Digital Credential Wallet Competition Risks

Introduction

Digital credential wallets are software systems that allow individuals or organisations to store, manage, present, verify, and sometimes selectively disclose digital credentials. These may include educational certificates, professional licences, identity credentials, employment records, age verification, financial credentials, health-related qualifications, and other attestations.

Examples include government-backed digital identity wallets, education-credential wallets, professional-certification wallets, and private-sector identity or authentication platforms.

From a competition-law perspective, the important issue is not merely whether a wallet is technically innovative. A wallet can become a gatekeeper for access to employment, education, financial services, public services, platforms, or commercial transactions. Control over credential issuance, verification infrastructure, interoperability standards, APIs, authentication and trust registries can therefore create substantial market power.

The principal competition risks include:

• exclusionary control over credential standards;
• foreclosure of competing wallets;
• tying identity or authentication to other services;
• discriminatory access to verification APIs;
• interoperability restrictions;
• self-preferencing;
• excessive switching costs;
• data accumulation and data advantages;
• control over trust lists and certification authorities;
• exclusive arrangements with universities, employers or governments;
• algorithmic ranking of credentials;
• leveraging wallet dominance into adjacent markets;
• refusal to recognise competing credentials; and
• strategic use of technical standards to exclude rivals.

1. Relevant Markets

Digital credential wallets may involve several overlapping markets.

A. Credential-wallet market

The first market may consist of applications that store and manage credentials.

Competition may occur between:

• government wallets;
• bank-operated identity wallets;
• technology-company wallets;
• education credential platforms;
• professional credential platforms; and
• interoperable open-source wallet systems.

B. Credential verification market

A separate market may exist for verifying whether a credential is genuine and valid.

A dominant verification infrastructure can become particularly important because the value of a credential wallet depends upon whether employers, universities, banks and other relying parties accept its credentials.

C. Identity and authentication services

Wallet providers may also compete in:

• digital identity;
• authentication;
• age verification;
• KYC;
• electronic signatures;
• access management; and
• trust services.

D. Adjacent data markets

Wallet operators may accumulate valuable information concerning:

• educational qualifications;
• employment history;
• professional status;
• identity attributes;
• transaction history;
• authentication behaviour; and
• institutional relationships.

This can give the operator an important data-based competitive advantage.

2. Network Effects

Digital credential wallets can exhibit powerful two-sided or multi-sided network effects.

There are typically at least three groups:

1. credential holders;
2. credential issuers; and
3. credential verifiers/relying parties.

The wallet becomes more valuable as more participants accept it.

For example:

More universities issue credentials through Wallet A → more employers recognise Wallet A → more students want Wallet A → more universities adopt Wallet A.

This can produce a positive feedback loop.

The competition problem arises when network effects transform an initially competitive wallet market into a concentrated market where rivals cannot obtain sufficient users or institutional acceptance.

3. Credential Acceptance as a Gatekeeping Function

One of the most serious risks is control over credential acceptance.

Suppose Wallet A becomes widely accepted by:

• universities;
• employers;
• banks;
• government departments; and
• professional regulators.

If Wallet A subsequently refuses to recognise credentials issued through Wallet B, Wallet B may become commercially unusable even though its underlying technology is superior.

The wallet therefore becomes a gatekeeper between credential issuers and economic opportunities.

This can be analysed under traditional theories of:

• refusal to deal;
• essential facilities;
• interoperability;
• discriminatory access;
• exclusionary abuse; and
• leveraging.

4. Interoperability Restrictions

Interoperability is central to competition between digital wallets.

A dominant provider could restrict:

• API access;
• credential portability;
• credential export;
• machine-readable formats;
• verification protocols;
• trust registries; or
• cryptographic interoperability.

For example, if Wallet A permits users to export credentials only into its own ecosystem, consumers may find it difficult to migrate to Wallet B.

This creates technical switching costs.

Competition authorities may therefore examine whether interoperability restrictions are objectively necessary or instead serve to preserve market power.

5. Data Portability and Switching Costs

Digital credentials are particularly susceptible to lock-in because users may accumulate many years of information in a wallet.

A user might have:

• ten university certificates;
• professional licences;
• employment credentials;
• training certificates;
• identity credentials; and
• verified achievements.

The greater the accumulated credential portfolio, the more expensive it becomes to migrate.

Competition concerns arise where the dominant provider makes migration:

• technically difficult;
• expensive;
• incomplete;
• incompatible with competing wallets; or
• dependent upon continued use of its ecosystem.

The competition issue therefore intersects strongly with data portability and interoperability.

6. Tying and Bundling

A dominant wallet operator could require users or institutions to purchase or use another service.

Examples include:

“To use our credential wallet, universities must use our cloud platform.”

or:

“Employers must use our recruitment platform to verify credentials.”

or:

“Banks using our KYC wallet must also use our identity-management service.”

Such conduct could amount to tying or bundling where the provider possesses market power in the wallet market and uses that power to extend its position into another market.

Potentially affected markets include:

• recruitment;
• education technology;
• cloud computing;
• financial services;
• identity management;
• professional certification; and
• HR software.

7. Self-Preferencing

A vertically integrated wallet operator might own several complementary services.

For example:

Wallet → Credential verification → Recruitment marketplace

The wallet provider could potentially:

• rank its own credentials more prominently;
• make its own verification service the default;
• give its affiliated recruitment platform faster verification;
• restrict competitors' access to credential information; or
• provide preferential API functionality to affiliated services.

This creates a classic vertical foreclosure problem.

The important question is whether the wallet operator is using control over a critical digital infrastructure layer to advantage its downstream business.

8. Exclusive Institutional Arrangements

Wallet providers may seek exclusive arrangements with:

• universities;
• governments;
• professional bodies;
• employers;
• recruitment companies;
• banks; or
• licensing authorities.

An exclusive arrangement with a small institution may have little competitive significance.

But exclusivity involving a major credential issuer can have substantial foreclosure effects.

For example, if the largest professional licensing body issues all credentials exclusively through Wallet A, competing wallets may be unable to achieve sufficient scale.

The relevant competition-law question is therefore not merely whether an agreement is exclusive, but how much of the contestable market it forecloses.

9. Trust Registries as Essential Infrastructure

Digital credential ecosystems often rely upon lists identifying trusted issuers and verification authorities.

Control over such a registry can create significant market power.

A dominant wallet operator could potentially determine:

• which universities are trusted;
• which professional bodies are recognised;
• which verification authorities are legitimate;
• which credential formats are supported; and
• which competing wallets are interoperable.

The trust registry therefore becomes more than a technical database.

It may become a competitive bottleneck.

10. Refusal to Recognise Competing Credentials

A dominant wallet could refuse to recognise credentials produced by competing systems.

This becomes particularly problematic where:

1. the wallet has substantial market power;
2. recognition is commercially indispensable;
3. interoperability is technically feasible;
4. the refusal lacks objective justification; and
5. the refusal eliminates or substantially weakens competition.

This resembles traditional refusal-to-deal and essential-facilities analysis adapted to digital infrastructure.

11. Credential Ranking and Algorithmic Discrimination

Wallets may eventually rank credentials.

For example, an algorithm could determine:

• which qualification is displayed first;
• which institution is considered more trustworthy;
• which certification is recommended;
• which credential receives a “verified” priority;
• which applicants are surfaced to employers.

A dominant wallet operator controlling these rankings could influence access to:

• employment;
• education;
• finance;
• professional opportunities; and
• public services.

This creates a potential competition problem when ranking rules systematically disadvantage credentials associated with competing ecosystems.

12. Data Advantage and Ecosystem Expansion

Credential wallets can generate large datasets.

A dominant provider may know:

• who holds particular qualifications;
• which institutions issue them;
• where users work;
• what credentials are frequently verified;
• which employers demand particular qualifications; and
• how frequently credentials are used.

The provider can potentially use this information to enter adjacent markets.

For example:

Credential wallet → employment marketplace → recruitment analytics

or:

Credential wallet → identity verification → financial services

The competition concern is not simply privacy. It is whether accumulated data creates an unfair competitive advantage that rivals cannot reasonably reproduce.

13. Zero-Price Services and Competition

Many digital wallets may be free to users.

A zero monetary price does not eliminate competition concerns.

Competition may instead occur through:

• data;
• attention;
• ecosystem participation;
• institutional dependence;
• verification fees;
• preferential access; and
• control over standards.

Thus, conventional price-based market analysis may be inadequate.

14. Standard-Setting and Credential Formats

Credential ecosystems frequently depend on technical standards.

A dominant firm may participate in standard-setting while simultaneously competing with other wallet providers.

Potential risks include:

• deliberately designing incompatible standards;
• withholding interoperability information;
• manipulating technical specifications;
• discriminatory certification;
• discriminatory licensing; and
• incorporating proprietary technology into an ostensibly open standard.

Standard-setting therefore raises both competition-law and governance concerns.

15. Relevant Case Laws

Although there are relatively few reported decisions specifically concerning modern digital credential wallets, several established competition cases provide highly relevant legal principles.

1. United Brands v Commission

United Brands Co v Commission, Case 27/76 (1978)

The European Court of Justice examined dominance and the ability of a powerful undertaking to behave independently of competitors, customers and consumers.

Relevance

A dominant digital credential wallet could similarly possess substantial bargaining power where institutions and users become dependent upon its ecosystem.

The case supports analysis of:

• dominance;
• economic dependence;
• market power; and
• exclusionary behaviour.

2. Commercial Solvents v Commission

Commercial Solvents Corp v Commission, Joined Cases 6/73 and 7/73 (1974)

The Court recognised that a dominant undertaking controlling an important input could abuse its position by restricting access to that input in a manner that eliminated competition in a downstream market.

Digital-wallet relevance

The analogy is strong where a wallet operator controls a critical credential-verification infrastructure.

For example:

Dominant verification infrastructure → refusal to provide access → downstream wallet competitors excluded.

The case therefore provides a foundation for analysing vertical foreclosure and refusal to supply.

3. Bronner v Mediaprint

Oscar Bronner GmbH & Co KG v Mediaprint, Case C-7/97 (1998)

The Court established a demanding test for compulsory access to an infrastructure under Article 102 TFEU.

Relevance

A credential-verification network might be characterised as indispensable infrastructure where competitors cannot realistically reproduce it.

However, mere usefulness would not necessarily be enough.

A claimant would generally need to demonstrate factors such as:

• indispensability;
• lack of realistic alternatives;
• potential elimination of effective competition; and
• absence of objective justification.

This case is therefore particularly important for digital credential wallet interoperability.

4. Microsoft v Commission

Microsoft Corp v Commission, Case T-201/04 (2007)

The General Court upheld important findings concerning Microsoft's refusal to provide interoperability information and the leveraging of dominance into neighbouring markets.

Digital-wallet relevance

This is one of the strongest analogies for credential-wallet competition.

A dominant wallet provider could potentially control:

• APIs;
• authentication protocols;
• verification interfaces;
• credential formats; and
• interoperability information.

If withholding such information prevents competing wallets from operating effectively, the Microsoft principles become highly relevant.

5. Google Shopping

Google Search (Shopping), Case AT.39740, European Commission (2017); General Court, Case T-612/17 (2021)

The Google Shopping litigation concerned preferential treatment of Google's own comparison-shopping service within its general search results.

Digital-wallet relevance

A dominant wallet could potentially favour its affiliated services in:

• credential verification;
• recruitment;
• professional certification;
• education services; or
• identity verification.

The case illustrates how self-preferencing and leveraging of an infrastructural position can raise competition concerns.

6. Google Android

Google Android, Case AT.40099, European Commission (2018); General Court, Case T-604/18 (2022)

The case concerned Google's use of contractual arrangements and tying practices involving Android and related services.

Digital-wallet relevance

The principles are relevant where a dominant wallet provider conditions access to its ecosystem upon adoption of complementary products.

Potential examples include:

• wallet + cloud;
• wallet + authentication;
• wallet + recruitment;
• wallet + payment services; or
• wallet + identity verification.

The central concern is whether contractual conditions reinforce dominance in adjacent markets.

7. Intel v Commission

Intel Corp v Commission, Case C-413/14 P (2017)

The Court clarified the importance of analysing the actual or potential foreclosure effects of conditional rebates and exclusivity-related conduct where dominance is involved.

Digital-wallet relevance

Suppose a wallet operator offers universities or employers:

• lower verification fees;
• technical subsidies;
• preferential support; or
• financial incentives

on condition that they use the wallet exclusively.

Intel provides an important framework for examining whether such arrangements are capable of foreclosing equally efficient competitors.

8. Slovak Telekom

Slovak Telekom a.s. v Commission, Joined Cases C-165/19 P and C-166/19 P (2021)

The case concerned exclusionary conduct involving access to infrastructure and the relationship between regulatory access obligations and Article 102 TFEU.

Digital-wallet relevance

The case is useful where credential infrastructure is subject to regulatory or interoperability obligations.

It demonstrates the importance of distinguishing between:

• ordinary refusal-to-deal cases; and
• situations where a dominant undertaking is already subject to regulatory duties concerning access.

16. Competition Risks by Conduct

17. Merger-Control Risks

Digital credential ecosystems can also generate significant merger concerns.

Consider:

Large wallet + major university credential platform

or:

Identity wallet + professional certification database

or:

Credential wallet + recruitment marketplace

The transaction may create a vertically integrated ecosystem controlling both credential production and economic opportunity.

Traditional turnover thresholds may fail to capture the strategic significance of such acquisitions, particularly where the acquired company has:

• valuable data;
• strong network effects;
• rapid growth;
• innovative technology; or
• significant future competitive potential.

Competition authorities may therefore need to examine nascent competition and ecosystem effects, rather than simply current revenues.

18. Public-Sector Wallets

The competition problem becomes more complex where the wallet is operated or mandated by a government.

A state-backed wallet may enjoy advantages such as:

• compulsory recognition;
• privileged access to government identity infrastructure;
• regulatory endorsement;
• access to public databases; and
• mandatory use for public services.

This can create a tension between public digital infrastructure and competitive neutrality.

A government wallet should ideally provide neutral interoperability rather than becoming a mechanism for excluding privately developed credential systems without legitimate justification.

19. Competition and Consumer Choice

Consumers may experience harm through:

• inability to switch wallets;
• inability to transfer credentials;
• loss of credential history;
• mandatory acceptance of one wallet;
• higher verification costs;
• reduced innovation;
• reduced privacy choices; and
• restricted ability to use alternative credential providers.

Competition law therefore protects more than monetary price.

In credential ecosystems, the relevant competitive parameters may include:

portability + interoperability + privacy + security + innovation + institutional acceptance + neutrality.

20. Remedies

Competition authorities could consider several remedies.

Structural remedies

In extreme cases:

• separation of wallet and verification businesses;
• divestiture of competing platforms; or
• restrictions on vertical integration.

Behavioural remedies

More commonly:

• mandatory interoperability;
• API access;
• non-discriminatory verification;
• credential portability;
• prohibition of exclusivity;
• transparent ranking systems;
• non-discriminatory trust-list access; and
• restrictions on self-preferencing.

Technical remedies

Authorities could require:

• open credential formats;
• interoperable APIs;
• export functionality;
• machine-readable credentials;
• portable cryptographic proofs; and
• independent verification mechanisms.

21. A Competition-Law Test for Digital Credential Wallets

A useful analytical framework is:

Step 1 — Define the ecosystem

Identify:

• wallet;
• issuer;
• verifier;
• relying party; and
• adjacent services.

↓

Step 2 — Identify market power

Examine:

• user numbers;
• institutional adoption;
• network effects;
• switching costs;
• data;
• interoperability;
• entry barriers.

↓

Step 3 — Identify the bottleneck

Ask whether the firm controls:

• credentials;
• verification;
• trust registries;
• APIs;
• authentication;
• standards.

↓

Step 4 — Identify exclusionary conduct

Check for:

• tying;
• bundling;
• exclusivity;
• refusal to deal;
• self-preferencing;
• discriminatory access;
• interoperability restrictions.

↓

Step 5 — Assess foreclosure

Determine whether rivals are prevented from achieving:

• scale;
• institutional recognition;
• technical compatibility; or
• effective access to users.

↓

Step 6 — Examine justification

Consider:

• security;
• fraud prevention;
• privacy;
• cybersecurity;
• technical integrity;
• regulatory requirements.

↓

Step 7 — Select proportionate remedy

Potential solutions include:

• interoperability;
• portability;
• access obligations;
• non-discrimination;
• monitoring; or
• structural separation.

Conclusion

Digital credential wallets can evolve from convenient storage applications into critical economic gatekeepers. Their competitive importance derives from network effects, accumulated credentials, institutional acceptance, interoperability, trust infrastructure and control over verification.

The central competition-law danger is the emergence of a credential bottleneck:

Control over digital credentials → control over verification → control over institutional acceptance → control over access to economic opportunities.

The most relevant legal principles come from cases concerning dominance, essential facilities, refusal to supply, interoperability, tying, exclusivity, self-preferencing and vertical foreclosure, particularly United Brands, Commercial Solvents, Bronner, Microsoft, Google Shopping, Google Android, Intel and Slovak Telekom.