Unlocking eSignature Licitness for Banking in the European Union

How to eSign a document: e-signature licitness for Banking in European Union

hello my name is Michael salony and I'd like to welcome you to another episode where we talk to interesting people around fintech and open Banking and today I'm very happy to meet with Yan from uh Tink where we want to talk about the uh EU identity wallet and how that connects to payments and sea and open banking so welcome Yan can you tell us a little bit what this interconnection might be sure thing Michael first off thank you so much for having me on the call um I love the etpa uh video series uh so excited to contribute um I mean the digital identity regulation that's coming up uh will really provide a really exciting uh next step for open banking um as some of you um who are watching this right now may have heard um the the identity regul tion will introduce so-called digital identity wallets which can be used for strong customer authentication and I think this is going to remove many of the challenges that third party providers have in the market today so can I just understand that the the way I'm thinking of identity identity Wes is going to be another app on my phone which will contain my whether I've had a covid vaccination my academic credentials my bank account and then if I want to initiate an open banking payment it would reroot to this wallet where I would do the sca is that roughly right yeah that's that's actually uh that that's it and more so uh I think most of the wallets that you will see in the market are going to be uh bound to a device so that's going to be an app-based uh identity wallet but there's no restriction there necessarily I believe that there will also be space for cloud wallets meaning that potentially even your browser could be become an identity wallets if of course it's um it it can get certified uh by one of the member states to provide such identity Services um and then in terms of what it can do in terms of story it's not just I guess your your credentials um but theoretically it can start to allow you to Federate any type of personal data with a relying party so um if you want to do a qualified signature or if you indeed want to show your fac a QR code or identify yourself towards um towards the authorities with your digital identity that's really interesting but the the key thing seems to be that I'm not rerooted to my bank as I am now to do the sca but I'm rerooted to this wallet now the data in the wallet will come from the bank whether I have the balance and everything presumably but it does sort of take the bank slightly out of the circuit is this a good thing a bad thing what are the consequences of that so so that's not entirely true so so first of all with with phd2 um it is it is clear that the regulation says that the that the bank must enforce the strong customer authentication right and so before a bank can do a strong customer authentication it must first onboard an identity wallet where it can store a verifiable presentation uh basically a that it can check whether or not uh the user is who he says he or she is so um in in this scenario the way that the wallets are designed it is still actually the bank who is performing the authentication um but the authentication device is issued by a a third party that is certified by a member states um and in order to make sure that that third party has not been uh um been um has has I guess is still certified there will be so-called trusted list providers that Banks can check with on an ongoing basis to make sure that those wallet providers still are still um uh I guess within scope of the regulation but the point here is it's it's not actually the the water provider that does the sea it is actually still the bank that that checks the proof of the credential that is stored within the wallet for the that's an important clarification yes absolutely and the security of the system is still guaranteed with these qtps and everything so that all sounds good the thing where I'm sort of slightly confused is there seem to be now several ways of doing the co the the sca I can either have it done at my bank directly or VI one or more of my wallets uh isn't this sort of confusing for the consumer does this not mean extra cost for the banks isn't that increase the complexity of the system what's the advantage of this yeah so so maybe in in initially uh many banks will uh um will react in a way where they think oh actually these are more compliance costs is going to cost us more money but the reality is is that actually with the enforcement of the RTS for sea uh many banks have underestimated how how costly it can be to hold and manage their own strong customer authentication mechanisms um by relying on ual identity wallets um basically Banks who believe that it is not their core competence to run authentication mechanisms can start to uh basically accept these because uh inherently every citizen will receive in a digital identity wallet through their government um and and Banks can start to rely on these mechanisms as a way for users to access their bank accounts online or for the initiation of payments so there will be this opportunity to see cost reductions for for banks uh uh in it by itself and with the promise of of course increasing customer satisfaction because many customers have over the last couple years um indicated their dissatisfaction of course with the complications of using a two-act authentication mechanism for the access to data or the initiation of payments you've raised two really interest interesting topics there I mean one is there's an advantage for banks that they are basically Outsourcing a bit of their security to this this wallet I mean I would still question whether all would be ready to do that you know since they're liable in the end do they have enough trust in the wallet and all the other bits and pieces but there is an opportunity there absolutely it's also for the user that they have sort of one single point where they do all this kind of stuff you know they verify their covid their health their academic their banking everything is in one place except and not sort of spread out all over the uh the electronic ecosystem so so I get that um but uh is are you seeing several wallets being adopted then in each country or is there will there only be one and will they be mandated to the user and to the banks or can the banks choose where they do their sea can you give us a bit of a Insight on that yeah so so I'm actually expecting to find that in any in every member State EU member State there will be one or more digital identity wallets that will emerge for uh for such purposes right and in fact it wouldn't surprise me if we start to see uh large incoming Banks repurpose their own mobile banking apps as digital identity wallets where theoretically you can start to initiate payments at a different bank or request a new account at a different bank using your uh basically the the the bank that was passed down to you from your parents right so basically creating that uh that loyalty and that um uh um the the customer relationship that a lot of banks have been missing in this digital era um so actually there's going to be a lot of opportunities for banks to capitalize off of the the opportunity to introduce their own wallets um while also accepting um alternative wallets uh for access to account and the initiation of payment so I think you're going to see this as an entirely New Market emerging um and mainly to to cater to the digital experience of the consumer and the citizen that's uh that's a completely new angle so that opens a whole new business Avenue for banks right that they become sort of security providers as it were not not only for their own but sort of For What and if you think of embedded Banking and other things where where we get more and more cross connection uh that the banks may end up playing a a different role in the future because of this development absolutely arguably it's one of the missing steps in the embedded Finance movement right so uh many have have spoken about you know uh back actually tin back in the day we talking about money on on autopilots and money on autopilot has been mainly restricted to Merchant initiated payments which are completely out of scope of strong custom authentication what if the digital identity wallets can start to merge the Federation of digital identity in combination with digital signatures and sea you can basically cut across all of these many important um components in a value chain when it comes to the access to credit when it comes to the initiation of payments and or basically requesting a new insurance when you go to uh when you go to um a car dealership right or when you go to a car rental service the entire value chain as a result can be digitized and I think that is one of the most interesting opportunities and missing bricks uh that embedded Finance was lacking that's absolutely amazing the mind boggles when one starts to begin thinking in that direction thank you so much Yan I'm afraid our time is up with that you've offered us more interesting insights in 10 minutes than I've heard in many a Time thank you very much for this uh to you and thanks very much to everybody who's watching this channel I hope you enjoyed it and look forward to seeing you on another episode