The first major update to eIDAS recently entered into force. We believe we will soon witness a race by ID companies to gain a first-mover advantage in a new digital identity marketplace. Here are 4 reasons why:
Among other goals, the eIDAS 2 update incorporates the principles of decentralized ID technology into the regulation to help protect privacy and enhance data security in electronic transactions.
Specifically, it updates the standards for national IDs to include newer technologies such as Verifiable Credentials, establishes a framework for interoperable consumer ID wallets, and encourages the use of ID credentials in commercial transactions.
This regulation intends to empower 450 million citizens with interoperable ID wallets, each containing legal ID credentials issued directly by their national government.
How this impacts ID companies:
1. Rising demand for digital ID verification: As eIDAS mandates secure electronic transactions, businesses and platforms operating within the EU will inevitably need to adopt eIDAS-compliant digital identity verification solutions.
2. Less physical document verification: New digital ID formats are imminent, namely the government-issued identity credentials stored in wallets compliant with the EU's digital identity wallet framework. Companies will soon need and want to verify and consume this data from their end-customers.
3. Broader markets as a result of unified standards: eIDAS introduces standardized electronic identification across EU states. Once ID solution providers align with eIDAS requirements, their services automatically become relevant and applicable to all EU members and citizens, opening up a vast market.
4. A period of consolidation may ensue as organizations acquire new technological capabilities rather than the less risky path of building inhouse.
As we stand at the cusp of a transformative era in digital identity, the question is not just about who will lead the race but how fast the ID industry will embrace this change to redefine trust and security in the digital world.