Financial Services

Financial services is one of the sectors most directly affected by eIDAS 2.0. The regulation explicitly designates financial institutions performing customer due diligence under anti-money laundering rules as mandatory relying parties. This means banks, payment institutions, electronic money institutions, and investment firms must accept the European Digital Identity Wallet when customers choose to present it for identity verification. This is not a future possibility; it is a binding legal obligation with defined implementation deadlines.

The impact extends beyond compliance. The EUDIW fundamentally changes the economics of customer onboarding, identity verification, and ongoing authentication. Processes that currently cost financial institutions significant amounts per customer in manual verification and document handling can be replaced by instant, cryptographically verified wallet presentations. Institutions that adapt quickly will gain a measurable competitive advantage in customer acquisition speed and operational efficiency.

Know Your Customer (KYC) processes are the most immediate area of transformation. Current onboarding flows typically require customers to upload identity documents, complete video verification or selfie matching, and wait for manual review. These processes generate friction that causes significant abandonment rates, particularly on mobile. With the EUDIW, onboarding becomes a single wallet presentation: the customer approves a request on their device, and the bank receives government-verified Person Identification Data (PID) in a cryptographically signed credential.

Remote identity verification through the wallet meets the high Level of Assurance required for financial services, satisfying both eIDAS 2.0 and anti-money laundering requirements. The wallet also enables ongoing identity re-verification without repeating the full KYC process. Financial institutions can request updated attestations from the wallet at any time, supporting continuous due diligence obligations. For cross-border account opening, the wallet eliminates the complexity of verifying foreign identity documents manually.

The EUDIW intersects directly with PSD2 strong customer authentication (SCA) requirements. PSD2 mandates that payment service providers authenticate customers using at least two of three factors: knowledge, possession, and inherence. The wallet, as a secure application on the user's device with cryptographic key binding and biometric unlock, naturally satisfies the possession and inherence factors. Combined with a PIN or password, it provides a complete SCA mechanism.

This convergence creates an opportunity to unify identity verification and transaction authentication into a single instrument. Rather than maintaining separate systems for onboarding (KYC) and ongoing authentication (SCA), financial institutions can use the wallet for both. Several Large-Scale Pilots, notably NOBID and POTENTIAL, are testing wallet-based payment authentication flows. The practical result is reduced infrastructure complexity, lower operational costs, and a smoother customer experience that replaces multiple authentication apps and SMS codes with a single wallet interaction.

For payment service providers, the wallet opens new possibilities for payment initiation and authorization. The EUDIW can serve as a verified identity layer for payment transactions, enabling payment initiation services to rely on wallet-based authentication rather than screen scraping or redirect-based bank authentication. This aligns with the direction of PSD3 and the proposed Payment Services Regulation, which continue to strengthen requirements for secure authentication and customer identity verification.

Open banking APIs can be enhanced with wallet-based identity: third-party providers can verify customer identity through the wallet before accessing account information, adding an additional layer of trust to the open banking ecosystem. For cross-border payments, the wallet provides a standardized identity verification mechanism that works across all EU Member States, simplifying compliance for payment providers operating in multiple jurisdictions. Wallet-based identity also enables more granular consent management, where customers authorize specific payment-related data sharing through the wallet's selective disclosure capabilities.

The establishment of the Anti-Money Laundering Authority (AMLA) alongside eIDAS 2.0 creates a reinforcing regulatory dynamic for financial institutions. AMLA will oversee how financial entities implement customer due diligence, and the wallet's role as a mandatory acceptance instrument for identity verification directly affects AML compliance processes. Wallet-based KYC provides government-verified identity data at the highest Level of Assurance, which may reduce the residual risk in customer identification and simplify risk scoring.

However, financial institutions must adapt their AML systems to handle wallet-based identity verification alongside traditional methods during the transition period. Transaction monitoring systems should be updated to flag anomalies in wallet-based authentication patterns. Suspicious activity reporting procedures must account for wallet-based identity scenarios. Institutions should also consider how Qualified Electronic Attestations of Attributes (QEAAs) could enhance enhanced due diligence, for example by receiving verified attestations about a customer's source of funds or employment status directly through the wallet.

Investment firms and wealth management platforms subject to MiFID II face specific identity verification requirements for client onboarding, suitability assessments, and transaction reporting. The EUDIW can streamline the client identification process required under MiFID II's know-your-client rules. Verified professional qualification attestations, such as proof of accredited investor status, could be delivered through the wallet as Electronic Attestations of Attributes, reducing the administrative burden of self-certification.

For transaction reporting obligations under MiFID II and EMIR, the wallet provides a high-assurance identity anchor that can improve the accuracy of client identification in regulatory reports. Fund distribution platforms and investment platforms operating across borders benefit from a standardized identity verification mechanism that replaces the current patchwork of national document verification requirements. As the wallet ecosystem matures, attestations covering financial suitability, tax residency, and beneficial ownership could further streamline investment services compliance.