BRUSSELS – The European Union is pushing ahead with an ambitious plan to expand digital identity, aiming for 80% of EU citizens to hold a digital identity wallet by 2030. Backed by the revised eIDAS 2.0 regulation, the initiative is designed to make it easier — and safer — to prove one’s identity, sign contracts, and initiate digital payments, with potentially far-reaching consequences for banking services across Europe.
For decades, financial fraudsters have found ways to open bank accounts using false or stolen identities. The rise of generative artificial intelligence has only accelerated the problem, enabling criminals to create highly convincing fake identities at scale. Against this backdrop, policymakers and banks are increasingly viewing digital identity solutions as a critical tool to counter fraud while streamlining access to financial services.
Under the EU framework, digital identity wallets will allow individuals to store verified credentials — such as identity documents or proof of address — in a secure digital format. From November 2027, a range of private-sector actors will be required to accept these wallets as a valid means of identity verification. In practice, credentials generated by applications such as France Identité, the French government’s official certification app, could be used directly by banks and financial institutions during Know Your Customer (KYC) checks.
For the banking sector, the implications are significant. Today’s KYC procedures are often slow, costly, and frustrating for customers, relying on document uploads and manual verification. By providing instant access to verified data, digital identity wallets could sharply reduce onboarding times, cut compliance costs, and lower the risk of identity-related fraud.
Banks are also watching the initiative closely as competition intensifies from fintechs and digital-only lenders. Faster and more secure customer onboarding could become a decisive advantage, particularly for cross-border services within the EU. Industry executives note that a standardized European digital identity could make it easier for consumers to open accounts, access credit, or switch providers across member states.
At the same time, challenges remain. Questions around data privacy, cybersecurity, and user adoption continue to fuel debate. Regulators insist that the system will give users full control over what data they share and with whom, while recent pilot projects across several EU countries are testing the robustness of the technology under real-world conditions.
As AI-driven fraud grows more sophisticated and financial institutions face mounting regulatory pressure, the rollout of digital identity is increasingly seen not just as a technological upgrade, but as a structural shift in how Europeans access banking and financial services.
FAQs
What is a digital identity wallet?
A digital identity wallet is a secure digital tool that allows users to store and share verified personal data, such as identity credentials, for services like banking, payments, or contract signing.
Why is the EU promoting digital identity?
The EU aims to improve security, reduce fraud, and simplify access to digital and financial services, while giving citizens greater control over their personal data.
How will this affect banks?
Banks could benefit from faster KYC processes, lower compliance costs, and reduced identity fraud, making account opening and customer onboarding more efficient.
When will digital identity become mandatory?
By November 2027, certain private-sector players will be required to accept digital identity wallets as a valid form of identification.
Can digital identity help fight AI-powered fraud?
Yes. By relying on verified credentials issued by trusted authorities, digital identity systems could significantly limit the use of fake or AI-generated identities in the banking sector.
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