Building on foundations and empowering users: The UK digital wallet opportunity

Digital wallet technology (mobile or software-based mechanisms that can store a user’s digital credentials) can offer multiple benefits to users and organisations. These span from enhanced security to fraud prevention, seamless user experiences to convenience, and much more.

With recent government commitments to deliver a GOV.UK wallet system; emerging regulatory frameworks; and growing momentum behind digital identity solutions and use cases, the UK is well-placed to build trusted, scalable digital wallet solutions.

But how can both the public and private sector encourage wider adoption – and ultimately build an ecosystem that empowers users and helps them see the benefits of wallets?

In this blog post we examine the wallet landscape and take a closer look at the UK’s opportunity to achieve this vision. Our new white paper, Digital Wallets: How to build for an emerging identity landscape, offers core strategies, considerations, and best practices for implementing digital wallet and ID solutions.

Global approaches to digital identity wallets

To understand the landscape, it’s useful to examine how other regions have approached digital wallets. Both the EU and the US present contrasting models, each with its own strengths and challenges. 

The EU approach: Centralised, interoperable, and privacy-focused

The European Union has taken a coordinated, government-led approach centred on trust, security, and interoperability. At the heart of this strategy is the Electronic Identification, Authentication, and Trust Services (eIDAS) regulation and its update, eIDAS 2.0, which introduced the concept of the European Digital Identity Wallet (EUDI).

Key principles:

• User control and privacy: Alignment with GDPR ensures users decide what data to share and with whom.
• Security: Multi-factor authentication and enhanced standards prevent fraud.
• Interoperability: Common frameworks promote cross-border and cross-sector compatibility.

Opportunities:

• Sets a global standard for secure, interoperable wallets.
• Offers versatile use cases for sectors like banking and government services.

Challenges:

• Varying levels of adoption and digital infrastructure across member states.
• The focus needs to shift from frameworks and technology to user centred thinking to encourage adoption.

The US approach: Private sector-driven and fragmented

The US digital wallet ecosystem is largely shaped by private sector giants like Apple, Google, and PayPal. Unlike the EU, the US lacks a centralised strategy, leading to a fragmented landscape dominated by payment and consumer-reward-focused services. While some states have implemented initiatives like mobile driver’s licences, a nationwide approach has yet to be established.

Opportunities:

• Competition drives innovation and responsiveness to consumer demands.
• Decentralised solutions offer potential privacy benefits.

Challenges:

• A lack of unified frameworks and public trust in government solutions.
• Privacy concerns in a market dominated by tech giants.

The UK’s hybrid opportunity

With these two contrasting models in mind, the UK has the chance to merge the best of both worlds and create a hybrid model that draws on private sector agility and innovation without compromising government-driven privacy and security frameworks. Here are some of the key themes surrounding the opportunity which we explore in more detail within the whitepaper:

Building on a thriving fintech sector

The UK has a well-established fintech sector that has fostered innovation in digital financial services. The success of digital-first banks like Monzo, Revolut, and Starling Bank reflects the strong demand for seamless, tech-driven financial solutions. These developments have been supported by a regulatory environment encouraging security and innovation.

This ecosystem provides a strong foundation for digital wallets to grow. With digital payments already a key part of everyday transactions, projections suggest that by 2027, digital wallet transactions could account for half of all e-commerce spending in the UK, potentially reaching £203.5 billion in transaction value.

Building trust through transparency

For digital wallets to succeed, trust must be at their core. This means clear communication about what wallets can and cannot do, regular public audits of security measures, and transparent governance frameworks. Collaboration between government and private sector players is key – combining public institutions’ authority and oversight with the agility and innovation of private companies.

User control through decentralisation

One of the most compelling aspects of modern digital wallets is the potential for a decentralised approach to data management. Instead of storing all personal information in one place, decentralised systems allow users to keep their data on their own devices, sharing only what’s necessary, when necessary.

Think about how you currently show your driving licence when ordering a drink at a pub. You share your full name, address, and date of birth. When all you need to prove is that you’re over 18. A similar issue arises in online age verification, where users often provide excessive personal details just to access age-restricted content. Digital wallets offer the potential verify your age without revealing any other personal details, giving users more control over their data.

Beyond borders and platforms

By designing digital wallets that work seamlessly across different platforms, organisations and even international borders, we’re not just solving today’s problems, we’re future-proofing our digital infrastructure.

This interoperability isn’t just about convenience, it’s about ensuring our systems can evolve alongside new technologies and services, such as biometric authentication or blockchain-based identity verification. As the digital landscape shifts, our wallet infrastructure must remain flexible enough to accommodate new use cases while maintaining the security and privacy standards that users expect.

What’s next for digital wallets in the UK?

The UK’s position – shaped and influenced by European regulatory frameworks and American market dynamics – creates an opportunity to develop digital wallet solutions that prioritise both innovation and trust, while creating compelling reasons for users to adopt the technology

The challenge now is maintaining this balance. As digital wallets evolve, ensuring that empowering users and creating a seamless experience will be key. The regulatory and tech foundations are in place—now it’s time to build on them.

To explore this topic in more depth, download our white paper: Digital Wallets: How to build for an emerging identity landscape.