What is the impact of EU digital ID wallets on banks and financial institutions?

eIDAS 2.0 and the introduction of EU digital ID wallets 

eIDAS (electronic identification and trust services)  came into force in July 2016. It created the first and most advanced cross-border legal framework for cross-border electronic identification, authentication, and website certification within the EU. 

The Commission subsequently published a report in June 2021 which was accompanied by a proposal amending eIDAS (eIDAS 2.0) which will upgrade eIDAS and create a new “European Digital Identity” framework. eIDAS 2.0 envisages the use of “European digital ID wallets” which are stored as an app (most common way on a smartphone but could also be a web application or a secure application on computers) and enable EU citizens to authenticate and access online public and private services across the EU.

The European Digital Identity framework will impact all stakeholders

The European Digital Identity will:

1. Be available to anyone who wants to use it: Any EU citizen, resident, and business in the Union who would like to make use of the European Digital Identity will be able to do so.
2. Be widely useable: The European Digital Identity wallets will be useable widely as a way either to identify users or to prove certain personal attributes, for the purpose of access to public and private digital services across the Union.
3. Facilitate digitisation of all sectors, and may be used for many purposes, for example:

• public services such as requesting birth certificates, medical certificates, reporting a change of address
• opening a bank account 
• filing tax returns
• applying for a university, at home or in another Member State
• storing a medical prescription that can be used anywhere in Europe 
• proving your age
• renting a car using a digital driving license
• checking in to a hotel 

What are the benefits for citizens?

EU digital ID wallets will enable the citizen to digitally sign documents with a qualified electronic signature (QES). QES affords a higher level of identity proofing and security than any other forms of electronic or digital signature and is therefore well-suited to banking transactions.

EU citizens are in control of their data: The European Digital Identity wallets will enable people to choose which aspects of their identity, data, and certificates they share with third parties, and to keep track of such sharing. User control ensures that only information that needs to be shared will be shared

What is the value proposition for banks and financial institutions?

Digitalisation of services is vital for all EU banks, and its importance has been amplified by the COVID-19 pandemic. The adoption of the EU digital ID wallet will accelerate the digitisation of the banks, by offering greater flexibility and convenience to customers, have a positive environmental impact, and will also generate cost savings:

a. Using the European Digital Identity Wallet for customer onboarding process, 

Banks will rely on the wallet to undertake AML and KYC due diligence processes on their customers. This should help counter the rising threat of identity fraud and cybercrimes, but it will also reduce the costs for banks, as the KYC process is really expensive. From a customer point of view, user experience is facilitated as the form can be prefilled with all the certified attributes shared by the wallet.

b. Using the European Digital Identity Wallet for applying for a bank loan

Applying for a bank loan is a process that typically includes numerous steps, from setting up appointments and having physical meetings, to collecting and signing all the paper documents - and repeating the operation if documents are missing.

By using the European Digital Identity, the user only has to select the necessary documents that are stored locally on his digital wallet to reply to the bank’s request. Then, verifiable digital documents are created and sent securely for verification to the bank, which can then continue with the application process.

Illustrations from European Digital Identity | European Commission (europa.eu)

c. Using the European Digital Identity Wallet for Strong Customer Authentication (SCA). 

Digital Identity Wallet can facilitate SCA in day-to-day banking transactions, and for payments. Of course, in the case of online payment, the wallet will need to be compliant with the requirements of the 3DSecure protocol and schemes mandates. That means, for instance, to comply with PSD2 SCA requirements (dynamic code linked to the transaction, display of the context of the transaction, …), and 3DSecure specific workflows that aims to reduce friction in the user journey, especially in the app. to app. flow (automatic redirection between merchant app. and authentication app.). And also there is still clarification expected about liability of fraud in case PSD2 SCA is delegated to the wallet.

About Claire Deprez-Pipon

Claire is responsible for the product management of Strong Customer Authentication & Security solutions such as WL Trusted Authentication, WL ACS and WL Digital Intrusion Protection. With 10+ years of experience in international business developments and presales, she has developed strong skills to understand customers and market requirements, with a special focus on security, payments, and identity.

About Worldline

Worldline is the European leader in the payment and transactional services industry. With innovation at the core of its DNA and thanks to a presence in 30+ countries, Worldline is the payment partner of choice for merchants, banks, public transport operators, government agencies, and industrial companies, delivering cutting-edge digital services.