Wallets are over. Your phone is now everything

Mobile payments replacing credit cards was just the start. Digital versions of your work ID, driver’s license and other card holdouts are coming to your smartphone.

By guest author Joanna Stern from the Wall Street Journal.

If you need someone to predict the future, Spike Feresten is your guy.

In the summer of 1997, in the “Seinfeld” writers room, Mr. Feresten boldly told Jerry Seinfeld that wallets were over.

Jerry disagreed. This led to a wallet throw-down, in which writers opened their wallets, as “it slowly dawned on them that they were carrying all of this garbage everywhere, everyday,” Mr. Feresten, an Emmy-nominated writer and producer on the show, told me.

This conversation eventually led to one of TV’s most iconic props: George Costanza’s bulging, exploding wallet.

OK, Mr. Feresten didn’t exactly foresee a world where smartphones, biometrics, ubiquitous cellular connectivity and high-tech terminals would replace stacks of cards and wads of paper. But he was right: Wallets are over.

Thanks to a global pandemic and our new collective fear of touching, well, anything, we’ve embraced contactless payments as an alternative to handing over plastic rectangles. In 2020, in-store mobile payments grew in the U.S. by 29%, according to research firm eMarketer, which predicts more than half of smartphone users will pay with their phones by 2025.

It isn’t just credit cards that smartphones have gobbled up like Pac-Man dots. Loyalty cards? Walgreens, Rite Aid and plenty of chains have digital cards you can load into Android or iPhone wallet apps. Membership cards? I bet your gym has transitioned from a key fob to a phone tap. Insurance cards? Aetna, Cigna and others now offer digital, printable cards. Transit cards? You can now tap and pay at all New York City subway stations and buses. San Francisco’s BART just added more mobile options, too. Vaccine cards? You’ve got options.

But the real story is in the progress of the holdouts: the driver’s licenses, work IDs and other keys that have struggled to make the leap to the screen. Those cards, the remaining ones in the small stick-on wallet on the back of my phone, are getting ready for their digital debut, too.

But do we want so much of our lives—and our personal information—tied to one battery-dependent device? Let’s ID the issues.

Driver’s License

Back in 2019, I journeyed to the fine state of Delaware to see how one of the nation’s first mobile driver’s license programs worked. It was less than ideal—it required you to download a state-partnered app, then punch in a password a couple of times until you could see it. And it didn’t work at quite a few places, including airports.

Now, Apple’s AAPL 0.42% coming iOS 15 has a new mobile driver’s license feature, and eight states—starting with Arizona and Georgia—have already signed up. So has the Transportation Security Administration.

If your state offers it, you’ll be able to add your driver’s license or state ID right in the iPhone’s Wallet app by scanning your physical license. To verify it’s your license—and that you are you—you’ll be prompted to take a selfie that’s sent to the issuing state. You’ll also be asked to move your head and face to confirm you’re alive. Assuming everything checks out, your ID soon appears in the Wallet app. During this setup, you’ll also authenticate yourself using Face ID or Touch ID, so only your face or your finger can access that ID.

OK, great—but what happens when you actually need to show your license to buy a bottle of Prosecco—or when a cop pulls you over for doing 78 in a 65? The phone doesn’t actually have a visual representation of your license. Like using Apple Pay, you hold your phone to a reader, see an on-screen prompt stating what kind of information is being requested (name, date of birth, etc.), then use Face ID or Touch ID to authorise that info to be sent to the receiver wirelessly.

One of the perks of going digital with something like a license is that you don’t need to share all your info with every establishment. The club bouncer, for instance, no longer needs to know your address—just your name and date of birth.

Apple says the system is built so you don’t need to hand over your phone to anyone—or even unlock it. Customers’ identity data is encrypted, and Apple and the issuing states don’t know when or where you present your ID, Apple says.

This does mean that any business or government agency that accepts these digital licenses will need a compatible reader or terminal. A TSA spokesman said it plans to start rolling out readers in select airports, starting with the first states to adopt the feature. More information will be available in early 2022, he added. Until these receivers are everywhere, we’ll still need our physical licenses—and even then there may be instances where people don’t feel comfortable using a digital version.

Google hasn’t announced any state partnerships like Apple’s, but Android 11 also has built-in support. Fortunately, Apple and Google are using the same mobile standard for driver’s licenses, so checkpoints should only need one machine to accept both.

Work ID

Am I proud of how many times I’ve had to replace a lost work badge? Possibly. But that’s exactly why workplaces are embracing the digital versions.

“Companies just want to beam out the IDs. They don’t want to worry about someone coming in to pick up a card, then losing the card again, then going back to the office to pick it up,” said Denis Mars, chief executive officer and co-founder of Proxy, which provides digital identification and keys to companies including Accenture and CloudFlare.

Mr. Mars and executives at other providers of digital-access control and management, including HID Global and NextKey, said they have seen demand skyrocket as companies prepare for the Great Office Return.

The solutions are fairly simple to set up. Your company works with one of the providers, you download an iPhone or Android app, and the app uses NFC or Bluetooth to unlock the terminals or doors in and around your office. In some instances, Apple’s Wallet will be able to hold your virtual office key. An executive at HID Global said most of its existing door terminals—of which there are several million around the world—can support smartphone-based keys. Proxy’s readers do, too.

Hooray for convenience! But isn’t this just another way for our companies to track us? All the executives I spoke to assured me that digital cards are designed to collect no more data than a regular physical keycard. But they’ll know it was really you, because are you really going to lend your phone to that friend who always forgets her ID? (Ahem.)

Everything Else

Apps for hotel chains now let you bypass the lobby and go straight to your room, and iOS 15 will let you add hotel keys right to your Apple Wallet. The same goes for house keys, provided you have a compatible smart lock.

And then there are car keys. BMW cars can already be unlocked with Apple’s solution; Google announced something similar coming in Android 12. Some car makers, such as Tesla, have smartphone apps that even let you drive when you’re logged in.

So there you have it, everything but your personal jet can soon be unlocked with your phone. All your keys and IDs—plus all your most personal info, passwords and payment methods—all stored right there in one little device. What could possibly go wrong?

Security is always my top concern, but whenever I bring that up, companies tell me to think about my plastic cards. Any card I drop on the street—or even hand over in a restaurant—could be abused by any unscrupulous character. On a secure device, with my info encrypted and biometrically protected, that’s much harder. Plus, if I lose my phone, I can remotely wipe it using Apple’s Find My iPhone or Google’s Find My Device. (Make sure you have those set up!)

Then there’s privacy. Are these systems collecting and sharing information behind the scenes? As with any app, check to see what permissions you’ve given in the settings menu. Is it accessing your location? Your contacts? Lock that all down. (Here’s Apple’s explanation of how privacy works in the Wallet app. Here’s Google’s.)

And finally? Yes, batteries die. “Sorry, officer, my license is out of juice,” isn’t going to fly. Even though smartphone batteries are lasting longer and longer, we’ll probably continue to carry a physical license and a credit card in those phone-back wallets for a while longer.

My go-to futurist, Mr. Feresten, has thoughts on those, too. “They are the final gasps of the western wallet empire,” he said. “They’ll fall like Rome.”