EUDI Wallet for payments best for KYC, combined with existing systems, industry groups say

Making payments simple is an important goal for the European Union Digital Identity (EUDI) wallet. But not all payment use cases are equally suitable for implementing the digital ID, according to a new paper published by the Smart Payment Association in collaboration with the Secure Identity Alliance.

The two organizations argue that using the EUDI Wallet as a means of payment should be based on existing payment instruments and solutions, including current scheme cards or existing account-to-account payment solutions.

“The alternative of creating an altogether new payment system for the EUDI wallet will be a very complex, costly and lengthy task. We do not consider this to be realistic,” the research titled Digital Identity Wallet for Payments concludes.

The paper, published last week, explores connections between payments and digital ID wallets. This includes use cases for the EUDI Wallet, such as digitizing existing payment cards, using the wallet for a future digital euro and for providing information to the merchants.

Aside from using the EUDI Wallet as a means of payment, the paper looks at its role in Strong Customer Authentication (SCA), warning that it could add complexity and cost for banks without adding significant benefits. Currently, banks are required to accept the wallet as a method to implement Strong Customer Authentication (SCA) upon the request of the user.

“For the EUDI wallet to be used for SCA, the wallet must be provisioned with credentials of the bank, bound to the user account, for example cryptographic keys and end user data issued by the bank,” the paper notes. “Provisioning such data will require to integrate the bank’s systems with the EUDI wallet systems. As banks in Europe have already invested heavily to implement their own SCA solutions to comply with PSD2, the additional use of the EUDI wallet for this purpose may be seen as a redundancy bringing costs and little added value.”

On the other side of the spectrum are the most interesting use cases for the EUDI Wallet: Initial Know Your Customer (KYC) processes and onboarding of a new user. Providing a user’s identity to a bank minimizes the risk of fraud and eases compliance, which will be valuable for the financial services sector.

The paper also looks at regulation and current trials within EU-wide Large-Scale Pilots (LSPs).  The conclusions include inputs from the two industry organizations, one focusing on the cards and mobile payments and the other on trusted identity.

Its conclusions largely align with those in a EUDI Wallet Consortium (EWC) white paper published last November.

Article Topics

digital ID  |  digital payments  |  EU Digital Identity Wallet  |  KYC  |  onboarding  |  Secure Identity Alliance  |  Smart Payment Association