From KYC to One-Click Identity: How the EUDI Wallet Could Transform Payments
Proof of identity and authentication in payment in an integrated wallet flow? The introduction of the EUDI wallet planned by the European Union for early 2027 could achieve this. For banks, PSPs, merchants and platforms, the question arises as to how KYB/KYC, SCA, checkout and fraud management will change when verified identity data becomes wallet-based and available to end customers and companies across borders.
From the eIDAS Regulation to the EUDI Wallet
A central element of the eIDAS Regulation, which will be amended in 2024, is the introduction of a European Digital Identity (EUDI) for the electronic identification of citizens, companies and administrations. The EUDI is intended to simplify access to digital services throughout the EU by means of a digital wallet, the EUDI wallet, via smartphone and similar devices and enable secure authentication when using them.
The EUDI wallet is designed as an EU-wide harmonized legal and technical framework for digital identities and data exchange, in which identification documents, qualified attribute certificates, certificates, electronic signatures and other data can be stored in encrypted form. The design of the EUDI wallet is the responsibility of the individual EU member states, subject to defined specifications. Particularly high demands are placed on the data protection and security of the wallet to ensure the confidentiality and integrity of personal data. The special feature here is that EU-wide, cross-border use is legally prescribed.
The introduction of the EUDI wallet therefore has the potential to significantly change the payment environment as a fundamental infrastructure for digital interactions. In this blog post, we would first like to categorize the EUDI wallet from a regulatory perspective and then explain its strategic relevance for the payment ecosystem.
Regulatory relevance for the payment ecosystem
eIDAS 2.0 provides a clear legal framework for the EUDI wallet. In the payment context, this legal framework is particularly relevant for onboarding/KYC/KYB, strong authentication and proof of attributes. Regulated sectors such as healthcare, transportation/mobility, energy, banking and finance, postal services, education, digital infrastructure and drinking water are obliged to integrate EUDI wallets into their processes. Very large platforms and marketplaces such as Amazon, Apple and Google must also integrate the EUDI wallet into their offerings as important access points for digital commerce and financial services. Specifications must be adhered to: Service providers and other “relaying parties” must register and disclose their data requirements. In addition to identity, they may also use attribute verification, qualified signatures or seals if required.
Thanks to the common European framework and common technical specifications, the EUDI Wallet is the first EU-wide infrastructure for all market participants – with a binding standard for digital identity across Europe. In combination with the PSD2 regulations for payment transactions and the requirements for secure authentication defined therein, the introduction of the EUDI wallet has created important prerequisites for broad market penetration, particularly in the payment environment.
The strengths of the EUDI Wallet
The planned EUDI wallet contains significantly more features and a more comprehensive range of services than previous eID approaches. By directly linking identity, attributes and authorizations, standardized solutions can be integrated into the transaction and authentication process at various points of the customer journey. This simplifies the complex customer journey in embedded finance and platform models, for example.
One-click payments, as are already common in store accounts or using stored cards with PayPal, Apple Pay or Google Pay, can be made more secure for providers and users with the EUDI Wallet – for example, by automatically combining the stored payment method with wallet-based authentication or attribute verification such as the buyer’s age (relevant when purchasing regulated goods such as alcohol or tobacco).
In the banking environment, the EUDI wallet enables fully digitalized and automated onboarding and authentication processes as well as secure digital payments across borders. And in AI-automated agentic commerce, the EUDI wallet is potentially a useful tool for checking who an agent is acting for, what they are allowed to do and whether a transaction is actually authorized.
Another benefit of the EUDI wallet is the improved prevention of fraud and chargebacks. A cryptographically verified identity, as contained in the EUDI wallet, is just as effective in preventing fraud through identity misuse, synthetic identities, weak registrations, insufficient age or attribute verification or account misuse as it is in preventing chargebacks through unauthorized use or false identities.
In addition, the introduction of the EUDI wallet in the payment ecosystem is expected to lead to new business models for verification and attribute orchestration. In Germany, for example, providers will be able to launch further UX-optimized wallet solutions on the market as a certified alternative to the government reference wallet.
Chances of success for the EUDI wallet: an assessment
The legally binding nature of the EUDI wallet gives it an enormous initial advantage – but this does not automatically ensure success. From OSTHAVEN’s perspective, the EUDI wallet can only establish itself as the central infrastructure for digital identity in Europe if it succeeds in establishing itself on the market. A key lever for scaling and user acceptance of the EUDI wallet therefore lies above all in its integration into real, high-frequency applications in the payment environment and attractive use cases.
This requires acceptance by users. Although the regulated sectors mentioned above are obliged to integrate the EUDI wallet into their processes in addition to solutions that have already been tried and tested, there is no obligation for end customers to use it. They can only be convinced by noticeably more convenient and faster processes: One-click payments and instant onboarding make payment processes more convenient from the user’s point of view. A uniform standard is enormously helpful for this. If it is not possible to convince users of the benefits, there is a risk that the EUDI wallet will remain a niche product despite its regulatory anchoring.
Conversely, broad user acceptance should lead to other market participants jumping on the bandwagon: Companies and platforms that are not obliged to include the EUDI wallet as an offering in their payment stack can, however, examine whether and for which processes it makes sense to specifically integrate information from the EUDI wallet in order to better meet the needs of customers. According to our assessment, merchants in particular could gain a lot, as they benefit from improved conversion rates, reduced abandonment rates and less fraud.
At the same time, the question arises as to what new competitive dynamics the EUDI wallet could trigger. From OSTHAVEN’s perspective, banks and PSPs would benefit from efficiency gains because processes could be further automated and streamlined. However, this automation also entails the risk that customer interfaces will change, meaning that banks and PSPs will become less visible as actual providers and therefore possibly more interchangeable.
Wallet providers and technology platforms, in turn, will increasingly compete for the front end in order to launch certified wallet offerings on the market in competition with or as a supplement to the state EUDI wallet.
The potential for B2B and representation-related processes is more difficult to assess. As Member States must also provide at least one wallet for companies, this could change B2B orders, financial services, insurance and contract processes in conjunction with signatures and proof of representation. In November 2025, the European Commission submitted an official proposal for a regulation to establish a European Business Wallet to complement the EUDI framework and build on the existing EUDI ecosystem. It remains to be seen whether, when and with what changes this proposal will become part of EU law.
One important point must also be kept in mind in view of changing political and economic conditions: The EUDI wallet, even if it is not a means of payment, can counterbalance the dependence on non-European solutions with regard to secure identity solutions in the payment sector. Alongside Wero and the digital euro, it is therefore a further step towards a competitive European payment market.