As per the eIDAS 2 Regulation, all EU member states are required to develop and roll out an EU Digital Identity (EUDI) Wallet by 2024. Since that deadline is mere months away at this point, in this article we’ll take a brief look at what EUDI will mean for large e-commerce businesses and marketplaces.
But first – some definitions and background information to make sure we’re on the same page.
What is the EU Digital Identity Wallet?
In 2014, the European Commission passed the original eIDAS Regulation, which made the EU the first global region with a legal framework designed to ensure trusted digital transactions.
Several years later, in 2018, seeing the development of consistent authentication standards and digital infrastructure, the Commission introduced the first draft of eIDAS 2.0. While currently still pending approval, it is expected to become legally binding in late 2023.
The EUDI Wallet is set to be interoperable across the whole EU and contain any number of “entitlements”, such as driving licenses, health records, passwords, store payment details, social benefits, drug prescriptions, digital travel documents, and much more.
Not only that, it will also be fully compliant with existing EU legal frameworks like the GDPR, and will feature high-level cryptography and selective disclosure, enabling citizens to remain firmly in control of their personal data.
How will it affect e-commerce and marketplaces?
Having a cross-border eID available to all citizens and companies will likely benefit the whole region in the long term. For instance, McKinsey has found that countries implementing a successful digital ID could unlock value equivalent to between 3% and 13% of GDP by 2030. Here are some more specific benefits relevant to e-commerce giants and marketplaces.
Time and cost savings
According to the European Commission, a solution like EUDI could save Europeans up to 855,000 hours of time, and reduce costs for business by more than €11 billion per year. This, of course, directly applies to e-commerce players and marketplaces, as well, enabling them to allocate more resources to core business functions and profit-making initiatives.
Advanced encryption protocols and biometric data-based access will make transactions between EU member states more secure by reducing the incidence of fraud and other financial crimes. Having a common infrastructure easily accessible by private entities will also greatly facilitate the exchange of data between heretofore isolated ecosystems, which is expected to bolster security even further.
Better access to market
Up to 80% of EU citizens are expected to be using an eID solution by 2030. In addition, digital wallets could account for just over 50% of the value of e-commerce transactions worldwide by 2025. As per the Digital Market Act, very large platforms, defined as having 45 million or more active monthly users in the EU, will be obliged to accept digital identity wallets.
This is all good news as far as e-commerce and marketplace enterprises are concerned. A growing body of users, both private individuals and companies, with access to secure and legally compliant EU-wide means of digital payment will make it easier for businesses to cast a wider net and make full use of the broader market.
Less red tape
EUDI Wallet’s integrated e-signature functionality will make it easier for e-commerce and marketplace businesses to prove their identity. This, in turn, could not only speed up the filing and completion of tax returns, but also enable them to sign contracts and legal permits digitally. As a result, the need for printing, scanning, and mailing paper documents, as well as traveling for business, will go down, with obvious benefits in terms of corporate resources and the environment.
More efficient hiring
Last but not least, EUDI could make the day-to-day life of HR departments less complicated and time-consuming. For one, hiring managers will be able to verify the identity of job candidates within seconds and gain easy access to relevant documents, such as those relating to education and criminal record. Furthermore, EUDI will enable them to post employee payslips directly to their wallet app, which is faster and more convenient. And finally, with an identity-bound digital wallet, submitting data to public authorities will become faster and more convenient.
The EU Digital Identity Wallet holds great promise both to consumers – who’ll be able to enjoy a more streamlined checkout process and access to a wider range of goods and services – as well as to e-commerce and marketplaces businesses. From time and cost savings to wider market access and faster transactions with less bothersome red tape – there’s every reason to believe that EUDI will bring many benefits and few if any complications. In addition, this solution could also boost the EU’s overall economic dynamism, which will redound to the financial performance of e-commerce companies and marketplaces.