What could make the EU Digital Identity Wallets fail?

The EU Digital Identity Wallet has enormous potential, but its success cannot be taken for granted. Insufficient ecosystem buy-in, unclear commercial incentives and unresolved trade-offs between privacy and fraud detection can risk derailing the initiative. Jon Ølnes, VP of Digital Identity and Regulation at Signicat says success is possible, but only if it is actively designed and governed, not assumed.

Let me start by being clear: I am a strong proponent of the EU Digital Identity Wallet.

The ambition is the right one. Simplify cross-border digital interactions across Europe. Improve privacy and security. Give individuals more autonomy over their personal data.

But most discussions around the EU Digital Identity Wallet take its success for granted. That assumption is risky.

Large-scale digital identity initiatives rarely fail because the technology does not work. They fail because adoption, incentives, trust, and accountability are underestimated. The EU Digital Identity Wallet could still fail, or partially fail, succeeding in some countries while struggling or stagnating in others.

Three possible outcomes

There are three realistic outcomes for the EU Digital Identity Wallets:

1. Full success. Wallets are widely adopted and used across all Member States.
2. Failure. Wallets technically exist, but adoption remains marginal.
3. Partial success. Wallets are widely used in some Member States, but not in others.

A realistic risk is fragmented success. Some member states are likely to deliver robust wallets on time. Others may launch late, with limited functionality, or without meaningful uptake. A smaller group may fail to deliver a convincing solution at all, at least in the first phase.

From the perspective of users and service providers, this fragmentation already undermines cross border usage. If wallets differ significantly in capabilities, attributes, and reliability across borders, the promise of a seamless European digital identity weakens.

If Europe wants the wallet to succeed, it must confront the risks that could derail it before they materialise.

Risk 1: Insufficient buy-in from all actors in the ecosystem

Regulation can mandate that wallets exist. It cannot mandate adoption.

For the EU Digital Identity Wallet to succeed, buy-in from three actors is essential:

• Governments: Will governments actively promote the wallet, or merely deliver a nominal solution to meet regulatory requirements? Marketing is not traditionally governmental strengths. Without active promotion, wallets risk becoming symbolic rather than transformative.
• Users: Use of the wallet is voluntary for citizens and residents. If the wallet does not feel clearly better than existing solutions, or if usability is poor or complex, many users will simply stick with what they already know.
• Service providers: Businesses and relying parties may technically support the wallet to meet mandatory acceptance requirements, yet fail to integrate it into real customer journeys. If wallets are not promoted as the most secure or frictionless option, users will default to alternatives.

Minimum compliance is not enough. All actors must actively endorse the wallet for it to succeed.

This is how digital identity initiatives quietly fail. Not through resistance, but through indifference.

Risk 2: Unclear commercial incentives

One of the most critical unanswered questions is economic. Who pays for wallet services, and why?

Every role in the ecosystem needs a sustainable business model. Without clear incentives for private-sector providers, investment and innovation will slow. Wallets risk becoming compliance artefacts rather than platforms that evolve with market needs and unlock real business value.

This is not a technical challenge. It is a market design challenge, and ignoring it threatens long-term viability.

I explore this in more detail in my blog The elephant in the digital identity wallet room, which explores some possible business models for the wallet ecosystem to thrive.

Risk 3: Parallel identity ecosystems that never converge

The EU Digital Identity Wallet will not exist in isolation. It will coexist with national eIDs, private wallets, big-tech wallets, and legacy identity methods.

If EU wallets remain highly constrained by regulation while alternative solutions innovate faster outside the framework, users and businesses may simply choose other paths for everyday use.

A wallet that exists but is rarely chosen is, in practical terms, a failure.

Risk 4: When strong privacy complicates fraud prevention

One of the EU Digital Identity Wallet’s biggest strengths is privacy by design. A core principle is unlinkability, meaning service providers cannot track or profile user transactions across services.

This is a major improvement over many existing identity systems. But it also introduces challenges.

Fraud prevention relies on understanding what is normal and what is unusual behaviour. Unlinkability makes behavioural analysis harder. Post-incident investigations can become more complex and may depend heavily on user cooperation.

While EU Digital Identity Wallets offer significantly higher security than current solutions, they will not eliminate fraud entirely. There will still be cases of wallets issued to the wrong individual, phishing attempts, and wallet takeovers. If early fraud cases are poorly handled or publicly misunderstood, trust in the ecosystem could erode quickly.

The wallet’s strong privacy architecture introduces real trade-offs. One uncomfortable but necessary question worth asking is: are we going too far with privacy?

Success must be engineered, not assumed

The European Digital Identity Wallet has the potential to become a global reference for trustworthy digital identity. But success will not happen by default.

It requires:

• Active endorsement from all actors in the ecosystem
• Clear incentives that drive adoption and innovation
• Pragmatic security models that balance privacy with real-world risk
• Sustained investment beyond the initial rollout

The EU Digital Identity Wallet will succeed only if policymakers, wallet providers, and service providers treat trust, economics, and usability as core design principles, not secondary concerns.

About the author

Jon Ølnes is a leading expert in digital identity, with over 25 years of experience in eIDs, electronic signatures, and trust services. He plays a key role in shaping European policies and standards on digital identity. He recently led the revision of ETSI’s identity proofing standard, a core technical standard that underpins the amended eIDAS regulation and the EU Digital Identity Wallets. At Signicat, Jon has spent the past eight years driving product development for the European market.

Article Topics

digital identity  |  digital wallets  |  EU Digital Identity Wallet  |  Signicat