Should Canadians embrace the digital wallet in a future without cash?

TORONTO – The recently announced end of the penny and the proposed launch of digital-chip currency are sure signs we are entering the era of the ‘digital wallet.’

But the question is, will Canadians embrace virtual money and personal identification over cold hard cash and the ID cards we now carry?

A digital wallet refers to a mobile phone that uses wireless technology for in-person identification or financial transactions. This means you could store your debit card, credit card, and all ID information in your phone and access it with a few taps on your screen.

Google announced plans to develop the Google Wallet app in May 2011, with cell phone companies, Visa and PayPal developing similar technology.

The wireless e-wallets are already popular with consumers in Europe, Asia and parts of Africa, but Canada lacks the secure system and infrastructure for widespread use.

A Global Overview of Digital Wallet Technologies, created by the University of Toronto’s Prop-ID research project, looks at various payment systems and digital wallet applications across the globe. The “Prop” in Prop-ID refers to the fact that the part of your ID that’s accessed is proportionate to the actual need for the transaction.

Project lead Dr. Andrew Clement hopes to investigate how digital wallet technologies could be used to help regain control over personal information.

Clement and his team have developed a privacy protective app that works like the Google wallet does, but solely with ID information. (While many other digital wallets focus on the financial transactions, they also transmit identifying information, despite not being referred to as ID wallets).

How it works

Clement’s version of the ID wallet would work like this: when you come within range of a service organization (the LCBO, for example) the LCBO will let you know that all they need is a face match and an age authentication. You press ‘ok’ on your smartphone, and the ID information will be transmitted to an authenticating device (that an LCBO employer or bouncer or bar would hold) in encrypted form. The LCBO then decrypts that using the key provided by the driver’s license authority in your province so they could verify the ID was real, and if your credential matched, the transaction would go through.

Privacy risks

Clement worries that when digital wallets become widespread, the proportionate method described above may not be used. If people start using their smartphones for any and all transactions, they’ll be handing over unnecessary personal information that could be kept on record.

“Currently when you show ID, you flash a card, somebody looks at it and they sort of decide whether you’re right or not, but they don’t actually record anything,” explains Clement. “But if you have a smartphone that does that kind of transaction, then all of the information potentially on your card is available.”

Clement mentions Facebook and Google as two online companies who appreciate how lucrative personal information is for targeted advertising, and the dangers of leaving ever-more detailed traces of our daily activities.

“I’m concerned that as transactions move to smartphones, our ID transactions will look more like what we do on the web-where a lot of personal information is transmitted-than the current practice for those situations, such as buying liquor or other transactions, where while we might show ID, we don’t leave the same kind of traces of our identity,” he says.

Moving forward

The Prop-ID prototype is a working example of how the digital wallet can be used without handing over personal information to retailers. When considering what needs to be in place for the widespread use of digital wallets in Canada, Clement emphasizes the option for people to disclose as little information as needed for the transaction to go through.

“There are real technological options,” he says. “These should be discussed and people should understand that they’re there, and the relative merits of these approaches should be weighed.

“Another key criteria is that we make these choices in a publicly deliberative informed fashion. And right now we’re doing that inadequately, I would say. Seriously inadequately.”

So before you throw out your leather wallet in favour of an electronic version, it’s worth considering how much personal information will be transmitted with a few taps of your finger.

Prop-ID project lead Dr. Andrew Clement specializes in ID documentation and systems, privacy and social implications of information and communications technologies in the Faculty of Information at the University of Toronto.