Been having lots of conversations about digital identities and digital wallets lately. It is a theme that has been bubbling for years, yet seem to now be coming to a head. From the EU Digital Wallet and Identity program to India’s Aadhaar and UPI to Brazil’s Pix, there’s definitely something afoot.
The core of the challenge, going back to first principles, is creating a secure and trusted, government backed, mobile-first designed digital wallet and identity scheme with low or zero fees, and strong regulatory backing. That final part is a critical part. If the government says you have to issue digital identities and digital wallets, then it gets done. That’s one of the critical things behind all of these programs.
Having said that, it ain’t easy.
Many of the national systems for digitalisation are unique to those nations, and have zero standardisation, harmonisation or interoperability with their next door neighbours.
I first experienced this issue when creating and running the Financial Services Club in the Nordic region. The Nordic countries were pioneers of internet banking, mobile payments and digital identities. They have always been at the forefront of European innovations in finance and critical to how to make these things work. Yet, I always remember making the comment that I could travel over 6,000 kilometres from Beijing to Stockholm and use my Alipay wallet everywhere but, if I travelled 40 kilometres from Malmo to Copenhagen, I would have a problem as Swish and MobilePay are incompatible.
By the end of 2024 the Nordic folks had solved that problem, but it did give a strong incentive to avoid national payment schemes and move to Apple Pay or similar.
In a similar way, digital identity schemes have been fragmented but that is now changing under the EUDI scheme which came into force in 2024 and mandated from next year. What is the EUDI scheme? According to the European Commission: “An EU digital identity scheme (EUDI) will make it safer and easier to use online services anywhere in Europe (e.g. enrolling in a foreign university, opening a bank account, accessing public services) give people more control over their personal data and privacy while respecting user anonymity.”
Sounds interesting, but sounds more related to data protection than onboarding, AML and KYC. However, the ambition does go further than this. From my AI friends: EUDI stands for “European Digital Identity Wallet,” a project by the European Union to create a secure and convenient digital identity for citizens and businesses across the EU, enabling them to access services online and offline.
Here’s a more detailed breakdown:
Purpose:
The EUDI Wallet aims to provide a safe and reliable way for individuals and businesses to prove their identity when accessing public and private services across the EU, both online and offline.
Functionality:
- Users can store and manage their digital identity documents and credentials within the wallet.
- The wallet allows users to share only the necessary information for accessing specific services, ensuring privacy and security.
- It is designed to be interoperable, meaning that users can use their digital identity credentials across different platforms and services within the EU.
Key Features:
- Security:The EUDI Wallet uses advanced encryption technologies to protect sensitive information.
- Privacy:Users have control over their data and can choose what information to share.
- Convenience:The wallet allows users to access services easily and securely using their smartphones.
Examples of Use Cases:
- Accessing online government services.
- Opening a bank account.
- Renting a car.
- Checking in at an airport.
- Signing documents electronically.
- Presenting medical prescriptions.
EU Digital Identity Wallet Architecture and Reference Framework (EUDI ARF):
This is a core component of the reference implementation, guiding the development of an interoperable EUDI Wallet solution.
It sounds laudable but getting 27 nations to standardise, harmonise and integrate such a scheme will be challenging, especially as no one is talking about it.
Anyways, I’ve been thinking a lot of ideas around this space recently , particularly around these three themes:
- Do digital ID schemes only work if government issued (Aadhar, EUDI)?
- What is the balance between government surveillance and privacy?
- How do we balance fraud versus convenience?
On the first, I feel it is likely that over the new decade most governments will issue digital identities that replace passports and driving licenses. The old American request on check-in for Picture ID will become a request for Digital ID.
On the second, many have discussed the concerns of the citizen of government nosiness – the surveillance of your life – and this will never go away. The fact is that using a digital wallet with identity-on-demand will be critical, but with identity-that’s-mine will be just as critical.
Then, the third point is most critical to finance and government which is that I need to know you are you and not someone with criminal intent. Today, that balance is geared far more towards blocking me from joining you than making it easy. A case in point is one of my financial firms is asking me for notarised documentation to prove who I am. Finding, visiting and providing a notarised document is a pain in the rear. That needs to change.
All in all, there is a drive to digital wallets and digital identities, but the journey is still early. There is a long way to go.
Postscript:
A few useful links on the EUDI if interested:
