Keeping payments secure from fraud is crucial in today’s times. Hence, strong authentication measures are vital to ensure only genuine payments are processed while keeping fraudsters and bad actors at bay. To protect consumers from fraud, Europe has the revised Payment Services Directive (PSD2) law, which requires all businesses to perform Strong Customer Authentication (SCA) while processing payments. It is also mandatory for all businesses in Europe to comply with the Anti-Money Laundering Directive (AMLD), which aims to prevent money laundering and terrorist financing. Knowing your customer (KYC) and other verification measures help ensure the legitimacy of transacting parties, and helps to keep all payments under ambit of the law. This is where the EU Digital ID wallet will play a big role – to ensure payments in Europe are safer through better, more seamless verification.
So, what is the EU Digital ID wallet?
The EU Digital Identity wallet is a biometrically secured digital wallet that allows consumers to link their national digital identities with their personal details like driver’s license, bank accounts, passwords, e-signatures, etc. The EID wallet app will store a user’s ID credentials and important documents in a digital format; in place of a physical wallet. Users will have more control on the privacy of their data, and they can choose how much of their personal details they wish to share, to access any service. Users can easily and securely store all data in one device and access them through an app on their smartphone.
The wallet will be based on eIDAS (electronic identification, authentication, and trust services), a regulation that has existed since 2014 in the EU. The EID wallet aims to break down barriers to e-commerce and support access to a single digital market. It is expected to go live in 2023.
It will provide:
- Quick, simple, and secure identity verification
- Single digital identity to access public and commercial services across the EU
- Secured sharing of personal data, while keeping track of how much data is shared
- Added security in digital payments and other online transactions
How will the EU Digital ID Wallet Improve Payment Verification?
One of the top priorities of the EU digital ID wallet is to seamlessly combine ID verification and payment processing. This means better KYC, and faster onboarding of customers and suppliers. It also means faster verification and payment processing. Here’s how it will happen:
Fool-proof Authentication Tool
Digital ID verification is a vital part of any business’s KYC and AML measures, and also for processing payments. But this can be a long-drawn process that slows down onboarding, leading to inefficient payments. The EID wallet is a single ID platform in a biometrically secure app. This means all of a customer’s ID details necessary for user authentication and payment verification are available on the app. Users can choose how much of their personal info they wish to share. The EID wallet also prevents the illegal access to users’ personal data. This makes the KYC and onboarding processes simpler, leading to faster authentication and seamless, secure payments.
Fraud Prevention
Ensuring a customer’s ID and ensuring every transaction is legit is critical to prevent fraud. Knowing your customer’s identity also helps you prevent money laundering and illegal transactions. Hence, every business has to do the due diligence to authenticate customers before they work together. Because a business can verify a customer’s genuine identity, it helps them avoid false declines and approve all legit transactions. This helps them deliver a more seamless payment experience, leading to higher levels of customer satisfaction. The EID wallet will allow users to choose what and how much info they share. This gives them better control over their personal data, and prevent unauthorized access. This protects user privacy and keeps them safe from identity theft, and in turn, other forms of financial fraud.
How Will the European Digital ID Improve Your Payments?
The EU Digital ID will simplify identity verification and authentication. Plus, it will ensure user data is kept safe and private. Users have more choice in how much and what data they share with third-parties. This helps to create more trust between buyers and sellers. Also, knowing customers better helps businesses to avoid fraud and offer an overall better customer experience. This is particularly true for cross-border e-commerce.
As a business,
- you save up on compliance costs,
- build more trust among people about safe online transactions,
- easily integrate digital payment methods
- prioritize your customers’ safety, leading to higher confidence in your brand
Final Thoughts
The EID wallet will provide a new direction to the EU’s mission of developing a cohesive, secure, and trusted digital ID framework. This will give impetus to ongoing efforts toward creating a pan-European payment solution. Mobile wallets are becoming the go-to payment choice for most people. As consumer demand for convenience grows, bringing payments and identity under a single framework will make verification and payment processing more seamless. This will provide greater flexibility to the payments industry to drive further growth and innovation.
To catch more updates on the EU Digital ID, head over here.
Jose Augustine is the Chief Business Development Officer at Novalnet with extensive experience in European payment industry and a knowledge powerhouse.