The idea is to enhance smart phones to the point that they can end the need for carrying around keys and regular wallets (making our pockets a lot lighter). The digitization of the wallet would enhance smart phones (like iPhone) to have
i. Digital credit cards
ii. Digital ATM cards
iii. Digital driver's license
iv. Digital version of other id’s like social security cards
v. Digital company (workplace) id cards allowing you to get inside buildings/rooms
vi. Digital medical insurance, automobile insurance and other insurance cards
vii. Digital store cards
viii. Digital membership (ex. AAA) cards
ix. Digital business cards
x. Digital car keys and home keys
The above would be in addition to all of the capabilities of smart phones of today (ex. phone, email, calendar, GPS, camera, music player, internet browser, pocket games console, flashlight etc.)

Instead of swiping plastic or showing id’s users would swipe corresponding digital applications on their phones or show digital id’s/cards.

The digital wallet would support a Bluetooth like protocol to broadcast information to a distance of 1 feet or so which could be processed by installed receivers on the consuming side (car doors and ignition systems, sale terminals, ATM machines etc.). The broadcast could be initiated by a simple finger swipe of the corresponding digital app ex. a particular credit card app for payments. For additional security the digital apps could require fingerprints of the user to match those registered previously to ensure that only valid registered users can use the app.

For the V1 release a one directional protocol would be sufficient to get a working digital wallet but eventually the communication protocol with the receivers could be enhanced to be bidirectional allowing for the digital wallet owners to see (and store) the details of the transactions (ex. confirm credit card payment amount, enter ATM pin) from their digital wallets as opposed to just on the consuming side sale terminals, ATM machine displays etc.

Given that transactions would be finger swipe initiated with optional fingerprint matching and encrypted broadcasts limited to 1 feet or so, it would be virtually impossible for malicious users to gain sensitive info like credit card numbers by eavesdropping hacks. Future support for the bi-directional protocol allowing for apps to be written so that the digital wallet owners can confirm/validate the transactions would provide for an additional level of security.

Services to back up the phones content would allow for easy replacement, if the digital wallet is lost or stolen. Sensitive content being encrypted and fingerprint/password protected would mean that unlike regular wallets and keys the digital wallet would be useless to thieves.

For most guys the digital wallet would replace everything in their pockets except combs and handkerchiefs ;). For women all the space freed up by removal of keys and wallets would mean smaller handbags or more space for other non digitizable things in their handbags ! Today's big three smartphone players have the clout to make the required ecosystem changes to make this real.