Apple’s state ID feature might catalyze Apple Pay use and bolster ecosystem engagement

The news: Residents in eight states, including Arizona, Connecticut, and Georgia, will soon be able to add their state IDs and driver’s licenses to the Apple Wallet, Apple confirmed in a press release.

Apple plans to enable the feature in other states soon and said that the Transportation Security Administration (TSA) will accept the digital IDs for travel at select airport security checkpoints. The tech giant first hinted at plans to enable the feature back in June.

The opportunities: The digital ID feature can help boost Apple Pay’s US user base, which is expected to hit 43.9 million this year, accounting for 43.4% of all proximity mobile payment users, per Insider Intelligence forecasts.

• The digital ID feature might incentivize iPhone users to put credentials in Apple Wallet that eventually get them on board with Apple Pay. Less than 40% of iPhone owners use Apple Pay, giving the wallet a large untapped addressable market. The ID feature offers a variety of use cases—like verification for traveling or opening a bank account—which might be an attractive perk for users who may not have considered using Apple Wallet before. Converting them into Apple Pay users could bolster volume and increase Apple’s share of US mobile payments.
• And the feature can increase engagement within Apple Pay’s ecosystem, which might boost adoption for other payment products. Giving existing Apple Pay users another reason to use Apple Wallet keeps customers tied to its ecosystem. This can increase Apple’s already strong brand loyalty and might make users more inclined to try out other Apple payment solutions, like the Apple Card—giving the tech giant a stronger foothold in the payments space.

The bigger picture: Apple has launched and expanded several other Apple Wallet and Pay features—pointing to a broader customer acquisition and engagement push.

In August, Apple expanded its student ID feature, which lets students at participating universities add their student IDs to Apple Wallet. And Apple created shockwaves in July when rumors surfaced of plans to launch a buy now, pay later product for Apple Pay. Though the latter remains unconfirmed, it's clear that Apple is ramping up offerings that give customers more convenience and incentives to use its services—which may eventually help it close the gap between iPhone and Apple Pay users.

Go deeper: If you want to read more about Apple Pay’s growth ambitions and its position in the wider US payments market, check out our US Mobile Payments Forecast 2021 report.