The European Digital Identity (EUDI) Wallet is an ambitious initiative that seeks to create a unified digital ID system for citizens and businesses in the European Union that will allow them to access various government and private sector services across borders.
It will offer users a simple way to verify their identity online, using biometrics and other personalized data such as fingerprints or facial scans. It will be based on blockchain technology and data-sharing between EU governments.
The personal digital wallet promises significant benefits for citizens, businesses, banks, and governments alike. Banks can rely on a single trusted and secure digital relationship with their customers, meaning they can provide better services.
Here, we explain what will change when the EUID Wallet is implemented and what it means for citizens and the banking and financial services sector.
What will the EUDI be used for?
The EUDI will allow people to use their digital identities to access online services across the bloc’s borders, from healthcare to banking. According to the European Commission, other uses include:
- Public services such as requesting birth certificates, medical certificates, and reporting a change of address.
- Opening a bank account.
- Filing tax returns.
- Applying for a university, either in a citizen’s home country or in another EU member state.
- Storing a medical prescription that can be used anywhere in Europe.
- Proving a citizen’s age.
- Renting a car by using a digital driving license.
- Checking into a hotel.
Why is it needed?
Movement restrictions during the COVID-19 pandemic outbreak prompted a digital revolution across the world, with many consumers opting for mobile apps and desktop systems to conduct their banking, send money to loved ones, invest in stocks, or make purchases online.
The world’s rapid digitalization means that there is now increased demand for digital credentials for citizens to identify and authenticate themselves online, according to a briefing document by the European Parliament.
“However, access to public services and certain sectors (health, finance, etc.) requires identification or the exchange of attributes1 with a high level of security and trustworthiness, including in terms of data protection,” it says.
How does it work?
The EUDI will be available through digital wallets on mobile phone apps and other devices, giving users a simple way to verify their identity online.
The process works by creating a digital profile that contains your name, date of birth, and other information. Citizens can then use their mobile phones to scan their faces or fingerprints to confirm their identity. This means users do not need to remember passwords or PINs.
The new system will also be based on blockchain technology and data-sharing between member states’ governments. A distributed ledger that allows data to be stored and shared across multiple computers, blockchain is considered more secure as it’s encrypted and decentralized – and doesn’t belong to any single entity.
What does it mean for the banking and financial services sector?
The EUDI will provide new opportunities for banks and financial institutions to develop innovative services and hyper-personalized products, create better customer experiences, reduce costs, and increase revenue.
For example, a bank could use the EUDI to offer its customers more personalized services by providing them with access to their digital data stored in various systems, for example, online banking.
With this access, a bank could offer additional value-added services such as improved fraud detection or optimized cross-selling opportunities based on purchasing behavior analysis of all transactions performed by its customers over time and based on purchase history.
They can also offer new products such as P2P payments or instant loan approvals based on credit scores obtained through digital identity validation systems that may become available due to the initiative.
Banks can rely on a single trusted and secure digital relationship with their customers, meaning they can provide better services by giving customers the information they need to make smarter financial decisions.
What are the benefits for citizens?
The EU’s digital identity initiative promises significant benefits for citizens, giving them a convenient and secure way to access services online and saving them time and money. It will also help to create trust in online transactions by reducing fraud and cybercrime.
Customers will also be able to choose where their data is stored, which organization has access to it, and be able to keep track of the sharing of their data.
When will the EUDI be introduced?
In April this year, the project moved to the pilot stage, where it is being tested in real-life situations encompassing different sectors, such as healthcare, financial services, education, and transport.
More than 250 private companies and public authorities across 25 member states and Norway, Iceland, and Ukraine are participating in the pilot, according to a report by the European Commission.
“An initial version of the reference implementation is to be made available on GitHub together with the first complete version of the common EU Toolbox to implement the EU Digital Identity Wallet in September 2023,” the European Commission says.
Currently, just 60% of the EU’s population in 14 Member States can utilize their national IDs for cross-border purposes. Furthermore, only 14% of public service providers in all EU Member States offer cross-border authentication utilizing an e-identity system, allowing individuals to verify their identity on the Internet without requiring a password.
However, the European Commission aims to give at least 80% of the EU’s population of 450 million citizens access to the EUDI Wallet by 2030.
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