Electronic payments in the EU are shifting. The European Digital Identity Wallet (EUDI Wallet) is set to change how people authenticate payments, replacing clunky security methods with a streamlined, identity-first approach. If you're a payment service provider, bank, or business that handles transactions, this is something you need to pay attention to.
Right now, Strong Customer Authentication (SCA) under PSD2 is a patchwork of passwords, one-time codes, and app approvals. It's meant to prevent fraud, but for users, it's often frustrating. Every additional step is a chance for someone to abandon their purchase. The EUDI Wallet is designed to fix this by integrating authentication directly with a verified digital identity.
Instead of juggling passwords or waiting for a text message, users confirm payments using biometric authentication (like a fingerprint or facial scan) inside their EUDI Wallet. This shift makes payments more secure and, just as important, faster. Banks and merchants get the security they need, while users get a better experience.
Dynamic linking plays a big role in making this possible. Under PSD2, dynamic linking ensures that payment authentication is tied directly to transaction details, like the recipient and the amount. If those details change, the authentication fails. The EUDI Wallet takes this a step further by handling dynamic linking natively. When a user confirms a payment, the wallet cryptographically binds the transaction details to the authentication process. This prevents any attempt to modify the payment during processing. Fraudsters have no room to manipulate transactions behind the scenes.
For payment service providers (PSPs), this means compliance and security are baked into the process. Instead of building and maintaining separate authentication layers, the EUDI Wallet provides a standardised, interoperable method that aligns with EU regulations. The same wallet that users trust for logging into government services can now be used to approve payments.
Merchants also benefit. Payment friction is a real problem, and the more steps involved, the higher the chance a user drops off before completing a purchase. The EUDI Wallet cuts down on unnecessary steps by allowing payments to be approved within a single flow. No extra redirects, no waiting for an SMS code that might never arrive. Just a simple approval inside a secure wallet.
For users, the experience is straightforward. They register their EUDI Wallet with their bank, which issues an A2Pay credential linking their account to their digital identity. When making a payment, the merchant or PSP requests this credential, and the user confirms the transaction with biometrics. The bank validates the request, the wallet ensures dynamic linking, and the payment goes through securely.
Cross-border payments within the EU will also improve. With a standardised authentication method, users won't have to worry about different banks requiring different verification steps. Payments made in Germany, France, or Spain will follow the same secure process. That consistency makes life easier for both businesses and consumers, reducing payment friction across Europe.
There’s still work to do before the EUDI Wallet becomes widely used for payments. Banks and PSPs must implement support for these digital credentials, and merchants will need to adapt to accept them. But the direction is clear. The EU is pushing for a future where identity and payments are seamlessly connected. Those who prepare now will be in a stronger position when adoption scales up.
The EUDI Wallet isn’t optional. Regulations under eIDAS 2.0 will require payment providers to support it for authentication.
Banks and PSPs will need to prepare for this shift. The EUDI Wallet isn’t optional. Regulations under eIDAS 2.0 will require payment providers to support it for authentication. That means integrating with OpenID4VP and handling Attestation to Pay (A2Pay) credentials, which act as verifiable payment authorisations stored in the wallet. These credentials allow users to authenticate payments without manually entering account details each time. It’s a step towards a more connected financial ecosystem where digital identity and payments work hand in hand.
The payments industry has been dealing with security-vs-convenience trade-offs for years. The EUDI Wallet removes that trade-off. It gives users a fast, frictionless way to approve payments while meeting the strongest security standards. Businesses that adapt early won’t just meet regulatory requirements, they’ll provide a better experience for their customers and reduce fraud at the same time.
If you're working in payments, now is the time to start thinking about how to integrate the EUDI Wallet into your systems. The shift is happening, and those who get ahead of it will have the advantage.
