With increasing issues around data ownership, there has been a push to give individuals and organisations control over their own data, and not an administrative third party granting or tracking access to these credentials.

Through his company Inrupt, Tim Berners-Lee, the inventor of the web, has recently introduced a data wallet, which its proponents claim, restores what is termed self-sovereign identity. How this may impact financial services is an open question, but the potential benefits come with challenges.  

Data wallets are digital tools that let individuals securely store and manage various types of personal information. This can include government-issued credentials like passports, educational certificates, and entitlement benefits. Beyond official documents, data wallets can hold demographic details, memberships, event tickets, professional credentials, purchase histories, and buying preferences. 

In essence, data wallets combine an individual’s personal data into a single, secure location, which can be easily accessed and shared with consent. Importantly, the information housed in a data wallet can be used to identify individuals and organisations in a safe and secure way.  

Inrupt’s data wallet will be built on its Enterprise Solid Server (ESS), which it claims is a unique approach to data management. ESS allows data stored in various apps and services to be reused, which Inrupt says ensures seamless integration and compliance with data privacy regulations. Users have full control over their data, deciding who can access it and for what purpose. 

This capability turns Inrupt’s data wallet into a powerful digital ID tool, allowing services to verify who or what they’re interacting with. 

Several companies and initiatives are working towards similar solutions in the digital wallet and ID space: 

• The Sovrin Network: A public service utility enabling self-sovereign identity across the internet.
• Yoti: A UK digital ID that is only accessible by the users.
• Privado: Enables users to integrate self-sovereign identity solutions for the verification of identities.  

Data wallets may have significant direct and indirect impacts on financial services. 

Banks could leverage data wallets to streamline verification of new accounts and services. Through accessing verified digital identities and credentials, the onboarding process becomes quicker and more secure. 

Data wallets could help in compliance with stringent data protection regulations. The consent-driven access model helps maintain transparency and accountability in data usage. 

Data wallets may provide banks with insights into customers' preferences and purchase histories. This information could be used to offer tailored financial products and services, enhancing customer satisfaction and loyalty. 

Secure data management and granular permission settings within data wallets may also reduce the risk of identity theft and fraud. Banks can trust the authenticity of the information stored in these wallets, ensuring safer transactions. 

While the concept of data wallets may sound promising, there are some hurdles. 

Security and trust is a key element to the success of digital wallets and IDs. Companies need to ensure the security of data stored in these wallets and keep identity data secure on an individual’s device. A data hack could compromise the data stored on data wallets, eroding trust and reducing their appeal. 

Consumers may find it hard to manage a separate data wallet. The success of data wallets depends on user adoption, and many might find it cumbersome to set up and manage new apps. Simplifying the user experience will be crucial for widespread acceptance. 

A saturated market of data wallets could lead to fragmented approaches to self-sovereign identity, impacting the credibility of offerings. The market will need to mature into several major players to codify the workings of data wallets and digital ID. 

For banks and other financial institutions, the technology offers the potential for enhanced verification processes, improved compliance, personalised services, and reduced fraud risk. However, addressing concerns around data security and consumer adoption is crucial. As the digital landscape continues to evolve, data wallets could become a central tool in managing personal information securely and efficiently.

To learn more about digital IDs, get in touch with your usual bank representative or contact us here. And if you’re attending Sibos 2024 in October, please join us on Stand J11 to learn more about the future of finance