The drawback of physical tokens is that you can't use them online. I don't want to spend an hour waiting in queue at the city hall for something I can do online in 10 minutes.

The ideal state is having both physical and digital ID. But that will lead to a slow erosion of the willingness to carry physical ID, even if it stays available (which I believe it will for many decades. Even if national ID cards and drivers licenses were to go digital only, passports won't)

I use credit cards online all the time. I have logins for government services so I do not need to queue (I had to verify my ID using an app once for one of them). Getting a new driving license (for a change of address) was done online.