Identity verification is at the core of financial transactions. Whether you're making a payment, applying for credit, or complying with anti-money laundering (AML) regulations, proving who you are is essential. But today’s systems are slow, repetitive, and vulnerable to fraud. Customers have to share excessive personal data, banks struggle with compliance burdens, and fraudsters exploit identity weaknesses.
Verifiable credentials (VCs) offer a better way. With digital identity credentials, financial institutions can verify users instantly, reducing fraud, improving security, and simplifying compliance processes.
Every financial transaction that requires identity verification comes with friction. Customers are asked to repeatedly provide the same documents—passports, utility bills, bank statements—across different services. This is inefficient and creates security risks. The more places sensitive data is stored, the more vulnerable it is to breaches and identity theft.
Fraud is another issue. Stolen credentials and synthetic identities cost banks and businesses billions every year. Identity fraud is difficult to detect with traditional verification methods, leading to unauthorized transactions and financial losses.
Regulatory compliance also adds complexity. Banks and payment providers must meet strict AML and Know Your Customer (KYC) requirements, often relying on manual processes that slow down transactions and increase costs.
With verifiable credentials, customers receive a cryptographically secure digital identity issued by a trusted authority, such as a bank or government agency. Instead of repeatedly submitting sensitive documents, users present their verifiable credential when needed. This allows businesses to verify identities instantly without storing unnecessary personal data.
VCs also enable selective disclosure, meaning users only share the specific information required. For example, a payment provider can confirm that a user is over 18 without accessing their full date of birth. This enhances privacy while maintaining compliance.
Verifiable credentials streamline payments and financial transactions across multiple industries. Banks can use them to accelerate KYC checks and reduce onboarding times for new customers. Payment providers can verify identities instantly, reducing the risk of fraud. Online merchants can authenticate customers without requiring them to store sensitive payment information, making e-commerce more secure.
In the cryptocurrency and decentralized finance (DeFi) space, VCs enable users to prove their credentials without exposing wallet addresses or transaction histories. This enhances security and regulatory compliance without sacrificing privacy.
Imagine a user making a purchase online. Instead of entering a password or waiting for an SMS code, they receive a payment request in their EUDI Wallet. They see the exact details of the transaction, confirm it with a fingerprint, and the payment is processed instantly.
For the merchant, the process is streamlined. Transactions are verified instantly with cryptographic authentication, reducing fraud risks and eliminating chargeback disputes. The customer completes the transaction without delays, improving conversion rates and customer satisfaction.
For banks, the benefits are just as significant. The EUDI Wallet means fewer support calls related to authentication issues, lower fraud related losses, and a simplified compliance process under eIDAS 2.0.
This is the future of payments in the EU. The businesses that adapt early will be best positioned for the changes ahead and the changes will happen soon. Contact us if you want to prepare for this inevitable technology in your processes.
The use of verifiable credentials in payments and transactions offers several key advantages:
Governments and financial institutions are moving towards digital identity solutions to improve security and efficiency. The European Digital Identity Wallet and similar initiatives worldwide are paving the way for verifiable credentials in finance.
The future of payments is frictionless, secure, and privacy-focused. Verifiable credentials make this possible by removing inefficiencies, reducing fraud, and giving individuals greater control over their financial identity.
Vidos provides the technology to support this transition. If you're in banking, fintech, or payments, now is the time to explore verifiable credentials for secure and efficient transactions.