Apple is rolling out digital ID. Will banks use it? | PaymentsSource


When Apple adds driver’s licenses to the Wallet app in the near future, it could streamline account management, identity verification and other aspects of financial services.

Apple’s implementation would build on the trust of state-issued IDs by adding biometric authentication and other security features built into its devices. But like Apple Pay, which the technology giant debuted in 2014, the service may come with a fee that Apple is unwilling to negotiate.

It will be up to banks and credit unions to decide if the benefits could outweigh any cost Apple sets.

In particular, Apple’s digital ID could transform know-your-customer processes, said Richard Crone, a principal with Crone Consulting.

“Providing digital access to the driver’s license — which has already been KYC’d — represents a huge leap forward, especially when combined with biometrics to make processes even more secure through the device, which is extremely important for digital account opening,” Crone said.

Apple is working with some states to store ID cards in its Wallet app. Banks may find ways to incorporate the digital IDs into their own vetting.


Fintechs may also incorporate the Wallet app into the installment loans they offer at the point of sale — as could Apple, which in July unveiled plans to provide buy now/pay later services through Goldman Sachs, which is also its partner in issuing the Apple Card.

“Digital ID within the iPhone could be a huge advantage for buy now/pay later financial services, creating an instant, secure way to connect the consumer, the merchant and the lender,” Crone said.

The Transportation Security Administration is the first organization planning to accept digital IDs through an encrypted process, so users won’t need to unlock or hand over their devices when clearing security, Apple said in a Wednesday press release. The TSA will enable the new feature at specific airports, but has not named them.

A big question is how Apple will handle third-party access to digital IDs. Even if Apple is working with government agencies on the project, it will likely assess a fee for any private-sector organizations that want to use the digital ID.

Beyond the TSA, it will probably take a long time for many other cases to evolve, said Tim Sloane, director of emerging technologies advisory at Mercator Advisory Group.

“Digital IDs will impact consumers, businesses and governments in significant ways, but these changes will take time to be deployed and longer to be adopted,” Sloane said.

Digital IDs could take even longer to catch on than mobile payments because acceptance will likely be fragmented, he predicts.

“Will my liquor store accept it? What about local police? How quickly government and business communicate that they issue and accept digital IDs will be a critical determining factor to widespread adoption,” Sloane said.

Arizona and Georgia are the first states that have agreed to support adding driver’s licenses and state IDs to Wallet when iOS 15 rolls out, Apple said in the release. Connecticut, Iowa, Kentucky, Maryland, Oklahoma and Utah will follow at a future date.