As services across industries become increasingly digitised, the need for secure and streamlined methods of identity verification has intensified. Traditional methods such as physical passports or driver’s licences are not only outdated but also ill-equipped to handle the privacy demands and efficiency expectations of today’s digital economy.
According to Moody’s, digital ID systems offer a modern solution, enabling individuals to verify their identity using a secure mobile application that stores verified credentials—ranging from passports and national IDs to health records and bank details. Unlike traditional IDs, digital IDs empower users to share only the specific data needed for a transaction, avoiding unnecessary data exposure.
At the core of this evolution is the concept of a digital ID wallet. These wallets allow individuals to manage their identity credentials and selectively share them with businesses or government agencies. For example, to prove they are over 18, a user could allow access only to a confirmation of age rather than their full date of birth and other personal details.
One of the most significant developments in this space is the European Union’s Digital ID Wallet initiative, part of the updated eIDAS 2.0 regulation. This ambitious effort will provide EU citizens with a unified platform for managing digital identities. Under the regulation, Member States must offer citizens access to the wallet by the end of 2026, with broader business adoption expected by 2027.
Pilot schemes are already in progress across various EU countries to test the wallet’s features, including electronic document signing, secure authentication, and access to services such as healthcare and tax systems. The wallet will also support cross-border use, allowing EU citizens to access services in other Member States without needing to present local documents.
The EU’s system hinges on selective data sharing, advanced encryption, and robust authentication mechanisms like multi-factor authentication and liveness testing. These measures aim to balance ease of use with data security, ensuring personal information is protected during digital transactions.
Globally, other nations are also pushing ahead with digital ID adoption. Estonia leads with its e-Residency programme, while India’s Aadhaar has become a cornerstone for service access. Japan, Singapore, Sweden, and Canada are likewise investing in national digital identity systems. In the UK, discussions are underway to introduce digital driving licences as part of a broader ID initiative.
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