Voice of the Industry

Digital credentials and wallets – what's the big deal?

Wednesday 5 June 2024 08:49 CET | Editor: Raluca Ochiana | Voice of the industry

The rise of digital identity wallets and digital credentials represents a shift towards reusable identity. Anne Bailey from KuppingerCole, discusses the impact of these developments on consumers and businesses.


There is a clear trend of issuing and using digital credentials as part of our interactions, both in the digital world and supporting us in the physical world. These interactions are varied: access to government services, opening a bank account, digitally signing documents, payments, and the issuance, storage, and presentation of things like ePrescriptions, travel documents, educational credentials, employment credentials, and much more. 

Inherent in such interactions is identity verification. Verification means examining the digital credentials being presented and who they are being presented by. This is done to establish that the correct, valid, and trustworthy credential that represents the specific, real, and non-spoofed individual is present for an interaction. 

Even in our digital age, a high-assurance verified digital identity is not a given. Through a variety of methods, individuals can prove their identity digitally. When verification is valid for only a single transaction, the individual often needs to complete the full identity verification process for each transaction. Some solutions provide access to reusable digital identity – which can sometimes be verified to a high level of assurance but often is not. 

A reusable, verified digital identity: the European effort 

The European effort to spin up a reusable, verified digital identity ecosystem is spearheaded by the eIDAS 2.0, the proposed amendment to the eIDAS Regulation no 910/2014 which aims to enable the use of digital identity for public services and private business in a harmonised EU digital market. 

The eIDAS 2.0 is more than just a regulation to comply with – it’s an opportunity for individuals to hold government-issued digital IDs that can be used across borders in the EU, give consent to share select portions of their personal data, and know exactly who they have shared that data with. It is an opportunity for public and private organisations to interact with citizens, customers, partners, and employees digitally, utilising this personal data that is verified and highly trusted.

A tenant of the European digital identity goals is that individuals hold their government-issued digital identity themselves, stored in a digital wallet. The European Digital Identity (EUDI) wallet concept enables the issuing, holding, and sharing of digital identity required by eIDAS 2.0. EUDI wallet solutions are to be made available by each Member State of the EU, independently certified at a national level and to EU-wide harmonised cybersecurity standards and others like GDPR. 

The advantage of EUDI wallets over other wallet solutions is that the citizen can hold a high-assurance, government-issued identity document for use in public service and private industry, eventually in any EU Member State. EUDI wallets bring an important element of trust to the emerging digital wallet market by pioneering the certification of wallets and the credentials issued by EU Member States. 

Multi-wallet, multi-credential reality 

Of course, EUDI wallets will not be the only wallets in existence. Actually, they are relatively late to the digital wallet market, with major tech vendors already seeing relatively strong adoption. We already exist in a multi-wallet, multi-credential reality, which will only intensify before consolidating around a few preferred wallet solutions. 

The multi-wallet reality will increase over the next several years as the EUDI wallets roll out, as mobile driver licences become more widely available globally, and as businesses learn to leverage a bring-your-own-ID (BYOID) approach for all types of users – consumers, customers, employees, partners, suppliers, and contractors. This will create an influx of wallet providers, some certified as EUDI wallet providers, some finding large-scale adoption through excellent user experience and frequent applicability. 

Individuals in their various roles as citizens, consumers, and employees will collect wallets as they need them, but will likely not enjoy the experience of trying to understand which wallet they can use in each transaction – their goal being to simply complete the transaction as quickly as possible. Therefore, the next phase is wallet consolidation, where individuals develop preferences for particular wallets. 

Wallets that will succeed during the consolidation phase must be widely applicable, allowing individuals to use them in the ways that are most important to them – from travelling to accessing public services to signing up for new online services. These wallets must also meet high-security standards while delivering excellent user experience. 

Some wallet solutions will be certified EUDI wallets, but not all. Given concerns around interoperability and data protection, the industry-provided wallets will likely not be EUDI certified. This will sharpen the growing competition between Big Tech digital wallets that create lock-in for users and organisations, and other more open and interoperable wallet solutions. Emerging mobile driving licence standards will further complicate the wallet landscape, depending on which types of digital wallets they may be issued to. 

Anew status-quo 

Overall, the rise of wallets and digital credentials represents a shift towards reusable identity - a massive change in the status quo. This shift reduces the need for one-time verifications, changes the business models of identity verification, and streamlines many processes that require high identity assurance. Wallets that can be issued verified government-issued digital identities will be pivotal to this shift to digital credentials.

This editorial was initially published in the Emerging Technologies and Trends in Identity Verification, KYC, and KYB Report 2024. The report dives into the latest practices and technologies that enable financial institutions and regulated entities to reduce fraud, build trust, navigate evolving regulatory and compliance requirements, and cut operational costs. You can download your free copy here

About Anne Bailey

Anne’s experience brings together political and economic knowledge, cultural sensitivity, and close attention to innovative ideas. She has worked with several nonprofit organisations in Sub-Saharan Africa, and has been invited to speak at events such as the World Trade Organisation Public Forum and the Global Peter Drucker Forum on topics like Public Value and management innovation, with additional research experience covering innovation in relation to nonprofits, diversity, and competitiveness.

About KuppingerCole Analysts

KuppingerCole Analysts is an international and independent IT analyst organisation headquartered in Europe, with a presence worldwide. We specialise in the strategic management of digital identities, privileges, authentication, and access control as well as cybersecurity and business resilience.

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Keywords: KYC, KYB, identity verification, digital identity, verifiable credentials, EIDAS, cybersecurity, digital wallet, customer experience
Categories: Fraud & Financial Crime
Companies: KuppingerCole Analysts
Countries: World
This article is part of category

Fraud & Financial Crime

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