Starting with digital ID? You're digging in the wrong place
What Indiana Jones and some Stanford students can teach us about digital ID and digital wallets
Hi everyone, thanks for coming back to Customer Futures.
Each week I unpack the disruptive shifts around Empowerment Tech. Digital wallets, Personal AI and the future of the digital customer relationship.
If you haven’t yet signed up, why not subscribe:
Customer Futures Meetups - London tonight!
Are you curious about Personal AI, digital ID and digital wallets? Or are you already working on Empowerment Tech?
Join us for casual drinks and a catch-up about all things ET.
TONIGHT IN LONDON: Thursday 9th October
From 6pm
Main bar, The Hoxton Hotel, 199 High Holborn, London, WC1V 7BD
COPENHAGEN: Wednesday 22nd October
From 6pm
Bifrost House, Sortedam Dossering 55, 2100 Copenhagen
LONDON: Wednesday 10th December
Christmas meetup from 6pm
Main bar, The Hoxton Hotel, 199 High Holborn, London, WC1V 7BD
Looking forward to seeing you there!
Hi folks,
This week we take a look at why digital ID is a terrible idea.
Or at least why it might be the wrong place to start.
Because asking for Digital ID interrupts the customer experience, businesses have to spend money asking for it, and have to collect data they don’t really want or need. It’s more of a risk than a benefit.
OK then, so where to start if not digital ID? Aha. That’s the opportunity. To know where to look. And how to make money.
So today we dive into:
Turning $5 into $650 - a lesson in distraction
Maybe we are wrong about digital wallets and digital ID
Everyone is digging in the wrong place, like in Indiana Jones
Flipping the perspective
Looking for new things, not replacements
There’s never been a more important time to help shape the future of being a digital customer.
So welcome back to the Customer Futures newsletter.
Grab a peppermint tea, a comfy chair, and Let’s Go.
Turning $5 into $650 - a lesson in distraction
Before we dig in, I’d like you to read this short story I picked up from Sahil Bloom.
Because we need to take another look at how we think about finding and creating value.
In 2009, a Stanford business professor named Tina Seelig split her class into groups and issued a challenge:
Each group had $5 and 2 hours to make the highest possible return on the initial money. At the end, they’d give a short presentation on their strategy.
The results were fascinating.
Most of the groups followed a basic approach:
Use the $5 to buy a few items
Barter or resell those items
Repeat
Sell final items for (hopefully) more than $5
These groups made a modest return on their initial $5.
Now, a few groups ignored the $5. They thought up ways to make the most money in the 2 hours of allotted time:
Made and sold reservations at hot restaurants
Refilled bike tires on campus for $1 each
These groups made a better return on their initial $5. But the winning group took an entirely different approach. They had three core realisations:
The $5 was nothing more than a distraction
The 2 hours of time was not enough to make an attractive, outsized return with a mini-business (like selling restaurant reservations or filling bike tires)
The most valuable “asset” was actually the presentation time in front of a class of Stanford students
Realising the value of this hidden asset, they offered the presentation time to companies looking to recruit Stanford students.
They struck a deal to sell the time slot for $650, netting a monstrous return on the $5 of initial capital.
The losing groups thought in linear, logical terms and achieved a linear, logical outcome. But the winning group thought differently.
Here’s the lesson:
Avoid the Distraction. There will always be an “obvious” solution that is simple, clear, and entirely wrong. In the challenge, the $5 was nothing more than a distraction. It was a trap.
Ask Foundational Questions. Ask and answer questions that expose and vet underlying assumptions and logic.
What’s the real problem you are trying to solve?
What’s your hypothesis?
What are your core assumptions?
What evidence do you have?
What are your core options?
What alternatives exist?
This takes time. But it’s an essential exercise when facing a problem with the potential for non-linear rewards.
Select the High Leverage Approach. Slow down and evaluate the options on the table. Find the path most likely to generate the asymmetric, attractive risk-adjusted returns.
What a great story about distraction. It really makes you stop and think about value.
So what else are we looking at the wrong way?
Maybe we are wrong about digital wallets and digital ID
Still with me? Good. Now let’s look again at digital wallets.
Most folks think that they are about money. Google Pay, Apple Pay and so on. A small but growing digital ID community now think digital wallets are about digital identity. Mobile driving licenses etc.
And others, many from the Web3 parish, believe they are about tokens and crypto coins. About decentralisation, sovereignty and privacy.
They’re all wrong. Or at least they are not yet right.
Why?
Because just like we saw in the Stanford experiment, creative, non-linear thinking generates creative, non-linear outcomes.
If we step back from the problem, where payments asks ‘can you pay’, and identity asks ‘who are you’, you’ll see that digital wallets are actually about many other things too.
For example, portability and connection.
Portability
My leather wallet helps me carry my paper and plastic information anywhere I want, and use the contents anywhere I want. I can put what I want in there. Entitlements and rewards, payments and money, reminders, anything,
It’s about portable blobs of data.
With digital wallets, it’s the same. But this time we have clever cryptography to make the data instantly verifiable. Sometimes the contents are about payments (virtual cards). Sometimes they are about identity (a digital driving license, an employee access badge).
But it’s always about the individual carrying the data with them. Portable facts and proofs.
Connection
Once those digital wallet and identity services scale, businesses will be able to use those wallets as a new digital customer channel to trust.
A new connection to the customer, the ciziten, the consumer.
Why send a message to a ‘verified’ (laughable) email address, or an untrusted SMS, when you can send it to a verified, secure and private end-point that the customer controls and owns? And which a business can instantly verify?
Wallet-as-the-channel has the potential to completely reimagine digital customer engagement.
So far, so interesting.
Now, I shared the Stanford student story with you first so you can fully understand my point.
That we need to start thinking creatively - and more disruptively - about what digital wallets are for.
Everyone is digging in the wrong place, like in Indiana Jones
In the 1981 movie classic Indiana Jones and the Raiders of the Lost Ark (if you haven’t seen it, go watch it immediately - it won seven Oscars), there’s a scene in the desert where the villains are hunting for a precious religious relic.
The Lost Ark.
The baddies are digging furiously all over the sand dunes… but it turns out they’re digging in the wrong place.
To find the Lost Ark’s true location, they needed to get directions from a secret ‘map room’. But they used the wrong instructions, and so failed to discover the treasure.
It leads to a famous moment in the film where Indiana Jones realises the villain’s map room mistake, looks up and laughs: “They’re digging in the wrong place.”
I’m afraid to say it folks. It’s where we are with most digital ID wallet projects today.
We’re also digging in the wrong place.
Hunting for value the wrong way. Just like those college students pumping up bike tyres. Why? Because there’s an uncomfortable truth here.
Most businesses don’t really want to ask for identity in the first place.
Let’s look again at digital ID:
Businesses only collect identity data because they are forced to. It’s often mandated by regulation or compliance, not because the business finds value in knowing exactly who someone is. Yes, the customer experience team might want to know your name for personalisation, and need your payment information to collect the money and for KYC. But they don’t really want to know - or care - who you are according to some government documents.
Digital ID ruins the customer experience. Asking people for extra steps, forms, scans, or uploads adds friction and slows down transactions. It usually kills conversion.
Digital ID costs the business money. It’s an overhead to check someone’s identity. Even if it’s a ‘reusable ID’, and even if it’s from the government directly, there will still be verification services to manage and pay for. And the spending continues beyond the ID check. It’s expensive to store the data, to secure it, to update it, to insure it, and eventually dispose of it.
It creates a ton of internal friction. Any change to identity processes usually touches multiple systems, triggers data protection checks, involves risk teams, and creates new privacy and architecture headaches, not to mention internal fights about ‘who owns the customer’.
Digital identity, in many cases, is more of a cost and risk centre than a source of value.
Flipping the perspective
I’ve written before that digital wallets might be the wrong term. It’s limiting our imagination.
If we assume that digital ID wallet projects aim to ‘replace the leather wallet’, we’re already heading in the wrong direction.
Because too many folks fixate on ‘digitising’ what’s already in a physical wallet:
Identity documents
Tickets
Loyalty stamps
Payment cards
It’s as if today’s ID wallet and verifiable credentials projects have been given $5. And they are now trying to turn it into $10. Yet I can see the path to making $650. But only if you start looking at digital wallets - and digital ID - in a different way.
If you start digging in a different place.
The opportunity is much bigger if we step back. If we reframe the question. Instead of asking “How do we digitise what’s in a wallet today?”, what if we think about the opposite:
What’s NOT in the wallet today, and doesn’t exist yet? Credentials we’ve never carried before, but that could improve experiences, reduce risk, or open up new services?
What’s NOT about remote verification? What’s useful in real-time, personal interactions? Almost all ID wallet projects assume doing things at a distance, but there are huge opportunities for in-person experiences.
What’s NOT about high assurance use cases? Not every interaction needs a passport-level proof. Sometimes a “lightweight” credential is all you need. What about the high-volume, low-assurance transactions that are more about portability and privacy?
What’s NOT about identity? As we saw above, most interactions don’t need to know WHO I am, but rather about my reputation and entitlements. Proof of what I can do, what I’ve achieved, or what I’m allowed, without revealing my name, address or government identifier.
Looking for new things, not replacements
Once you think this way, a whole new set of possibilities opens up. Credentials that don’t exist today, that are useful in person, and that are as much about portability as remote assurance. For example:
Proof of insurance
Proof of volunteering
Proof of attendance
Proof of ownership
Proof of customer status
These kinds of credentials won’t replace what’s in your wallet today. Because they don’t yet exist. Instead, they’re potentially new, useful, and game-changing data sets about people that can transform business processes.
Digital identity wallets won’t win mass adoption just by putting driving licences and boarding passes on your phone. Yes, they’ll be useful. But they’re really about digitising what we already have.
It’s incremental innovation.
And starting with the hardest, slowest part of the market to drive change: Digital Identity.
Where too many people can say, “why do this new thing when I already have something that works?”
So let’s look back at Sahil’s story about the Stanford students, and think about value again:
Avoid the Distraction. Don’t look at digital ID wallets as a replacement for today. Think of them as new tools for data portability, and a new digital customer channel.
Ask Foundational Questions. With customer interactions, do we really need ID? To know who it is? Or do we just need to know enough about the person to get something done, like offer them a digital service (do you belong to group X…. are you still working at company Y… are you a resident of Z?….where we can ask: YES or NO?)
Select the High Leverage Approach. What’s the smartest move with digital wallets, not just the one right in front of us? Is it about yet another ID transaction? Or could it be about non-obvious benefits like viral effects, where you can use it to bring other customers into the network too? Or where you can unlock a new long-term customer relationship, and a new trusted data sharing channel that compounds over time?
If we start looking around for value in different places - away from digital ID and the obvious ‘digitised’ credentials of today - we won’t just replace our leather wallets or ID documents.
We’ll create an entirely new set of tools for trusted, digital customer interactions. And for customer empowerment.
We certainly won’t find the Lost Ark. But at least we’ll have a shot at turning our digital identity $5 into $650.
And that’s a wrap. Stay tuned for more Customer Futures soon, both here and over at LinkedIn.
And if you’re not yet signed up, why not subscribe: