The Future of Digital Identity: Europe's eIDAS 2.0

The internet was not configured with a human identification layer, leading to centralised models where consumers must onboard separately with each entity, resulting in countless accounts and passwords. However, Europe’s Electronic Identification and Trust Services (eIDAS 2.0), a self-sovereign identity initiative, offers a new way to manage digital identity by creating a European Digital Identity Wallet (EDIW). The EDIW is designed to be a single source of data accessible to citizens and businesses alike, a tool that could transform the way personal information is handled online.

The Potential of a European Digital Identity Wallet

The EDIW is intended to be a voluntary tool for individuals, but most public and private bodies that require user data will be obligated to use strong authentication protocols for online identification and accept the wallet as a means of doing so. This mandatory acceptance could be particularly impactful in sectors such as healthcare, energy, and banking.

The proposed changes could simplify digital signatures, reducing the time and cost associated with administrative tasks. The EDIW could also have significant benefits for financial institutions, telecommunications companies, healthcare operators, energy, and utility providers, supporting further digitisation of services and enhancing customer experiences.

The Case of BankID

A similar scheme in the Nordics, BankID, successfully reduced account opening times from five days to just five minutes. In Sweden, BankID is now used by over 99% of the population, demonstrating the potential impact of digital identity solutions on efficiency and user experience.

The Changing Landscape of Identity Verification

Merchant verification processes are anticipated to evolve from standalone and siloed to modular and flexible, accepting different forms of verification. This change could be particularly beneficial in Europe, given the diversity of regional government IDs.

As the market matures, businesses seek simplified vendor stacks. ID verification providers are responding by offering single platforms that can integrate with specialty endpoint solutions. For instance, Trulioo, a portfolio partner of Mouro Capital, recently acquired HelloFlow to enhance its digital onboarding capabilities.

Future Implications of the EDIW

With the introduction of the EDIW, the digital ID wallet space could soon become crowded with operators such as Google and Apple introducing their own solutions. The shift to a customer-owned credential model could encourage providers to differentiate themselves by building capabilities across multiple use cases or by deepening a solution for a targeted customer segment.

The decentralisation of data could also potentially enable data enrichment and sharing between financial institutions, subject to regulations. This could drive deeper insights on Know Your Customer (KYC) and Anti-Money Laundering (AML) checks and fraud reviews.

The Importance of Standardisation

For Europe’s regulators, the challenge is to adopt standardisation across policy implementation to support this expanded platform. Without standardisation, the risk of fragmentation and the need to integrate multiple digital wallet variants could significantly increase IT costs.

Final Thoughts

If implemented effectively, eIDAS 2.0 has the potential to revolutionise online safety, privacy, and user experience for Europe’s citizens, while offering cost savings to both public and private sector organisations. The success of this initiative, however, hinges on effective implementation and widespread acceptance.