Remote onboarding has become a make-or-break moment for the financial industry, but stringent AML requirements often collide with clunky identity checks that frustrate users and drain compliance teams.
According to Hopae, traditional verification methods, such as document capture plus liveness checks, video calls, or manual reviews, can turn a simple account opening into a drawn-out process. The result is significant customer loss, with close to one in two potential customers abandoning onboarding due to a poor user experience.
As Europe moves forward with eIDAS2.0, the EUDI Wallet is being positioned as a way to replace fragmented, document-heavy verification with a unified, government-grade digital identity wallet. For financial institutions, early adoption is being framed as a first-mover advantage: not only to streamline onboarding, but to reduce operational burden and strengthen defences against increasingly sophisticated fraud.
Across key financial use cases, the pain points are consistent. In customer onboarding (KYC), friction spikes at the identity step as users struggle with document and liveness capture, while firms absorb high costs when checks still depend on manual review or slow video calls, often with different user journeys required to satisfy local regulators. In lending and mortgage applications, the repeated verification of income, employment, or residency for each new product increases workload and slows approvals, while manual validation remains vulnerable to AI-enabled deception. Even payment authentication is not immune: mandatory multi-factor authentication to meet PSD2/SCA requirements can drive drop-offs, while weak or inconsistent flows across countries create openings for fraud attempts.
Account recovery is another weak spot. Customers can face long delays due to multi-step processes that may involve re-uploading documents, completing video calls, or attending in person. Meanwhile, repeated re-verification can push people to overshare sensitive data, increasing support costs and expanding the attack surface for impersonation.
These pressures can be grouped into four categories: high onboarding drop-off; complex compliance workload as rules evolve and differ across borders; escalating fraud exposure as deepfakes and synthetic identities become more common; and the challenges of cross-border expansion, where entering a new market can mean rebuilding ID flows and vendor stacks even as demand for cross-border banking grows.
Supporters argue the EUDI Wallet tackles these issues by enabling high-assurance, wallet-based identity verification, potentially shrinking onboarding from minutes—or longer—to seconds and reducing repeated data collection. Better conversion is a central promise, and the user journey is seen as a differentiator. In banking, according to Deloitte, “Digital Champions” differentiate themselves by proposing better user journey and mobile experience.
The wallet model is also pitched as a compliance simplifier, reducing reliance on passport scans and proofs of address by using verified credentials, aligned with regulatory expectations spanning AML and payments.
On fraud, the argument is that cryptographically signed credentials and government-grade enrolment reduce common entry points for document tampering and deepfake-driven manipulation, while selective disclosure could limit unnecessary exposure of personal attributes. Finally, for cross-border growth, a consistent wallet-based flow could allow financial institutions to onboard EU users from different member states without redesigning processes for each jurisdiction.
Beyond consuming the wallet, financial institutions may also participate by issuing Electronic Attestation of Attributes (EEA) and Qualified Electronic Attestation of Attributes (QEEA). That could enable instant, compliant eSignatures for high-value contracts, faster lending decisions through verifiable income or employment credentials, and even new business models where bank-verified attributes are reused across partner services.
Taken together, the EUDI Wallet is being presented not merely as a compliance tool, but as a conversion and cost lever: reducing friction, tightening fraud controls, and making cross-border onboarding more practical through a single trusted identity layer. For firms watching abandonment, operational costs, and AI-driven threats rise in parallel, the shift to wallet-based identity is increasingly framed as a competitive decision, not just a technical upgrade.
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