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The killer digital wallet will not come from a fintech company - it will come from a social media platform.
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For 2022 and beyond, the line between social media and fintech will begin to blend, paving the way for true self-sovereign digital wallets and identity.
This isn’t as far-fetched as it seems. Though the biggest digital wallets today are operated by financial services providers - WeChat, Apple Pay, Venmo - all of those companies operate a personal identity platform. WeChat’s wallet was built on top of a messaging identity, Apple Pay’s on top of a mobile OAuth identity and Venmo’s ingests Facebook to create a social identity.
The last two years has seen an explosion in platforms releasing digital wallets. Shopify with a wallet to unify the consumer e-commerce identity; Facebook with wallets in Messenger and WhatsApp to build on its social profile; TikTok with a wallet to accelerate commerce on its video platform. Anywhere consumers store a persistent identity, there’s an opportunity to grow that profile into one that includes KYC, contextual personal information and ultimately, payment authorisation.
But these profiles are all verticalised and fragmented. They exist somewhere down the funnel in the journey from intent to purchase decision.
The challenge in building the most popular digital wallet isn’t building the wallet itself - it’s unifying consumer data in one comprehensive profile that can be permissioned and accessed anywhere. And that’s why the winner in the digital wallet war will sit at the top of the funnel, at the point where people are creating their profiles.
The challenge in building the most popular digital wallet isn’t building the wallet itself - it’s unifying consumer data in one comprehensive profile
People don’t compartmentalise when they think of identity: consumers want the ease of having the right information on-hand at the right time when they want to pay for something. When you find a product you like on Instagram, you want your Instagram profile to pass over your mailing address and payment details with no additional effort.
My pick for the platform most likely to achieve this in the next few years is Twitter’s Bluesky initiative. With Bluesky, Twitter plans to build a decentralised social platform - that means that your OAuth, your bio, your photos, your tweets, etc. could all be portable across different platforms. If someone builds a better Twitter, you could seamlessly move your social profile (or ‘identity wallet’) over to that platform - same for a better Instagram, a better Airbnb, a better Credit Karma, etc.
My pick for the platform most likely to achieve this in the next few years is Twitter’s Bluesky initiative.
By opting to decentralise this social profile instead of building a conventional OAuth, Twitter is hoping (1) that users will want to truly own their own identities and (2) that developers will continue to build better, more high-affinity online platforms that attract new consumers. With Bluesky, Twitter can capitalise on that development even if it isn’t coming from Twitter.
Once a company like Twitter has built the dominant social profile - and that social profile is fungible across different platforms and networks - it’s a relatively small step to add ID/KYC features, and then to build payment features on top of that. So your Bluesky self-sovereign ID could be not only a way to port your personal info to a new social platform, but also a way to make payments on that platform.
My unfiltered opinion
People who only look at fintech companies to build the next dominant payment tool or digital wallet are missing the forest for the trees. Financial services is no longer just a standalone start-up category: it’s becoming a fundamental piece of the product development of any consumer platform. The platform that wins the consumers will also win the digital wallet war. And right now social media looks set to take the gold.
