In modern times the wallet became the source of value to us – who we are and what we can buy. There are a lot of wallet solutions on the market: for payment, for payment combined with boarding passes and tickets, for all sorts of credentials, then why another wallet? What can a new European Digital Identity (EUDI) wallet bring? The answer is simple – the identity and many more pieces of information with a legal value that can be used in cross-border transactions within European space, no matter the country of issuance, to identify ourselves to public or private services.
eIDAS 2.0 is the proposal to amend the eIDAS Regulation (no. 910/2014) on electronic identification and trust services for electronic transactions in the internal market. The aim of eIDAS 2.0 is to achieve the target set in Europe’s ‘Path to digital decade’ – 80% of EU citizens being able to use a digital ID by 2030, to be able to prove who they are cross-border, to be able to give the explicit consent for sharing pieces of their personal information, to know exactly with whom they’ve shared personal information and for what purpose. This legislative intervention changes the EU framework for digital identity, introducing the EUDI wallet concept.
The EU’s way for the digital transformation of our societies and economy encompasses in particular digital sovereignty openly, respect of fundamental rights, the rule of law and democracy, inclusion, accessibility, equality, sustainability, and respect for everyone’s rights and aspirations. The EUDI wallet is human-centred, enforcing control and privacy, data minimisation, security, interoperability, and sharing of personal information based on explicit consent. We will know for sure with whom we share out data and for what purpose, as the wallet will have a dedicated section for that, and those consents are available for consultation or withdrawal in time. This is a radical shift into the digital identity and authentication space, towards a decentralised model, user-centric, and individually controlled.
Identity is the bedrock for financial services and we have seen various initiatives in this space, like the Nordic countries’ banks issuing digital identities (BankID Sweden, BankID Norway, NemID, MitID, FTN, iDIN) with a high adoption rate. However, these identities cannot be used cross-borders if a citizen needs to get a bank account in another country, for instance. There are also various remote identity verification solutions integrated into banking processes, collecting all sorts of documents and performing sophisticated checks of biometrics and liveness. This comes with an associated cost per transaction, in addition to the costs associated with customers’ identity document preservation, encryption, and protection over a long period.
Here is where the EUDI Wallet enters the game, alleviating all of the complexity of onboarding customers or processing payments: being an electronic identification means with a high level of assurance, the EUDI Wallet can cut down the costs for KYC/AML, helping financial institutions fulfil specific regulatory requirements and build seamless online experiences. The eIDAS 2.0 highlights that the financial services sector should accept the use of EUDI Wallet for the provision of services where strong customer authentication for online identification is required by national or EU law or by contractual obligations.
In addition to digital identity, through the EUDI Wallet, banks can also use other credentials (electronic attestation of attributes) with legal value issued by trust service providers or other banks, such as creditworthiness, fraud profiles, IBAN, and income/financial transaction data attestation. At the same time, banks can play the role of credential providers to the EUDI wallet, which can help with distribution and availability across multiple channels.
While the eIDAS2.0 is following the legislative process, expected to be approved by the end of 2023, several consortia deploying large-scale projects have been selected for co-funding by the European Commission. EWC, NOBID, POTENTIAL, and DC4EU, composed of public-private organisations, have proposed various use cases in a cross-border environment, covering all European Member States. One in particular, the NOBID consortium, is focused on the payment means issuance and payment acceptance by retail or similar: instant payments and account-to-account transfers. The solution will build on the EUDI wallet usage as strong customer authentication, as well as transaction linking according to the PSD2 requirements.
The new European digital identity framework has a huge potential for banks, fintech, and payment providers: it will solve the historical problem of proving who we are on the internet, decreasing the frauds associated with identity theft or false claims. EUDI Wallet is the future of identification, going beyond making payments online or managing payment cards only.
It is the time for banks to recognise the role they want to play in shaping the future of digital financial services and to decide on how they want to move forward as the ecosystem is in rapid development. The transition from physical wallets to digital wallets has already started, so the question is: are you a player or a spectator?
This editorial was initially published in the Financial Crime and Fraud Report 2023 which dives into the captivating world of fraud management, digital onboarding, and financial crime in the financial services industry. You can download your free copy here.
Viky is an international expert in the field of electronic signatures, digital identity, and digital transformation processes. She has been contributing to the impact assessment for the revision of the eIDAS Regulation in support of the European Commission, to establish a legislative framework for a secure, widely usable, and interoperable Digital Identity for the Digital Single Market – eIDAS 2.0.
An Italian private company, Qualified Trust Service Provider according to eIDAS Regulation, Intesi Group has more than 20 years of experience in cryptography, technology development, and trust services provisioning, serving customers from the highest regulated industries such as financial, biopharmaceutical, and healthcare.
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