Digital wallets are reshaping how people access services, marking a significant shift in digital identity management. The UK government’s planned GOV.UK Wallet is a key example, offering citizens a seamless way to store and access government-issued documents—such as driving licences and passports—directly from their smartphones.

The promise of instant verification and streamlined interactions with both public and private sector services is compelling. However, for digital wallets to gain public trust, data privacy management and strong data protection solutions must be embedded at every stage. Without these safeguards, digital wallets risk becoming a tool for mass data collection, identity fraud, and security breaches rather than a secure, user-controlled innovation.

Balancing innovation with privacy: key concerns

For digital wallets to succeed, they must be designed within a privacy compliance framework that ensures both GDPR compliance and strong data governance practices. Below are the key concerns that must be addressed:

1. Centralised data storage: a prime target for cybercriminals

Consolidating multiple identity documents into one platform increases efficiency but also creates a single point of failure. If compromised, personal identities could be exposed, leading to fraud, financial loss, and unauthorised cross-border data transfers.

2. Data security: reducing the risks of everyday use

Many individuals already store unofficial digital copies of important documents—such as taking photos of their passports or driving licences on their phones. These often lack data security tools such as encryption. A formal privacy-compliant digital identity solution must ensure that all stored data is encrypted both at rest and in transit.

3. The risk of digital identity becoming ‘mandatory by default’

Even if the GOV.UK Wallet is introduced as a voluntary tool, there is concern that automated compliance reporting and growing reliance on digital verification could lead to de facto mandatory adoption. If businesses and public services gradually phase out traditional ID methods, individuals who lack access to cloud data compliance solutions may be unfairly excluded.

4. Scope of data use: where will your information end up?

Digital wallets could extend beyond simple identity verification to automated eligibility checks for public services, welfare benefits, and employment verification. While this could improve efficiency, it raises concerns about third-party risk management, especially regarding who can access this data and under what conditions. Vendor risk management policies must ensure that external service providers handling user data comply with strict privacy standards.

5. Cross-border compatibility: a patchwork of standards

The UK must ensure that the GOV.UK Wallet aligns with global data governance solutions, enabling smooth interactions across borders. If interoperability is not addressed, British citizens may still need to carry physical documents when travelling, limiting the effectiveness of a digital-first identity system.

How digital wallets can work without compromising privacy

To mitigate these risks and build public confidence, the UK government must implement the following privacy-focused safeguards:

1. Robust security and encryption

• Implement state-of-the-art data security tools, including encryption, to protect digital identities from breaches.
• Require multi-factor authentication (MFA) to prevent unauthorised access to digital identity documents.
• Conduct regular privacy impact assessments (PIAs) to evaluate risks before new features are introduced.

2. Data minimisation and selective sharing

• The system should store only the necessary data for specific transactions, reducing exposure.
• Instead of displaying full personal details, the wallet should return simple binary responses (e.g., “YES” or “NO”) for age or eligibility verification.
• Privacy compliance automation should be used to ensure that excessive data collection is avoided by default.

3. User control and transparency

• Users must have full control over their data.
• A data subject access request (DSAR) management system should allow individuals to see who has accessed their digital ID and request deletions where necessary.
• Clear policies must outline how long data is retained and whether it is subject to data retention policy management rules.

4. Strict legal and regulatory frameworks

• Digital wallets must comply with UK GDPR, the Data Protection Act 2018, and align with GDPR compliance tools to maintain EU recognition.
• An independent regulatory body must oversee compliance, ensuring that privacy impact assessments (PIA tools) are conducted.
• Cross-border data transfer compliance must be established to ensure smooth use of UK-issued digital IDs in international settings.

5. Accessibility and inclusion

• The GOV.UK Wallet must remain optional, with alternative ID verification methods available for those who prefer them.
• Enterprise data privacy software should be used to ensure security across devices and operating systems.
• Digital identity systems must be accessible to all, including individuals without smartphones or stable internet connections.

Final thoughts - A Fine Balance Between Convenience and Privacy

Digital wallets have the potential to enhance efficiency and security, but only if they are built with rigorous privacy safeguards. The GOV.UK Wallet must prioritise user control, transparency, and compliance with privacy laws to prevent it from becoming a tool for mass data collection.

Ultimately, data privacy management must be embedded from the start. With privacy impact assessments, data governance solutions, and automated compliance reporting, digital wallets can become a trusted tool—rather than a risk to individual freedoms.

As the UK government moves forward with digital identity solutions, privacy professionals, policymakers, and industry leaders must work together to ensure that convenience does not come at the cost of privacy rights.