The European Commission aims to achieve widespread adoption of digital identity wallets among 80% of the European population by 2030 through the implementation of the eIDAS 2.0 regulation. Throughout this editorial piece, we highlight the potential opportunities it brings, along with the obstacles that must be addressed to realise the vision of one-click payment.
The initial objective of the eIDAS 2.0 regulation is to support the creation of a European Digital Single Market to help businesses, citizens, and public authorities to carry out secure and seamless electronic interactions in all European Member States. The digital onboarding process is expected to be incredibly fast, simple, and secure with the digital identity wallet. However, how to ensure its wider adoption among the population? Digital payment wallets are currently the most commonly utilised method for electronic transactions. That is the reason why the European Commission (EC) wants to link the digital payments wallet to the digital identity wallet. But what is the status of this regulation? How has the payment been integrated? Are all the actors ready to follow this way?
Since the proposal was introduced in June 2021, the EC, the Council, and the Parliament have presented their respective approach, and a trilogue for final negotiations was initiated in March 2023. We anticipate the validation of this regulation by autumn 2023. Encouragingly, there are already shared views among these three propositions. The Member States will be required to issue a wallet with a ‘High’ Level of Assurance enabling identification and authentication, working both online and offline, offering the capability to exchange attestations of attributes, such as mobile driver’s license, diploma, or financial credentials (IBAN, PAN card). Furthermore, it will facilitate the application of qualified electronic signatures.
To drive the adoption of the wallet among the population, the regulation aims to impose an obligation on private relying parties such as acceptors and merchants to accept it when strong user authentication is legally required. This applies to the banking and financial services that must comply with identity verification and Strong Customer Authentication standards (AMLD5, PSD2). Moreover, the regulation emphasizes the need for the wallet to offer enhanced flexibility and solutions for account login and transactions initiation in the field of payment services.
At the European level, there are three main ongoing projects that are interconnected:
The first project focuses on developing an architecture reference framework, also known as toolbox, which provides the specifications for the wallet.
The second one is the implementation of a wallet prototype.
The third one is the launch of four large scale pilots, spanning a two-year duration, exploring different use cases. Two of these consortia, namely EWC and NOBID, will concentrate on the payment use case. These consortia, comprising several banks and major payment service providers, will study different options such as the wallet holding payment credentials and sharing them with third parties or authorising payment requests.
The ECSAs (European Credit Sector Associations) recommend limiting the acceptance of the wallet for Strong Customer Authentication solely to verifying the user’s identity, excluding its use for payment authorisation. This aims to facilitate wider adoption of digital banking services, like opening a bank account, to resolve the liability problem for banks, and to prevent disproportionate costs for merchants accepting card payments under the Payment Services Directive (PSD2).
Contrarily, the EFAs (European Fintech Associations) advocate to keep payment within the scope of the eIDAS regulation to authorise payments, access account information, and sign direct debit mandates using their wallet in a standardised and non-proprietary manner across all EU countries.
But in the end, let's not forget that the decision lies in the hands of consumers.
See the success of Apple Pay and Google Pay, which are evolving into digital wallets like Apple Wallet and Google Wallet. Additionally, the authorisation of payments through an eID app like itsme in Belgium, MitID in Denmark, or BankID in Sweden is gaining traction. Various studies exploring the concept of a cashless society and the implementation of digital currencies like e-Krona in Sweden or Central Bank Digital Coin (CBDC) highlight the urgent need for establishing a digital identity framework as a first step.
The eIDAS regulation and its wallet play a crucial role in defining interoperability standards on identification and authentication, which should be however completed with other financial regulations to be applicable to payments. Some work is still in progress, such as the technical specifications for payments within the toolbox, and opportunities are also arising for private sectors, such as banks, wallet providers, attribute issuers and payment processors, to improve the customer experience and develop a business model that is essential to ensure success.
Early adopter merchants who are able to manage this new ecosystem will gain a competitive advantage in the market by positioning themselves as industry leaders enabling one-click payments.
Worldline, recognising this opportunity, will be there to support its 1.25 million merchants throughout this transformative journey with the Worldline Digital Identity Hub, which serves as a one-stop shop for identity and payment services. Are you interested in learning how we simplify digital identity adoption? Visit: Worldline | Digital Identity Hub: Simplify Digital Identity adoption | Brochure.
Etienne Plouvier, Business Development Manager, has developed strong expertise in Digital Identity and Trust Services such as electronic signature and archiving to help companies in their digital transformation. He is an active member of various working groups and associations to boost the digital economy in Europe and to prepare the application of the new eIDAS regulation (Electronic IDentification and Authentication Services – Trust Services).
Worldline helps businesses of all shapes and sizes to accelerate their growth journey – quickly, simply, and securely. With advanced payment technology, local expertise, and solutions customised for hundreds of markets and industries, Worldline powers the growth of over one million businesses around the world. Worldline generated EUR 4.4 billion in revenue in 2022.
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