2020 was, without a doubt, the year of digitalization. It's the year where every entity, small or large, had to go digital or rethink their digital strategies. The European Commission is no exception, as they just unveiled plans for a bloc-wide digital wallet, following the demand from member states for a secure way to access public and private services online.
According to the Financial Times, this digital wallet will allow citizens across the 27 European countries to safely access a range of services with a single online ID. Using the digital wallet, citizens will be able to log onto local government websites, pay utility bills, and even have their store payments details securely stored.
Up until now, individual EU member states have issued their own digital IDs, but not all are compatible and take-up is relatively low at just 19 countries, but with the pandemic forcing a lot of folks online, the EU will promote an EU wide compatible digital identity.
Unfortunately, at the time of the recording there isn’t much the EU revealed in regards to the user authentication methods. What we do know is that fingerprint and iris recognition are two of the possible methods.
The responses towards the european digital wallet are mixed. While some people had endless concerns about data security and personal information, many others expressed excitement about the potential it holds for the future of Europe .
From our perspective, the largest benefit of a European digital wallet is that it will enforce a structural separation. One which prevents companies that access user data from using the wallet for commercial activities.
Another advantage of this app is that it can be used as a vault where users can store official documents like the driver's licence, further minimizing the need for physical cards and wallets.
Additionally, the european digital wallet can further help combat money laundering and identity fraud. Not to mention the economic benefits it can create by authenticating high value cross-border payments within europe.
What is particularly impressive is that we are witnessing a movement where the EU is building a payments network that is independent from the giant American schemes such as Visa and Mastercard, and the high fees hunted by commercial banks. More specifically, the EPI attack on the dominating schemes and the Digital Euro, which we covered in earlier episodes!
Looking at the compatibility across the EU, the use cases of this digital wallet are promising. For instance, one could use their digital wallet to rent a car, pay for the rental fees and confirm their identity remotely via the app. An electronic key for the rented car could be issued immediately, completely taking away waiting in queues at the airport car rental desk.
As competition in the payments ecosystem is riling up between traditional and challenger banks, reshaping core systems and technologies of traditional banking is long overdue. When talking about future-proofing banks and financial services, the term Banking-as-a-service is starting to come up a lot. But what is banking as a service all about and how is it reshaping the industry?
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