New eID regulation opens opportunities in EU
The need for digital security has been accelerated by new consumer needs and behaviours during the COVID-19 pandemic, and by the forced societal changes and demand for further digitalisation led by this. Being secure when online is therefore now more vital than ever. New eID standards in the EU are underway and may be a gamechanger for digital security, and they provide a golden opportunity to expand advanced eID solutions outside of the Nordics and into the rest of Europe.
For years, digitalisation has become an increasingly important part of the life for every single individual around the globe. However, it has proven even more important during the COVID-19 pandemic, when governments issue orders that nearly overnight limits large gatherings of people, restricts in-person business operations, and encourage people to work from home. In response, many things moved from a physical to an online or virtual setting. For highly digitalised countries, the pandemic has proven to be an opportunity to leverage new digital services. For others, it has been a less welcome reminder of the challenges ahead.
A digital boost sweeps across Europe
In Denmark, which is already one of the most developed societies in the world, new ways of how digitalisation can help societies has emerged and delivered practical solutions to some of society's most critical challenges during the pandemic, e.g. smart wallets for COVID-19 test bookings and COVID-19 passports proving a negative COVID-19 test. The encouragement to reap the benefits of digitalisation midst a global pandemic was also fuelled in other parts of Europe, and the pandemic has proven to be a digital booster in several countries.
According to a study by the German Federal Bundesbank on payment behaviour in 2020, the share of cashless payments in Germany has almost tripled since 2017 with a considerable increase from 14 to 40 percent. A testament to how quickly consumers is willing to change their habits as they discover the benefits of digitalisation. A tendency also seen in many other semi-analogue European societies where cumbersome analogue processes have come short of consumer demands in the wake of the COVID-19 crisis.
While new eID regulation is a key element in speeding up this transformation, it provides banks across Europe with a golden opportunity to gain from this shift in technology, and to build on their level of trust essential to lead their customers safely on this journey. More than ever, there is a demand for secure digital solutions – delivered by trusted institutions.
New EU regulations entail new perspectives on eID solutions
Major steps are also taken by the EU regulatory bodies to safeguard and protect consumers and citizens, such as eIDAS and PSD2, that will help minimise fraud by ensuring stronger customer authentication. By the end of 2020, all banks in Europe had to be PSD2 compliant, and EU member states are now also obliged to offer eID services.
The European Digital Identity framework is the most recent regulatory proposal, which includes a European Digital Identity Wallet that will in turn provide citizens with a digital ID solution that notably will be accepted by banks and financial services as well as other public and private services and online platforms. The toolbox that provides the standards and requirements to a European Digital Identity Wallet are expected to be published within 12 months after that the legal framework has come into effect and will enable the EU Member States to exercise mutual recognition of digital ID solutions from other EU Member States.
The European Parliament in Brussels
The purpose of the regulation is to empower EU citizens and consumers giving them full control over their personal data, making it their decision which data will be shared and stored when using online authentication or identification services.
Ultimately, the vision of the latest regulatory developments in EU within the eID area will potentially lead to a more European cross-broader approach to digital identities and enhance interoperability. There seems to be a good opportunity to establish a presence especially in countries which currently does not have a notified eID scheme as of today.
eID solution upgrade
Inspiration could very well be found by looking to Denmark, where the national eID scheme, since its initial introduction more than 10 years ago, has seen a steep increase in the usage of digitalization both in the private and public sector. In October 2021 the next generation of a national Danish eID solution went live. The solution meets both the requirements of eIDAS and PSD2 which is the public sector regulations and the financial sector regulations. This next level is driven in close collaboration between the Agency for Digitisation (Digitaliseringsstyrelsen), Finance Denmark (FiDa, the business association for banks in Denmark), and IN Groupe, to create a solution that will satisfy a more flexible solution with focus on great user experiences and even more digitalization like digital onboarding of new users as well as future legal and security requirements. In Denmark the solution was launched public in October 2021, and it is set to be operating minimum 10 years ahead.
The new eID ecosystem
The new generation eID solutions brings significant value to both the financial and public sector. Cost heavy processes to onboard users can be done fully digital the same for opening for new and faster revenue streams by offering services digitally all done with the right level of security and fully compliant to all regulative.
What is eIDAS and PSD2
Adopted in 2014, eIDAS paved the way towards cross-border identification. The reach and effectiveness of this framework will now be exploited under more stringent standards. The European Commission have recently proposed a new framework for a European Digital Identity – or digital identity wallet, which can be used to access both public and private services. The goal and the ambition are to allow for cross-border identification "forcing" both banks and businesses in each country to accept the to-be-developed EU digital identity wallet. Given the fact that some countries already have their own national digital ID scheme in place, it is not yet clear how a combination of government-issued and existing cross-border solutions is going to be shaped into the new digital ecosystem. Drafting the technical architecture and clarifying security requirements are going to be one of the main discussion topics, which will be addressed by the European Commission over the next year and into 2022.
The PSD2 Directive was launched in 2015, where the European Parliament adopted the European Commission proposal to create safer and more innovative European payments. The current rules aim to better protect consumers when they pay online, promote the development, and use of innovative online and mobile payments such as through open banking services safer. PSD2 also comes into play when banks are digitalizing their business byon payment i.e. Account view and transfer initiating services. PSD2 went into full effect September 2019, but due to delays in the implementation, the European Banking Authority allowed for a time extension of the strong customer authentication (SCA) until 31 December 2020.
Written by: Jens-Jakob Lykke Larsen, Director, IN Groupe Denmark A/S
