eIDAS - Enabling Banking Without Borders

The European Single Market has made it possible for large companies and small businesses to freely access one of the biggest unified markets in the world.

This allows more resources to be spent on innovation, product development, and improving service standards rather than redundant regulatory compliance across various national jurisdictions. eIDAS brings this concept to digital identification and trust services and has the potential to revolutionize products that rely on these services.

Costly compliance

A prime example of an industry that benefits immensely from eIDAS is the banking and finance sector. Banks must comply with some of the most stringent regulatory guidelines in the corporate world, which is justified considering the impact a single non-compliant client can have. However, this also means that banks spend a disproportionate amount of time trying to comply with all the individual KYC norms, verifying corporate identity papers, checking multiple layers of shareholding for beneficial ownership details, performing checks against blacklisted individuals and companies, checking for any sanctioned-country linkages and complying with multiple agency requests based all over the world. All of these checks are undoubtedly necessary, but they usually lead to delays that can adversely impact both a financial institution and its retail/ corporate customers.

This is one area where a reliable, pan-European digital identification and trust service would help greatly. Individual countries have been experimenting with such things. Still, eIDAS aims to bring it to an international level by allowing for identification and signature data to be shared across national boundaries and financial jurisdictions in Europe.

Digital-only banks

Maintaining a vast branch or ATM network is a high cost for banks, which in most cases, does not justify the investment.

This situation gets even more complicated when you have to operate in a foreign country which considerably increases your compliance cost without necessarily providing a commensurate return for many years. eIDAS allows all banks in participating countries to use a shared system for identification and signature, thus removing some of the compliance redundancy and allowing for a digital-only strategy.

The kind of cost and time savings would be pretty impressive on its own - without considering the ease-of-use factor and the increased security. Eventually, you would be able to open a bank account in any European country online with just a single set of digital identification. This applies to non-banking services and even public services provided by local governments.

A pan-European digital identification service undoubtedly makes life easier for retail customers by allowing them to opt for a bank or product in another country and offering them a better deal or service standard, such as full mobile banking. This already sounds fantastic, but it gets even better if you are a corporate entity or even a small business that does business in multiple countries. No longer would you have to wait for weeks to get your local bank account open or trade documents processed. International trade and overseas payments would become more seamless, and the potential for exporters/ importers is yet to be discovered.

 References and Further Reading

• Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing (2016), by the European Commission
• Selected articles on Authentication (2014-16), by Heather Walker, Luis Balbas, Guillaume Forget, Jan Kjaersgaard, Dawn M. Turner and more

• Selected articles on Electronic Signing and Digital Signatures (2014-16), by Ashiq JA, Guillaume Forget, Jan Kjaersgaard , Peter Landrock, Torben Pedersen, Dawn M. Turner, Tricia Wittig and more
• REGULATION (EU) No 910/2014  on electronic identification and trust services for electronic transactions in the internal market and repealing Directive 1999/93/EC (2014) by the European Parliament and the European Commission
• Recommendations for the Security of Internet Payments (Final Version) (2013), by the European Central Bank
• Draft NIST Special Publication 800-63-3: Digital Authentication Guideline (2016), by the National Institute of Standards and Technology, USA.
• NIST Special Publication 800-63-2: Electronic Authentication Guideline (2013), by the National Institute of Standards and Technology, USA.
• Security Controls Related to Internat Banking Services (2016), Hong Kong Monetary Authority

 Image: Europe, courtesy of Charles Clegg, Flickr (CC BY-SA 2.0)