud-Based Multi-Factor Authentication: Beyond Passwords, OTPs, and FaceID

The Complete Guide to Biometric Authentication and Zero-Knowledge Technology

The Cost of Passwordless Authentication: Technologies, Trade-offs & ROI