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EU digital wallet to lower friction around identity authentication

Apple watch to store digital credentials


The way citizens in the European Union use and manage their digital identities and digital security could change significantly due to new EU regulations. Companies around the world will need to be ready for this, but for Europeans, the digital wallet being launched by the bloc could pave the way for a smoother digital life.

A month ago details began emerging of the European Commission’s plans for a digital wallet which would allow users – typically via a smartphone – to authenticate their identity digitally, store digital versions of other identity credentials such as driving licences and access government services for any EU member.

The developers hope that the greater reliance on online services during the pandemic will make the benefits of their app more readily apparent.

“Customers’ and clients’ expectations have changed as sectors have evolved their digital offering, with users now expecting the same quality of experience from all providers regardless of industry — whether dealing with Amazon, Spotify, or financial institutions,” wrote Dan Morgan, European policy lead at Plaid, a company which builds data transfer networks for fintech products, in an opinion piece on the EU digital wallet for the Financial News.

Morgan believes there is still some way to go in developing digital identities that would facilitate life online “as a continued over-reliance on paper and plastic identity credentials holds back the ability for businesses to provide innovative and efficient digital solutions, or more seamless user journeys.”

More prevalent use of digital credentials would reduce human error and limit the opportunities for fraud according to Morgan as well as open up opportunities for financial inclusion. As the EU requires all member states to prepare for integration, the private sector will also have to be ready to accept the digital wallet as a single credential for their services.

FIDO Alliance weighs in

The ‘Authenticate Virtual Summit: Focus on Europe’, hosted by the FIDO Alliance, examined the state of identity authentication in Europe as regulations such as eIDAS, the legal framework for mutual recognition of national ID systems, come into effect.

The FIDO Alliance (Fast Identity Online) seeks to develop authentication standards to move away from passwords. It covers biometrics and secure keys as ways to authenticate identity and hopes to tackle issues around the lack of interoperability between strong authentication systems.

The current state of play leads to ‘friction’ when it comes to identity authentication, according to FIDO. Speakers at the summit discussed issues such as how authentication requirements for card payments lead to cart abandonment at the checkout for e-retailers. Thirteen percent of credit card payments are abandoned, representing huge losses for companies. Simpler digital identities and authentication could tackle this, and a harmonized EU-wide digital wallet via eIDAS could see Europe lead the way.

“The purpose of eIDAS is cross border access for citizens in any European country to gain access to any public service in the EU,” Sebastian Elfors, senior solutions architect at Yubico said at the conference.

A great deal more harmonization across states is required in order for the private sector to treat the bloc as one, according to Dan Morgan: “While the single market may exist in theory, in practice the complexity and variety in local regulations, including identity and Know Your Customer rules, means the growth of financial services companies is often inhibited”.

Also speaking at the conference, Santosh Rajvaidya, senior director of product management at Jumio, noted the lack of a consistent approach to remote ID verification in Europe. The EC’s digital wallet could be the first step to changing that.

“What is happening with digital identity wallet is you do a one-time verification of your ID and the identity is created in the digital identity wallet,” Rajvaidya is quoted as saying. “From there on the user can reuse it multiple times across different applications.”

His company, Jumio, has even released an e-book on the types of eID involved in eIDAS and how it will affect the single market.

Apple Watch gets digital wallet

Meanwhile, at the consumer design end of digital wallets and their integration in daily life, FIDO member Apple is about to give people a greater insight of the possibilities. The next software update for the Apple Watch will allow users to store digital versions of credentials such as driving licences and car insurance on their wrists, reports Yahoo!Finance. Some U.S. states already accept such documents in the iPhone digital wallet and the U.S. government is exploring regulation at a federal level.

The update will allow users to unlock compatible cars, an upgrade developers including Google and Samsung are also exploring.

Back in Europe, where the regulation is far broader but little sign of a consumer product, Plaid’s Dan Morgan remains hopeful: “Providing that digital identities are interoperable across borders, commonplace and standardised among member states, a single market digital identity will show the benefit of standardisation, laying the foundation for greater harmonisation in future.”

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