On September 30, 2024, the federal government of Germany announced its plan to develop a digital wallet for smartphones, with the aim of allowing people to identify themselves digitally across Europe in the future. The European Union Digital Identity (EUDI) wallet has many operational implications for ecommerce businesses in Germany.

In this article, we’ll take a look at how the EUDI wallet works and how it can be used in various industries. We’ll also discuss how businesses can integrate the digital wallet into their operations and benefit from it.

What’s in this article?

• What is the EUDI wallet, and why is it being introduced?
  
• How does the EUDI wallet work?
  
• What are the benefits of the EUDI wallet?
  
• Use cases for selected industries
  
• How can businesses implement the EUDI wallet?
  

What is the EUDI wallet, and why is it being introduced?

The EUDI wallet is a multi-use, smartphone-supported digital wallet offering individuals and businesses in Europe the following benefits:

• Identification: Users can identify themselves digitally (e.g., to authorities) without an additional card or reader.
  
• Storing and sharing important information: Identity information and official documents, such as identification (ID) cards, driver’s licenses, medical data, and academic degrees, can be stored and shared digitally.
  
• Signing documents: Documents can be signed using a qualified electronic signature (QES).
  

The federal government of Germany commissioned the development of the wallet as a result of the electronic Identification, Authentication, and Trust Service (eIDAS) 2.0 Regulation, adopted by the European Parliament in February 2024. The regulation outlines the future of digital identities in Europe and aims to promote the use of electronic identification tools and trust services; the European Union (EU) hopes to improve international cooperation and foster trust in digital transactions. The eIDAS is based on secure online identification and the use of electronic signatures, seals, and time stamps.

Under eiDAS 2.0, all EU member states are required to issue or certify one or more EUDI wallets by 2027. Member states can develop their own versions, provided they are:

• Compliant with EU data protection standards
  
• Usable across the EU
  
• Free of charge
  
• Highly user-friendly
  

In Germany, the Federal Ministry of the Interior and Community (BMI), the Federal Agency for Breakthrough Innovation (SPRIND), and the Federal Office for Information Security (BSI) are working on the development of the EUDI wallet. The concept is being developed within a public framework and consultation process; the goal is to involve individuals, organizations, and representatives from the business and research communities to get feedback and integrate specialist knowledge. The process includes outreach practices such as workshops and open online consultation hours. Ideally, this level of transparency will ensure a user-friendly EUDI wallet and promote acceptance of the end result.

In addition, the federal government has allowed nongovernmental providers to develop their own EUDI wallets, meaning that businesses, organizations, foundations, or research institutions can certify and offer relevant solutions. This is intended to promote innovation and freedom of choice.

How does the EUDI wallet work?

As the EUDI wallet is still under development, the specifics of how it will work are not yet known. While the exact range of functionalities and implementations will become clearer in the coming months, what is certain is that its range of functionalities will gradually expand after launch. The first functionality to be activated will be digital identification. This allows online IDs to be uploaded to a smartphone, so that users can identify themselves quickly and securely.

It’s safe to assume that using the EUDI wallet will involve the following steps:

Setup

The EUDI wallet will be available as an app that users can download to their devices. Setting up the app and creating a digital identity will require verification through a trusted authority, such as a public institution or bank. Uploading an ID document or using other existing identification methods, such as eID, might be involved.

Identity information storage

After setting up the wallet, users will likely be able to add identity information to the app, including ID cards and passports, driver’s licenses, health insurance cards, social security numbers, and university diplomas. Once stored in the wallet, the encrypted data will only be accessible through secure authentication.

Authentication and applications

Authentication will be required to use the digital wallet. This can be done biometrically through fingerprint or facial recognition, with a PIN, or by using other tried-and-true methods such as two-factor authentication. This ensures that only legitimate users can use the EUDI wallet.

After authentication, the wallet will be able to be used for things such as means of identification by authorities or services, or for signing contracts with businesses that require a digital signature. Users can selectively and securely share specific information with third parties, without manually copying or uploading it. All data transmissions are encrypted, allowing users to remain in control.

What are the benefits of the EUDI wallet?

Among other benefits, the EUDI wallet enables government authorities to identify individuals and businesses quickly and securely. Digital identification can help simplify and automate administrative processes.

Users have full control over their data and can identify themselves without using physical documents. The EUDI wallet makes it easier for users to use various government and online services, while cross-border deployment promotes access to public and private services throughout the EU.

The digital wallet also benefits businesses in Germany, especially ecommerce companies relying on cross-border online trade. Here are the main benefits.

Fast and secure customer identification

The EUDI wallet enables reliable and fast customer identification without online retailers having to depend on manual verification processes or extra security measures. This speeds up and simplifies the buying process, potentially increasing conversion rates. The wallet also reduces the risk of fraud and identity theft, which is particularly important in industries with strict Know Your Customer (KYC) regulations. The EUDI wallet is also valuable for ecommerce businesses that are required to verify users’ ages—it provides these businesses with a reliable compliance process.

Legally binding digital signatures

With the EUDI wallet, businesses and organizations can take advantage of legally binding digital signatures. This is especially useful for contracts, official documents, and business process management. Instead of relying on paper documents and physical signatures, all parties involved can easily and securely sign digitally. Without the need for physical meetings or mail, processes are accelerated. Paper consumption is also significantly reduced, which is not only more environmentally friendly but also cuts operating costs.

Simplified cross-border trade

The EUDI wallet ensures standardized EU-wide identification. For ecommerce businesses based in Germany that offer goods and services in other EU countries, this simplifies cross-border transactions and communication. In addition, customers gain a high degree of trust in security and data protection, which can bolster international trade.

Increased efficiency and reduced costs

Using the EUDI wallet to verify transactions can enable the automation of some operational tasks, such as KYC and user identity verification. Ecommerce businesses can save time and money that would otherwise be spent on manual audits or third-party services.

Compliance with legal requirements

For many digital trade business processes, meeting the requirements under the General Data Protection Regulation (GDPR) hinges on secure, data protection-compliant identification. The EUDI wallet protects ecommerce businesses legally when identifying customers.

Enhanced competitiveness

Businesses that implement the EUDI wallet from the start might be branded as innovators and gain a competitive edge. The tool offers customers a cutting-edge, user-friendly, secure solution, which is particularly valuable in the highly competitive ecommerce market.

Use cases for select industries

In addition to ecommerce, the EUDI wallet will have a significant impact on other industries. Here are the main sectors that will see changes.

Finance

The EUDI wallet can significantly simplify and accelerate customer identity verification in the finance industry. Currently, customers often have to go through complex procedures such as video identification or uploading documents. The EUDI wallet automates the process. This allows banks, for example, to verify customer identities without manual operations.

The digital wallet can also be used for authentication purposes in online banking. Customers can log in using their digital identities, without additional passwords or transaction authentication numbers (TANs). This is likely to considerably simplify the login process, all while making it more secure, as the wallet uses advanced encryption technologies to protect against identity theft and unauthorized access to sensitive information.

Retail

Age verification is one of the many benefits of the EUDI wallet in the field of retail. When purchasing age-restricted goods, such as alcoholic beverages or tobacco products, businesses can use the wallet to verify the customer’s age, making manual verifications or additional proofs of identity unnecessary.

In addition, the wallet can be used as a digital customer card. Users can store their discount cards, membership cards, or loyalty cards in their EUDI wallet and have them automatically pulled up when paying. All important information is stored in an app, which simplifies handling and speeds up the purchasing process.

Healthcare

The EUDI wallet opens up new possibilities for managing healthcare data. Patients can store electronic prescriptions, medical records, and certificates in the wallet, securely and conveniently. This simplifies access to important information while ensuring privacy protection. When patients visit a clinician or pharmacy, they can share their information directly via the app.

The wallet can also be used to manage digital product passports for pharmaceuticals. These passports contain key information about medications, such as their origin, ingredients, and shelf life. By uploading them to the wallet, patients can access the information at any time, which promotes the safety and convenience of medication management.

Public administration

Public administration might become significantly more efficient thanks to the EUDI wallet. Users can easily and securely prove their identity when dealing with authorities, without having to present physical identification documents. Applications could be signed digitally and submitted directly through the wallet. This would significantly speed up application and document processing procedures.

How can businesses implement the EUDI wallet?

Since the EUDI wallet is still under development, businesses cannot currently integrate it into their operations. Until the EUDI wallet is introduced, businesses should consider alternative solutions, such as Stripe Identity. With Identity, businesses can verify official identification documents from over 100 countries. ID photos and selfies can be biometrically compared, while names, dates of birth, and identity numbers can be validated automatically.

Early planning for the implementation of the EUDI wallet is recommended. Businesses should consider the following points:

Information technology (IT) infrastructure upgrade

To ensure a smooth integration of the EUDI wallet, businesses and organizations should thoroughly review their existing IT infrastructures and upgrade them as necessary. Such upgrades include, among other things, the development and implementation of reliable interfaces enabling seamless communication between existing systems and the wallet.

Login masks, also known as password masks, and authentication protocols should be revised to support the wallet’s technology and allow it to be used securely. While these adjustments are necessary to optimize the efficiency of internal processes, they also ensure that customers will be able to use the EUDI wallet easily, without running into technical obstacles.

Employee training

The successful deployment of the EUDI wallet hinges on comprehensive employee training. Staff need to become familiar with the new technology and learn how to use it securely and efficiently in various business operations. This is especially relevant to internal processes such as identity verification or transaction management.

Employees must also be prepared to assist customers and business partners in using the EUDI wallet—they should be able to answer questions, troubleshoot issues, and ensure that the wallet is used optimally in daily business operations.

Data protection policies and strategies

Data protection is also key to the implementation of the EUDI wallet. Businesses must ensure that their existing data protection policies are fully compliant with the technology powering the wallet. It is important that customer data be collected and processed only to the extent necessary for the use of the wallet—see, among others, Articles 5 and 6 of the GDPR. Businesses should revise their existing data protection strategies as necessary.

Customer involvement

Businesses should involve customers in the deployment of the wallet as early as possible. Surveys, feedback sessions, and usability tests can boost acceptance of the EUDI wallet and ensure that users are comfortable with it. The goal is to optimize user-friendliness by identifying and addressing potential user experience hurdles or issues at an early stage.