Can the EU DI Wallets Revolutionise How We Pay (And What Could That Mean for the Banks)?

Okay, great. Hello. Good afternoon everyone. So what's in it for the banks? Should they care? And will the EU identity wallet have an impact on payment and change the way that we pay? I was going to start with a research that we did with the consumers.

It's not, not yesterday, but not, not that long ago. And one of the big answers we got was when we ask the consumers, who do you trust for your personal data security? Who do you think can respect the, the security of your personal data? They answered banks, governments as well as of course, you know, payment schemes like Visa, 80%. So we think there's something in it here for the banks as well. And really, you know, ideally they, they need to get engaged and step up. But what else is it for the banks?

And we know that one of the big challenges that we have with the wallet is going to be consumer adoption. Without consumer adoption, this doesn't mean a thing. So the banks, I think they have a role to play, But what does the wallet mean for the banks and why should they care? So let's take a, let's take a deep look and you probably see in this slide, in this concept five times already today, right? But basically we expect that the wallet will be able to hold a payment credential. That's work that we are, that we are doing. We expect it going to hold a number of wallet credentials as well.

So why not we look at options to combine them so that you can have a richer, more interesting, more seamless, more secure payment experience. So here's an example of something that we, we put together where you make a purchase, You authenticate a purchase, and at the same time you confirm the sharing of, for instance, your age or the fact that you're more than 18. So it's not the perfect use of flow. We're still working through the details on exactly how that can be done technically.

But a point is that you share your, your ident certain parts of your identity at the same time that you make the purchase that satisfies the regulatory requirements for the merchants and it's a very seamless payment experience. So that's just one example of how the wallet could impact impact payments. So we know this is the case in the eu, we've spent a lot of time talking about the IDAs UK have their own flavor, that's, you know, it's coming at some point in time and they finally get a new government. They're also talking about the wallets.

And of course we know that there's similar discussions in other markets as well. So this is not just a unique EU problem, but it's probably the concept around verifiable credentials. The availability or wallet at least is something that I've taken away as you know, over the last few days, that this is something that's coming in minimal markets than than the eu. So we see that the e iida regulation is going to impact banks in quite significant ways. So having looked at how the consumers are expecting the banks to get involved or would hope that they will get involved backed by the government.

If attorney one will look at the banks themself, they will be mandated to use the wallet as a regulated industry. There are expectations, if you read the IDA very carefully and then you look towards the PSR that's coming as well, that the wallet is expected to be an option to authenticate a payment as well as to initiate payments. So it will have an, you know, we expect it'll have an impact. Are they going to do this in a minimum regulatory compliant way or can we look at, there's a business opportunity for the whole, for the whole payment sector.

That is, I think is the big question. And from what I see so far we've not, it's not really, we don't really have a good answer yet.

However, it will, it'll require a few things. You don't give a great overview of the commercial model. Not at all solved, nowhere near the unlink ability is a big challenge. But it also means that the banks need to see the business benefits. How is it going to impact the engagement with the customers to onboard new customers, deliver new services? What about reducing cost, improving KYC, improving regulatory compliance, and how on earth are we going to be able to trust the wallet that they deliver? Reliability, the delivery scalability that can be trusted, who is liable for what?

And I think in particular, the last point there is one of the big outstanding questions, but I thought there should dwell a little bit more into the business benefits. And then I'll talk about some of the experiences that we have being part participants in the, one of the large scale pilots where we are really exploring how the wallet can be used for, for payment services. We see that banks, as I mentioned, will use the wallet for, to onboard a customer. It'll be an identity proof, it should be compliant with a ML.

We see that they, they can use it or must offer us an option to authenticate a payment, to initiate a payment. But what about being a provider of a verifiable credential, a proof it, digital proof of something.

So let's, let's unpack these cases in a little bit more details. So firstly, in terms of onboarding a new customer, the dream for a bank would be to be able to have a digital onboarding and within seconds or maximum minutes, the customer will have an account, they'll be issued a card, the card will go into our payment wallet and they'll have a bank account that they can be set up with, with everything that they need.

So I think the first step I expect to see is that it's digital onboarding to a new bank in your own country that gives, with a ML compliance, it gives regulatory certainty, certainly very convenient and it should be significant reducing the cost significant compared to current. So that's probably the first one. Then is it possible to do this across borders, at least within the eu? What impact will that have on the market? Can they make it easier to acquire customers in a different country?

Do we get more competition across the banks and you know, when they look at the passporting for licensing and so forth, will we be able to then to get, you know, easier to open a bank account in a different country in the eu? What about if we extend that even further, what type of benefits will that see to banks? So any bank thinking of, you know, or I mean already many banks in the EU have a footprint across the, across the countries. How can that simplify their business even more and make them even more efficient, especially across cross market.

I think that's a significant benefit that the banks, the banks should look at much, much closer, let alone the fact that it'll simplify international payments and remittances as well. You can then know that you're sending money to the right recipient. That's quite hard to do today across borders. Is it possible at some point to be able to open a bank account outside the EU with you based on your EU ID wallet?

Well, I think that's where the negotiations with the governments and, and many other institutions as well will be needed to make sure that this possible to recognize the identity proof that's coming through the EUID wallet. But that's where the real, the real innovation will happen I think is when we, when we ex extend it out to cross border, let's look at the second case then authenticating our transaction and also providing access to your account.

Of course the first thing, which is a little bit painful for the, for the banks as we are talking to them, they already spent a lot of effort getting that banking up into the hands of their consumers and educating them in terms of this is how you now authenticate a payment transaction in Europe. We love strong customer authentication is keeping the fraud down. And now it's more of a question of how do we make it as as seamless as possible. So that's the first one and that is a bit painful, that's for sure.

But what about if you flip it around, if this is a tool that the consumers hold, if the consumers have an authenticator in their hand that is based on biometric, great use rig use rig, it's fully regulatory compliant. What if we allow any other party within the customer journey and engagement with the merchant to invoke that to make it much more convenient and a much more natural part of the purchase process, what will then happen? Can we then maintain the, the low fraud and can we make it much more convenient?

So I think that's the, the second, you know, now the market is opening up a little bit more. There's a lit few more, few more use cases and we should see an improvement in success rate, reducing the fraud as well as maybe improving the merchant engagement with the consumers. But what does that mean for the banks in terms of their consumer relationship? And then of course, like I showed you earlier in this very simple user flow from making a payment can made an add additional attributes, additional credentials to the purchase process.

For instance, you more than 18, so you can buy that kitchen knife or you have a valid driving license in the car rental example that that was given previously. So that's around authentication and these, these are examples I'm sure that as you think of, you know, there will be many more use cases as well that we can, we can think of. So I think, but for payments, initiating a payment with the wallet, the first thing we are looking at is can you perform an in-store payment with your favorite card?

And the reason I'm mentioning card explicitly, although we of course we always look at accounts as well as cards, is that that's really where the payment infrastructure is today in terms of making, in-store payments based on NFC that gives more choice for the consumers. It gives them yet or the wallet, more flexi, more flexibility, more convenience, and it's an opportunity to make the wallets attractive for the consumers from the beginning by adding a payment capability. Maybe that is a good place to start. But of course you can add other types of payment credentials.

You can use the wallet online for e-comm transactions. Again, keeping that secure as well as convenient and give the consumers a choice of a choice of the source of funds. And there's a lot of innovation going on within the payment industry of having flexible payment credentials that allows you to say, pay over three months, have a have it as a credit, have it as a debit, have it from your account and so forth.

So that combination, I think with the, the wallet that's in everybody's hand and these new flexible payment credentials with a good authentication can may simplify again, the payment process makes it much more embedded and that should be a good thing for the banks, right? They're, this is, this is something that they can, that they participate in. They are the source of funds. So now hopefully it's getting a little bit more tempting, a little bit more exciting for the banks to join.

And then I think the last one around digital proofs, this is just my way of simplifying the term verifiable credentials, but the banks know a lot about the account holder, whether it's a consumer, but also whether it's a business customer. They do know that this is an iban, this is an account number that's actually valid and belongs to that person. Can that be a, a verifiable credential or a proof can that be used to confirm that this is how you actually pay me proof of registered address. Often they have that as well registered with the, with the bank. So it's about convenience of course.

It's also about fundamental digital transformation that you can provide the evidence in a way that is, is is fully digital and this kind of information is something that the bank already has. And as was talked about earlier in terms of the business model, there might be a willingness to pay for this as well. What about making it a little bit more advanced, like proof of income, I'm getting a salary paid from, from the company I work for every month, proof of income maybe that can then support a mortgage application, proof of ability to repay.

Can the merchant, the digital service provider where I want to buy something for a thousand euros, can they offer me that for over three monthly installment based on a confirmation from the bank on my ability to repay that over three months, that has value for the merchant that reduces their risks. And this is information that the bank, that the bank have.

So again, this is about digital transformation, it's also about regulatory comp compliance and it's very much about a new business model and new services. And then of course, you know, the ultimate is to combine these different types of proofs. Some from the bank, some from the, you know, the, the the, the agency that holds my driving license. What about my health insurance or the insurance of the house and combine that to, to be to for new services.

And I think the role of, of banks in this as a trusted provider for the be the trusted relationship to the consumers, they're proven, they are trusted to be able to hold personal information. Maybe this is something that the banks could, could consider at least to be, to be part of new model for them. But it doesn't, it doesn't stop there. These were consumer examples and there are many more examples when we start talking about an organizational wallet, an organizational identity, both in terms of knowing your business, knowing your supplier, proof of an Iban.

IBAN as a verifiable credential is something that we've been looking into verifying the syndrome and the re recipient, ensuring eligibility for certain government disbursements to support small and medium sized businesses, digital proofs of proven income as an example to give a loan to a small business in a very efficient way. These are example services that are available already in mature markets, but which where everybody has a wallet, it's possible to deliver at scale.

So I think this is the, this is the positive side of the story, but I also promise to share some of the learnings that we've made in terms of the large scale pilots. And there's a few tiny hurdles that we have to get across. I think the first one is the consumer adoption.

This is where I think the banks, the governments, all the private sector companies really have to come together to, to, to define the, to develop the good use cases as well as the, the, the good user experience we've seen in the past with existing identity schemes that when there is a compelling use case, the consumers adopt the service. Covid passed to access a restaurant is one of the classic ones. It double customer base within a within 10 months. The second one is to get the technology standards right and completed.

And that's not just open DECONNECT or M-M-M-D-L and the others that's mentioned in the A RF, that's also industry specific standards. So one of the things we are working hard on is to understand how can the wallets that are being defined now interact with industry standards like for payment as an example. But you pick any industry and they're going to have the same kind of requirements, whether that's travel or health commercial models for value exchange between the issuers and verifiers. Absolutely essential to, for investments to drive innovation.

I think we talked about that already quite a bit. Operationalization as banks and payment infrastructure, you know, we like to have at least five nines, maybe six nines in terms of reliability, zero downtime, literally how can we get that from the wallet as well. And so it really can be trusted regulatory and legal alignment. We have a very fun, I mentioned, can we move the authentication to the merchant as part of the payment process. That could be cha that has some limitations with the current regulations. So there's a bit of work to be done there.

I'm thinking about PST two and PS PST three and of course acceptance of these verifiable credentials. There's a lot of work that needs to be done to ensure the acceptance of the wallet and also of the, of the, the credentials themselves, which is why it's exciting to see the, you know, certain global initiatives that's now going on. So I thought I should just go into end before I'm sure that Andy has a few questions for me. I was just going to have end with, so what, what's what's Visa doing in this as well?

You know, we still a payment company but we see the changes that's happening in the identity space and how that's impacting payments. So while innovating within payment, we are also active within a number of, of industry activities like the large scale pilots, the open wallet foundation of course, different standards organization to try to navigate this complicated the territory.

And we're still, you know, working hard on authentication, biometric authentication, PA keys fit very nicely I think with the wallet payments, making sure that the payment credentials can be, you know, they fit into the shape of the wallet as well. As well as the, the interfacing with existing infrastructure and then money movements sending money from A to B, that's also things that we do. So that's where we see how we fit into this, to this ecosystem.

So ande, any questions? Thanks Maria. First of all, a round of applause for Marie for an excellent presentation. Thank you very much.

Yeah, really good Marie to see, to see what's going on from the banking perspective, I'm personally really worried about what I call minimum viable compliance. So banks just kind of ticking the box to say, yeah, we comply with the thing we've gotta comply to are not benefiting from all of those, you know, amazing things that they could do.

What, what can we do to avoid minimum viable compliance do you think? Yeah, I think, I think that is a real risk and it might even be minimum viable noncompliance as well.

You know, if we keep discussing whether this applies or not applies, right? There's lots of, lots of discussions in the industry. I think it's important to focus on the benefits for the banks and also how we alleviating some of the risks.

But yeah, that, that is a real risk. But if the banks consider, you know, they've been trying for years to make a business out of open finance or open banking, they're, they're, they're sitting on information about the consumers and their ability to pay that could be valuable. Verifiable credentials. Maybe that's one option at least even proof of address. Yeah. All sort sort of things. So make it easier for them to get into the market, but this is hard for them. And presumably the, what we're gonna see is the cost of identity verifications trending downward hugely.

So products that previously were too expensive to launch could then be launched maybe, Possibly at least you will get the, the digital onboarding journey much simpler. Yeah, the expansion into another country, much simpler. And that could then, and of course we know that customers go for convenience and a great use of experience.

So yeah, maybe the, the most innovative bank will have an advantage in that case. We've got a few questions. I'll just do one more 'cause I know there's, there's lunch key coming up. Last one. Oh this is a good one. Jason McDonald in the room somewhere. This is an evil question. It sounds like banks are thinking they'll sell people's data instead of the big tech providers. People may have concerns that lead to GDPR in the first place. What's the difference here? Is that a fair question to ask you?

I think the, the, the type of data the banks have in terms of proof of income or your ability to pay are valuable data. They are useful data that needs to be used in a trusted transaction as well. And of course you have the right not to share because They're giving it to the person not selling it round the back Exactly. They're giving and as of a transaction where it's actually valuable to you as well.

So Yeah, but they have to comply with DPR That I think's the big difference is that, is that the bank gives you the data and you can decide to share it or not. Yeah, yeah, exactly. Brilliant. Thank you Marie, very much indeed again. Yep.