Is Compliance About to Get a UX Upgrade? Vera Esteves Cardoso Analyses the Impact of eIDAS 2.0

Vera Esteves Cardoso, Counsel at Morais Leitão, analyses in an opinion article, published in Jornal PT50, the impact of Regulation (EU) 2024/1183 (eIDAS 2.0) on the digital onboarding of financial institutions.

According to the author, the more financial institutions reinforce their digital onboarding processes, the more friction they create for the user. Many European consumers abandon account opening due to the complexity, duration and documentary requirements involved, at the same time as institutions face increasingly rigorous obligations regarding client identification and verification.

What Changes with eIDAS 2.0

eIDAS 2.0 broadens the scope of European digital identity to sectors such as banking, finance, healthcare, energy and transport. Its central instrument, the European Digital Identity Wallet (EUDI Wallet), replaces the previous model of mutual recognition between national systems, which was fragmented and had limited interoperability.

Through the wallet, users will be able to store their Personal Identification Data (PID) and prove specific attributes, such as qualifications or licences, through Electronic Attestations of Attributes (EAA), without needing to disclose their full identity.
The author highlights the principle of "self-sovereignty": it is the user who decides what to share, with whom, and for what purpose.

eIDAS 2.0 and the AML Regulation

Vera Esteves Cardoso links eIDAS 2.0 to Regulation (EU) 2024/1624 (the AML Regulation), applicable to all European financial institutions. The two regimes serve distinct functions: the AML Regulation defines what needs to be done (identifying, verifying, assessing risk), while eIDAS 2.0 provides the infrastructure to do so more reliably and with less dependence on manual processes.

The Limits of the New Regime

eIDAS 2.0 is not, however, a complete solution for AML and KYC compliance. Institutions remain obliged to assess risk, carry out screening, identify Politically Exposed Persons and monitor transactions on an ongoing basis. Digital identity answers "who are you?", but not "what is the risk?".

Implementation Challenges

The effectiveness of eIDAS 2.0 depends on three factors: the effective rollout of wallets by Member States, their adoption by users, and their integration into the internal processes of private entities. Financial institutions will also need to replace systems built around physical documents and manual review with digital credentials validated in real time.

Vera Esteves Cardoso concludes that eIDAS 2.0 may not reduce regulatory requirements, but could offer a more suitable infrastructure for meeting them, with more reliable, efficient and cross-border processes.

Read the full article here.