Identity verification in financial services has been inefficient and expensive for decades. Opening a bank account meant submitting physical documents, showing up in person, and waiting days for processing. The system stayed vulnerable to fraud despite all these costly steps. Digital identity wallets are changing how this works.
The European Union mandated that every member country provide digital identity wallets to citizens by December 2026. This regulatory push will bring standardised credentials to hundreds of millions of users and financial institutions alongside government agencies are already building the infrastructure.
The EU’s POTENTIAL pilot project, which concluded in late 2025, demonstrated what’s possible when more than 140 organisations across the 19 Member States tested wallet functionality in six key areas including bank account opening and e-prescriptions. Over 1,300 tests and 1,000 successful transactions, including 249 cross-border, confirmed technical feasibility.
Technical Infrastructure
Digital identity wallets work as secure storage for credentials signed by trusted authorities. This differs substantially from storing photos of your driver’s licence on your phone. Government agencies provide digital credentials containing cryptographic signatures that confirm authenticity.
When someone needs to verify your identity, the wallet handles it. You see exactly what information they’re requesting, decide whether to approve it, and verification completes instantly if you agree. Selective disclosure lets you prove specific facts without revealing extra data. Buying restricted products online requires confirming you’re over 21, not sharing your exact birth date or address.
The underlying technology isn’t new. What’s different now is systematic deployment at real scale. The EU mandate creates infrastructure that works across member states, turning small pilot programs into functional networks that cross borders.
Financial Services Applications
Know-your-customer processes cost banks between $60 and $500 per customer, and for large banks handling thousands of applications monthly, these expenses add up fast. Verification takes days or weeks, yet sophisticated fakes still get through.
Digital identity wallets change this entirely. Instead of submitting documents and waiting for manual review, a bank simply requests specific credentials through the wallet. You approve the request, the institution receives government-verified information with cryptographic signatures proving legitimacy, and the process completes in seconds. Banks no longer need to store copies of your documents.
Due to this, fraud prevention improves dramatically. Creating fake digital credentials means breaking into government cryptographic systems, which presents a much higher barrier than producing physical forgeries. As Ivaylo Bozoukov observed from his fintech experience, this fundamentally changes how identity verification scales.
“Digital identity wallets solve a problem that’s plagued financial services for decades,” says Ivo Bozukov. “The current system is expensive, slow, and still vulnerable to fraud. Cryptographic verification changes all three at once.”
Cross-Border Functionality
International banking has always involved jurisdictional friction. Different countries want different documents, some require notarisation, others demand certified translations. These complications drive up costs and slow down transactions.
Digital identity wallets solve jurisdictional problems through standardised protocols. A credential issued in one EU country works in all the others. For instance, a Danish contractor opening a French business account presents Danish government credentials, and the French bank verifies them instantly. Technology investors like Ivo Bozukov, who worked across international business sectors, saw early on that removing these friction points creates real economic value.
Security and Privacy
Storing sensitive identity information digitally raises obvious concerns. Current verification methods actually create worse privacy risks. Every time you submit physical documents, another institution stores copies in their database. Those copies end up scattered across dozens of systems.
Yet, digital wallets keep your information on your device where you control it. Verification means providing cryptographic proof you meet certain requirements without handing over the underlying data. You approve each request explicitly.
Broader Applications
Healthcare could see major efficiency improvements. Verifying insurance coverage and accessing medical records currently means proving who you are multiple times to different systems. Digital credentials streamline this.
Some airports are already testing faster security processing through facial recognition tied to digital credentials. Job verification becomes instant when degrees and certifications exist digitally, which speeds up hiring and stops credential fraud.
Current Implementation Status
Major banks are building digital wallet verification into their systems right now, and government mandates are pushing acceptance across multiple sectors. The infrastructure is being deployed today. With this progress, physical ID cards might become obsolete within a few years.
