The impending launch of the EU digital ID in late 2023 may enable banks and other payments organizations to save costs and utilize widespread use to better engage their customers within the continent. Claire Deprez-Pipon analyzes the benefits in today’s version of The Paypers:
Banks will rely on the wallet to undertake AML and KYC due diligence processes on their customers. This should help counter the rising threat of identity fraud and cybercrimes, but it will also reduce the costs for banks, as the KYC process is really expensive. From a customer point of view, user experience is facilitated as the form can be prefilled with all the certified attributes shared by the wallet.
She also sees similar benefits for Strong Customer Authentication (SCA) provided that the wallet development is completed to current standards:
Digital Identity Wallet can facilitate SCA in day-to-day banking transactions, and for payments. Of course, in the case of online payment, the wallet will need to be compliant with the requirements of the 3DSecure protocol and schemes mandates. That means, for instance, to comply with PSD2 SCA requirements (dynamic code linked to the transaction, display of the context of the transaction, …), and 3DSecure specific workflows that aims to reduce friction in the user journey, especially in the app. to app. flow (automatic redirection between merchant app. and authentication app.). And also there is still clarification expected about liability of fraud in case PSD2 SCA is delegated to the wallet.
The full development continues the EU’s purpose of reducing friction across borders and providing universal service to all its residents. This provides the opportunity to standardize digital payments in the same manner that common currency standardized paper payments in 1999.
Overview by Jordan Hirschfield, Director of Research at Mercator Advisory Group
